FedSmith readers told us in our latest survey that they do not want to see selection of Thrift Savings Plan (TSP) fund managers based on diversity as some lawmakers have proposed.
The topic came up when a group of Senators sent a letter to the Federal Retirement Thrift Investment Board (FRTIB) calling for more opportunities for federal employees to invest in funds run by “racially, ethnically, and gender diverse asset managers.”
“A diverse team of asset managers is more likely to hold varied perspectives and may be better equipped to identify novel investment opportunities. Diversity can also help firms avoid the dangerous pitfalls of ‘groupthink,'” said the Senators in their letter.
The Senators also said that more diverse asset managers would lead to overall higher returns for the TSP.
The notion of diversifying the fund management firms may be catching on. Fox Business reported over the weekend that State Street Global Advisors that company leadership must meet hiring targets intended to “triple the number of Black, Asian and other minority staff in senior positions by 2023.” Failure to do so will result in lower bonuses for the company’s executives.
Fox Business further notes in its article, “Recruiters will now have to establish panels of four or five employees, including a woman and a person with a minority background, when hiring middle management staff. The firm will still hire White men, …but recruiters are required to show that women and minority applicants were interviewed by the panels.”
State Street Global Advisors has been one of the investment managers for the TSP’s C, S and F Funds since April. State Street’s contract for managing the TSP funds was awarded in October 2020.
Response from FedSmith Readers
Nearly 1,200 individuals responded to the survey, and over 90% of respondents said they do not believe that the TSP is in need of more diversity among its asset managers. An even greater number of respondents said that they would not be more inclined to invest in funds based on the racial or gender composition of the fund managers and that they do not believe more diversity would lead to higher returns in TSP funds.
Here is a summary of the questions and the responses:
Do you think the TSP needs more diversity among the asset managers selected to manage the funds inside of the program?
- No: 91%
- Yes: 9%
Do you think fund managers should be chosen on the basis of diversity?
- No, it should based on qualifications only: 93%
- Yes, it should be a factor: 7%
- Yes, exclusively: 0%
Would you be more inclined to invest in a fund inside of the TSP if you knew that its asset managers were more diverse (on the basis of race and/or gender)?
- No: 95%
- Yes: 5%
Do you think federal employees would get better returns on their investments if more diverse fund managers were added to the TSP?
- No: 95%
- Yes: 5%
Comments on the Subject
These are a sampling of some of the many comments readers left on the article about the topic.
These kind of things cause a great disservice to blacks and other minorities. It makes it appear that they lack qualifications that would allow them to compete in the job market. This is false, false and false! Blacks and minorities are educated and have ample qualifications and abilities to compete for jobs. Stop making them into perpetual victims that need assistance to survive.
I would prefer asset managers who understand the markets, trends, etc… I honestly don’t care who’s managing my funds as long as they know what the heck they’re doing!! Diversity is probably more important for my portfolio than it is as a requirement for the job of fund manager. When it comes to my money and my retirement, I’m all about having the most qualified to do the job, regardless of race, color, creed, etc..
Are we going to have every diverse group represented, and then how many permutations (e.g. white/gay/ physically challenged) etc? We’re going to need a lot of funds, especially when new diverse groups are identified every day.
The TSP(seems to me) that is very well managed. I am happy with the Funds we have, the withdrawal options and low fees. I dont think we need to add more funds and I DONT THINK we need to hire anybody based on diversity. If youre going to hire someone check FIRST his/her qualifications. An expert in finances or alike. NOT on diversity.
Our thanks to everyone who took the time to participate in the survey and share their feedback.