There is no capitalism as we know it without financing funneling capital to entrepreneurs, start-ups, restructured companies, and much more. But data show financiers have failed when it comes to diversity, equity, and inclusion. We’ve often reported on banking failures, for instance lending to Black-owned startups and Black first-time homeowners. But this goes beyond banking – a somewhat similar story holds for other parts of the financial services industry. “Marketplace Morning Report’s” David Brancaccio spoke with senior economics contributor Chris Farrell about the data that illustrates some of this. Below is an edited transcript of their conversation.

David Brancaccio: You’ve been reading the studies, where else do we see this failure to lend and finance in an equitable fashion? 

Chris Farrell: The asset management industry, I mean, this includes private equity, real estate mutual funds, hedge funds. And, you know, David, the asset management industry, it’s a cornerstone of the economy, which is why the business press spends so much time covering private equity and hedge funds. And in this industry, minority and women-owned firms account for a small percentage of the business. 

Brancaccio: All right, so these asset managers, you’ve seen the numbers on – I was gonna say diversity – but it’s really the numbers on lack of diversity. 

Farrell: Right, so the Knight Foundation has been tracking minority and women owned asset management firms for more than a decade. And by the way, the term minority in their study, it means racial and ethnic groups such as Black and Asian. So the foundation’s latest report looks at the asset management industry – totals more than $82 trillion – only 1.4% of the total U.S. base assets under management was managed by diverse-owned firms as of the fall of 2021. That’s a sliver, David, of the total pie. 

Brancaccio: So about a trillion of $82 trillion. That’s hardly a surprising result. But it is certainly disturbing. Now, you mentioned this is the latest in a series of studies … do these studies track any progress? 

Farrell: There’s been modest progress, small progress … the first study was in, this particular series, 2017. And, you know, the past five years, we have seen improvement, the percentage of U.S. base assets under management by diverse owned firms, it rose from 1% in 2016, to 1.4% in 2021. It’s not much of a change, however. 

Brancaccio: What about investment performance to address that bias? 

Farrell: So I think this is absolutely critical in this study, the author’s took great pains, all these different performance metrics, David, to answer this question, and the bottom line: No consistent, statistically significant difference in performance among diverse and non-diverse owned groups across all the asset classes. 

Brancaccio: All right. The financial planning business sends a lot of client money into private equity, hedge funds and the like. That’s not particularly diverse either. 

Farrell: No, so I was reading the Knight Foundation study, it reminded me – and I went back, 2018 survey a certified financial planners – less than 3.5% of all 80,000 certified financial planners in the U.S. were black or Latinx. Put it this way: There’s only 2,700 Black or Latinx CFPs. So, there’s lots of initiatives underway in the asset management business, the financial planning industry, I mean, really the whole financial services industry, to embrace greater diversity, but the message in numbers like this, there is so much more that needs to be done, especially since money and managing money is central to our economy.