RESEARCH PARTNERSHIP WITH STANFORD SPARQ

Illumen Capital, the first mission-driven private investment firm dedicated to reducing implicit bias across financial markets to unlock returns and impact, initiated a research partnership with Stanford SPARQ, a “do tank” that partners with industry leaders to tackle disparities and inspire culture change using behavioral science, to examine the lack of gender and racial diversity in the financial services industry.

 

The partnership’s aim is to document and share insights on how bias operates in the industry and to reduce disparities that likely contribute to the underestimating of women and people of color in investing. Learn more

“Illumen Capital sees our impact in terms of systems change. That’s why we’ve created a research arm dedicated to providing insights that enable managers to deliver higher returns and even greater impact.” - Daryn Dodson

BIAS IN INVESTING

Illumen Capital's research applications help investors become aware of their own implicit biases so they can make better investment decisions and generate more impact and financial value in the process.

IMPACT EXITS

Illumen Capital's research applications help investors become aware of their own implicit biases so they can make better investment decisions and generate more impact and financial value in the process.

THE FUTURE OF IMPACT METRICS

Illumen Capital's research applications help investors become aware of their own implicit biases so they can make better investment decisions and generate more impact and financial value in the process.

LATEST RESEARCH

Race Influences Professional Investors’ Financial Judgments
 

In North America, of the $67.1 trillion global financial assets under management across mutual funds, hedge funds, real estate, and private equity, fewer than 1.1% are managed by people of color. Why is this powerful, elite industry so racially homogenous? In the first study of its kind, we conducted an online experiment with actual asset allocators to determine whether there are biases in their evaluations of funds led by people of color, and, if so, how these biases manifest. We asked asset allocators to rate venture capital funds based on their evaluation of a one-page summary of the fund’s performance history, in which we manipulated the race of the managing partner (white or black) and the strength of the fund’s credentials (stronger or weaker). Asset allocators favored the white-led, racially homogenous team when credentials were stronger, but the black-led, racially diverse team when credentials were weaker. Moreover, asset allocators’ judgments of the team’s competence were more strongly correlated with predictions about future performance (e.g., money raised) for racially homogenous teams than for racially diverse teams. Despite the apparent preference for racially diverse teams at weaker performance levels, asset allocators did not express a high likelihood of investing in these teams. These results suggest first that underrepresentation of people of color in the realm of investing is not only a pipeline problem, and second, that funds led by people of color might paradoxically face the most barriers to advancement after they have established themselves as strong performers.
 

Authors: Lyons-Padilla, S.,1 Markus, H.R.,1 Monk, A.,2 Radhakrishna, S.,3 Shah, R., 3 Dodson, N.A.,3 & Eberhardt, J.L.1

 

1 Stanford SPARQ, Stanford University, 450 Serra Mall, Stanford, CA 94305

2 Global Projects Center, Stanford University, 473 Via Ortega, Suite 242, Stanford, CA 94305

3 Illumen Capital, 2323 Broadway, Oakland, CA 94612

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