Kresge Pledges to Increase Portion of Endowment Invested With Firms Owned by Minorities or Women

The Kresge Foundation has announced that by 2025, a quarter of its U.S. assets will be invested with firms owned by people of color or women.

The decision is based on equity, opportunity, and, most important, returns, says Robert Manilla, chief investment officer at Kresge. He says that over the past 20 years, foundations’ investments have not earned enough to cover their spending plus the rate of inflation and that diversifying the pool of fund managers they work with could change that.

“In a difficult return environment, the best way to make returns is to find people who can bring different perspectives to a problem,” he says. “Different perspectives to a problem often come with different backgrounds, different race, different ethnicity, different experiences in life.”

Kresge has an endowment of $2.7 billion, with $2 billion held in U.S. assets. Currently 14 percent of the foundation’s domestic assets are managed by minority and female-owned firms.

Diversity Pledge

The Detroit fund is the first to sign ABFE’s Diversity in Foundation Asset Management Pledge, which it is rolling out at its annual conference in Detroit this week.

The organization, which was founded in 1971 as the Association of Black Foundation Executives, is challenging grant makers to pledge to meet or exceed Kresge’s commitment of having 25 percent of its portfolio invested with firms owned by people of color or women by 2025. ABFE hopes that least 50 funds will make this pledge by 2021, which will be the group’s 50th anniversary.

“If we’re talking about issues of the racial wealth divide, we can’t overlook the fact that engaging black-owned firms, firms of color, really is about addressing wealth and the wealth divide in this country,” says Susan Taylor Batten, chief executive of ABFE.

Kresge’s investment office has revamped its recruiting and hiring practices to attract a more diverse candidate pool. Among the steps it has taken so far: adopting a blind recruiting process and removing a requirement that people seeking internships have at least one other work experience. Manilla says that by this summer, Kresge’s investment team will be 40 percent women and people of color.