In a nondescript, red-brick building off Chambers Street, less than a quarter-mile from FitzRandolph Gate, the Princeton University Investment Company (PRINCO) oversees a staggering $26.1 billion—the largest per-student endowment of any college in the United States.
Nassau Hall credits the colossal endowment for making possible need-blind financial aid, which has transformed a student body that was largely male, white, and wealthy only a few decades ago. Yet, as the elite world of asset management reckons with its own startling lack of diversity, PRINCO has found itself in the crosshairs of a national debate.
In a mid-March letter to President Christopher L. Eisgruber ’83, Rev. Al Sharpton — the prominent and at times controversial civil rights advocate, minister, and talk-show host — called on the University to release a report detailing the demographic makeup of the asset managers who oversee the endowment.
“While the systematic exclusion of people of color and women from the management of endowment assets has been a question of social justice over time, today it is for me a question of fiduciary responsibility,” Sharpton wrote. “If a trustees’ responsibility is to maximize returns, why are elite institutions using women and people of color at palpably low rates?”
A 2018 study found that, in most asset classes, women and people of color in the finance industry performed at levels equal to their non-diverse counterparts.
Sharpton’s letter, sent on behalf of the National Action Network, the civil rights group he founded and leads, is part of a broader campaign to bring greater attention to the issue of diversity among elite university endowments.
“There’s no way that in the 21st century you can sit around and not have a fair and inclusive policy of diversity in who manages your money,” Sharpton said in an interview with The Daily Princetonian.
While the presidents of Harvard, Yale, Cornell and the University of Michigan received similar letters, Sharpton’s words raise unique considerations for the University. Its endowment — at $3.1 million per student — reaps some of the strongest returns in the Ivy League.
All eyes on elite institutions
For its part, PRINCO contends it has demonstrated its commitment to working with a diverse group of asset managers.
“Folks seem to agree that we’re leaders in the field,” said Andrew Golden, PRINCO’s president. He added, “Our numbers are literally an order of magnitude better than the industry overall.”
In recent years PRINCO has claimed several high-profile successes as it seeks to increase demographic diversity among its asset managers.
Golden noted that among the six new investment management firms hired since 2018, four are led by either women or minorities. “In this case, both have significant, on the minority front, African American representation,” he said.
John Rogers ’80, a former University trustee who founded Ariel Investments, the country’s first minority-owned asset management firm, at age 24, believes in PRINCO and the University’s commitment to the values Golden professed.
“I know that Princeton’s committed to this,” he said, “that diversity and inclusion is important — it’s not just important for us to get to be students, we want to be successful when we graduate.”
However, the University, along with the other schools Sharpton addressed, have all declined to release detailed demographic information. Sharpton said he has not received a response from Eisgruber.
Having spoken with President Donald Trump in recent weeks, Sharpton is frustrated by the University’s response time.
“It seems to be interesting, if I can get President Trump on the phone, that I have not heard from the Presidents of these Ivy League schools,” Sharpton said. “And everybody in America knows President Trump and I don’t have a high regard for each other.”
He added, “I would hate to think that Donald Trump is more mature than the presidents of Ivy League colleges.”
Yale President Peter Salovey is the only Ivy League administrator who has written back to Sharpton.
“Diversity is essential to Yale’s mission to educate aspiring leaders who serve and contribute to all sectors of society,” he noted, according to the Yale Daily News. “We are taking steps to foster diversity within every department and section at Yale, including the investments office.”
Still, Sharpton and others — including alumni in the financial sector — say the University and its peer institutions have not gone far enough. The debate raises difficult questions about whether transparency can drive progress in the secretive world of private endowments, why asset management firms have struggled to diversify, and the intersection of social justice with profit.
“It’s about the movement,” said Carra Wallace, special projects advisor to Sharpton and former chief diversity officer for New York City. “As Harvard goes, as these top institutions [go], others will follow, and when you look across the country and see all of the endowments and teaching systems that have excluded these diverse firms for so long, we need some leaders to take the first step.”
“It’s a very complex and complicated, sort of multidimensional problem,” said Juan Martinez, an expert on diversity in the asset management industry and the chief financial officer and treasurer at the Knight Foundation.
PRINCO and social justice: A brief history
Between 2008 and 2018, the most recent decade for which data is available, PRINCO boasted an average annual return of 8 percent, placing it first among all Ivy League endowments.
Rather than managing the University’s investments on its own, PRINCO outsources its funds to third-party investment managers. The managers work for companies, or “firms,” which seek to grow PRINCO’s money. Firms aim to see financial returns through a variety of means — among them, mutual funds.
Sharpton and his allies are seeking demographic information about those third parties.
Since before PRINCO was established in 1987, the University endowment has been a regular target for criticism, especially among activist circles.
In 1985, student protestors were arrested for demanding that the University divest from companies operating in apartheid South Africa.
Decades later, a 2015 undergraduate referendum came within 102 votes of urging the University to cut its affiliation with companies “that maintain the infrastructure of the Israeli occupation of the West Bank” or “facilitate state repression against Palestinians.” The graduate student government approved the referendum with an 18-point margin.
The legacy of protest persists today, both at the University and across the Ivy League. Groups such as Divest Princeton are now calling upon schools to sever financial ties with fossil fuel companies, the subject of ongoing deliberations at the Council of the Princeton University Community.
‘The very best team’
Despite at times clashing with activists, PRINCO has been receptive to claims that it should focus on diversity.
If PRINCO is to continue its impressive returns, “we have to have the very best team,” Golden said.
“The complex nature of investment management is the perfect example of the type of problem that is best solved by teamwork and bringing together a bunch of different thinking minds,” he added. “So the diversity we care most about is cognitive diversity, but it turns out that cognitive diversity maps pretty well to other classic forms of diversity.”
PRINCO has received its fair share of positive press coverage for its diversity efforts. A 2018 article from Bloomberg, “Princeton Looks to Break Up the White Male Money Monopoly,” noted that Golden, who “looks and sounds more like a popular professor than a Wall Street type,” hopes diversifying Princeton’s money managers will be “part of his legacy.”
The article explained, however, that until 2018, only one of the investment companies with which PRINCO contracted was owned by a woman, despite the fact that the University worked with more than 70 such partners. At the time, none were owned by black investors.
The figures are similar for senior employees at PRINCO’s investment managers. Among the 260 individuals who earned over $1 million, only one was African American, one was Hispanic, and 30 were women, according to a source privy to recent information.
The ‘Prince’ was unable to access similar data for other institutions, including Harvard and Yale.
Golden, now in his twenty-fifth year leading PRINCO, declined to comment on this “older” data. The overall profile of those investing money on the University’s behalf is difficult to change rapidly, he explained. Rather than examining broader pools, he encourages observers to look at his organization’s more recent track record.
But critics say that in order to evaluate PRINCO’s progress, additional data is necessary.
According to Robert Raben, executive director of the Diverse Asset Management Initiative, a consortium that promotes demographic diversity in the finance world, institutions often claim, “‘we don’t talk about our strategies, [but] we assure you diversity is important.’ Thanks, I’m glad you assure us of that, [but] I’d like to know if you live your values.”
Raben and Sharpton are insisting that PRINCO release demographic data to prove the strength of its convictions. They cite a 2019 report from the University of California system — which details gender, age, and race, among other data — as a model for Golden to follow.
Among other findings, the California report indicated that people of color comprise 60 percent of the university’s internal investment team, while at least 59 percent of its partner firms are owned in majority by white men.
The Knight Foundation study concluded that 10 percent of all American investment firms are owned by women, whose groups oversee 5.4 percent of all mutual funds and direct 0.8 percent of all assets under management. Minority-owned firms comprise 8.7 percent, hold 4.0 percent of funds, and manage 0.4 percent of assets nationally.
Raben and Sharpton aren’t alone in urging Princeton to collect and disclose demographic data.
Mellody Hobson ’91, president of Ariel Investments and a former University trustee, believes transparency can help institutions make good on their intentions.
“I just always think data and openness is a good thing,” Hobson said in an interview with the ‘Prince.’ “You know I love the line ‘math has no opinion.’ It is what it is.”
The debate over data
Golden said he has no plans to release the kind of data Sharpton and Raben are demanding.
“We do not intend to create a report like that,” he said.
Nevertheless, Golden claims that the University runs ahead of its West Coast counterpart on matters of diversity. “I will tell you that if we did issue a report, it would be better than the numbers I scanned for the University of California,” he noted.
The 2019 University of California report indicates that the school system partners with at least 13 “majority diverse” firms, which it defines as being “50% or more” owned by female, Latinx, Native American, Black, Asian/Pacific Islander, LBGTQ, veteran, or disabled investors. As mentioned previously, however, until 2018 PRINCO was not invested in any firms owned by black investors. In the two years since, Golden claims to have hired four firms controlled by “women or minorities.”
Golden believes that releasing the detailed demographic information that Sharpton and his allies are seeking could harm PRINCO and its partners. If such information were published, Golden believes other investment managers could reverse-engineer PRINCO’s time-tested strategy. “It becomes pretty clear to many other investors who we invest with,” he said.
Not everyone accepts that explanation.
“Revealing information on the race, age, [or] gender of the investment managers does not really tip Princeton’s hand regarding the strategy of their investment,” said Richard Vedder, an economics professor emeritus at Ohio University and expert on college endowments. “I think Princeton’s stretching a bit to make that argument.”
“Demographic data is just that: it’s demographic data,” he said. “It’s no insight into strategy [or] investment approach. It’s just demographic data.”
Golden also claims that the University of California’s public status makes its case distinct from the University.
“We have a much lower profile on all matters than a public university does,” he said.
“I think reports like that can be counterproductive,” he added, “Reasonable people can have a difference of opinion on that front, but reports like that encourage people to just do things to satisfy numbers.”
Vedder, who is also the founding director of the Center for College Affordability and Productivity, rebuffed this argument, contending that the University must meet the same obligations as a public institution.
“I am not as sympathetic as many are about Princeton claiming, ‘well we’re a private institution, we don’t have to disclose,’” he explained. “I once wrote an article arguing that Princeton University is more a public institution than the College of New Jersey … because Princeton gets more federal money per student.”
Raben similarly dismissed Golden’s distinction between private and public.
“I think if you’re resting on that argument, you’re dodging the real issue,” he noted. “The issue is, what are you hiding? What’s the big deal? It’s 2020 — why can’t you say whether you’re working with women and people of color?”
For his part, Sharpton said, “If they are not embarrassed and have done well in the area of diversity, then they would come forward and say that this is how we set our policy.”
Despite withholding demographic data, Golden said he is “not embarrassed by those numbers.”
Golden also expressed concern for PRINCO’s investing partners, both past and present.
“Imagine that we issue that report and someone says, ‘well, we’d like an update on that, we want those numbers very specific and updated,’ and there’s a change,” he explained. “Then all of the sudden we have to explain what’s going in that change.”
Golden offered an example of how publicizing data regarding PRINCO’s work with minority-owned investment managers could be damaging to those companies.
“Years ago we employed an external manager that had a lot of African American representation that we no longer employ. The idea that we are going to announce to the world that we have stopped employing that manager would be a great disservice to that manager.”
Vedder, who has advised right-wing stalwarts such as former President George Bush, Russian President Vladimir Putin, British Prime Minister Margaret Thatcher, and Israeli Prime Minister Benjamin Netanyahu, again disagreed with Golden, arguing that — even for an institution of PRINCO’s stature — it would be nearly impossible for outside observers to identify specific firms with only manager demographics.
“I think the probability of that being a realistic argument is pretty slim,” he said. “It’s not zero, but I think it’s pretty slim.”
Though Hobson empathized with Golden’s perspective, she too endorsed a greater level of transparency.
“If Princeton is proud to disclose the information about the student body and other things, I don’t know why this would be any different,” she said.
Hobson continued, “Institutions have great success — they’re rightly super proud of that success … I guess what we’re trying to say is, because … this area of diversity has been one that has eluded so many institutions, that we’re asking for a bright light to be shined on it and for commitments to be made.”
Raben situated the debate over PRINCO’s demographic data within wider trends in higher education.
“Corporations, municipalities, even Princeton as an institution. They’re putting out their numbers, they’re not hiding it anymore,” Raben said. “They’re putting on their website, ‘the percentage of Princeton’s entering class is X percent black,’” he explained. “Everybody’s moved on, but elite asset management [Chief Investment Officers] like yours have not.”
A former senior official in the Department of Justice, Raben sees PRINCO’s policies as damaging to the University.
“It’s harming every student, every alumnae, every future student, the communities that Princeton cares about,” he added.
PRINCO’s push for progress
In the rarefied world of investment management, where strategies and practices change gradually, achieving diversity can prove a tall order.
According to Golden, “Our manager roster turns over … slowly,” thus making it difficult to rapidly increase the proportion of women and people of color with whom PRINCO works. To that end, he cautioned against large and sudden transfers of endowment funds.
“I agree with him,” Vedder said. “I think radical changes in the way you invest open yourself up to erratic performance changes. I think universities thrive with certainty.”
Golden believes PRINCO’s history speaks for itself. Beyond employing firms owned by women and people of color, he asserted that the organization seeks to cultivate diversity in a variety of other ways.
“I created an experimental plan to provide mentorship to a broad array of people,” Golden noted, “which is both to help them understand the investment management business better but also to help me and PRINCO understand just what do we not know about why the industry is not yet making as much progress as we’d like on matters of diversity.”
The mentorship program gives 50 individuals the opportunity to meet with Golden one time for “one-on-one or few-on-one meetings.” Mentees may be at “any stage in their career, ranging from current high school and college students to mid-career professionals.”
A page on the University website states, “ideally, the selected cohort will reflect the demographics of the U.S. population at large.”
The program squares with Golden’s beliefs in the strength and necessity of diverse teams in asset management.
“We think diversity leads to better decisions [and] better decisions lead to better returns,” Golden explained.
Including people of color in the financial sector aids systematically disadvantaged communities, according to Rogers, who also captained the University’s varsity basketball team.
“[It’s] about the wealth gap in this country; if you exclude black people … [they] become poorer relative to the white community,” he explained.
The Bloomberg article notes that, in August of 2018, PRINCO committed to a $40.6 million fund overseen by 645 Ventures, a firm owned by a pair of black investors. 645 Ventures did not respond to a request for comment.
Raben appreciates PRINCO’s investment with 645 Ventures and Golden’s mentorship program, but remains unsatisfied.
“Both are terrific, and we applaud that — [but] both are absolute dodges from the central question,” he said. Of the $26.1 billion in the University’s endowment, “why is so little of it managed by women or people of color?”
Hobson agreed with Golden, noting the extent to which diversity contributes to her success alongside Rogers as the co-CEOs of Ariel Investments.
“We really do believe you get the best outcome with diverse perspectives, that’s what we all learned at Princeton,” she explained.
Ariel Investments neither oversees funds for PRINCO nor plans to pursue business with the University in the future, according to Hobson.
Confronting structural barriers
Rogers, the first African American winner of the Woodrow Wilson Award, the University’s highest alumni honor, believes PRINCO’s continued reliance on a set network of investment managers has accrued through long-standing connections and understandings.
“I don’t think people are intentionally being exclusionary,” Rogers said. “You just go where it’s naturally comfortable. And then if you don’t have a staff that’s diverse, then you have no one to build a bridge to those diverse communities.”
According to Hobson, the second African American winner of the Wilson Award, several factors contribute to the disproportionate control white men continue to exert over the field of asset management.
“There’s no quick and easy answer,” she said. “Some of it is the fact that when you’re the black kid like me who’s the first black kid in their family to go to college ... your parents don’t know people who work as investment managers or investment bankers, that’s not even in our lexicon.”
On achieving diversity, Hobson said, “In our minds it’s not a controversial conversation: it just is.”
Martinez explained that subconscious bias leads white male power brokers to transfer their social and economic capital to other white men.
“People have a natural propensity to want to trust people that are like them,” Martinez said.
“And so if you are in a world where the majority of people who are dictating how these assets are spent or how these assets are invested are white males, they’re gonna tend to invest with people who are white males,” he explained.
Rogers concurred that demographic discrimination still plagues the world of finance.
“It’s just one of the most heartbreaking things that I’ve seen,” he said.
The case for diversification
Numbers suggest that the prevalence of white male firms persists today. But inequities don’t stop there. According to the Knight Foundation study, the few women and people of color who ascend in the finance world manage far fewer assets than their representation in the industry would suggest; the firms are mostly small.
This discrepancy is most stark in the Northeast — near the University — which boasts the greatest number of women and minority-owned firms in the country. Nevertheless, at a combined 0.7 percent of assets under management, women and minority-owned firms in the Northeast control the smallest percentage of assets per region in the country.
Furthermore, firms owned by women and people of color perform at levels equal to or slightly better than those owned by their white male counterparts.
Women-owned mutual funds produce an average quarterly return of 2.33 percent where minority-owned funds return at a rate of 2.37 percent. In comparison, “non-diverse owned” funds produce 5 percent less — touting an average quarterly return of 2.21 percent.
“When you look at self-reported performance data ... women and minority-owned firms’ performance is either exactly the same distribution or slightly-better than non-diverse firms,” said Martinez.
Raben argues that management diversity is also a matter of financial responsibility. By failing to provide demographic data, he claims the University is neglecting its fiduciary duty.
“The maxim of any investor is diversification,” explained Raben. “A diverse group of inputs means that you’ll have better access to opportunities, deals, advice, people who can help you make money.” He added, “the studies show that women and people of color manage money at good or better rates than white [men].”
Rogers agrees with the Jackie Robinson metaphor.
“Before Jackie Robinson got to play baseball … there were generations of extraordinarily talented African American baseball players who weren’t allowed to play,” he said. “The owners had all the same excuses: ‘oh, we can’t find talented enough players.’ But they proved that when they got on the playing field they can more than hold their own.”
Sharpton claims that he is not asking the University to make any sort of financial sacrifice. In the case of many university endowments, he said, failure to contract with investors of color reveals a lack of financial prowess.
“We’re not asking for charity,” he said.
Martinez saw a similar parallel. The Knight Foundation executive noted that some endowment managers claim both that they struggle to find talented minority managers and that they would be at a disadvantage by disclosing their investing partners.
“What they’re doing is arguing, at least in my opinion, both sides of that coin to their advantage,” he said. “They’re saying ‘I don’t want to disclose the sort of top secret investments that I have and I also think that it’s too hard to find these firms even though they may be out performers.’”
Rogers supports Raben and Sharpton’s efforts because he hopes to increase the access of people of color to a field from which they have been historically excluded.
Hobson emphasized that in their advocacy, she and Rogers seek to serve their alma mater.
“Our perspective on this grows out of a love of Princeton. John and I are indebted to our university. We have been, you know, Princeton fanatics for our whole lives,” she said. “We only wanted to continue to see it thrive in every way for generations to come.”
“This isn’t about, ‘by December the endowment should be this, that, or the other,’” she added. “It’s about what is the long-term commitment that the University wants to make to being inclusive and having diverse representation in everything that it does.”
COVID-19 and the road ahead
For Sharpton, the pandemic only intensifies the need for the University to address his request. Hiring investors of color, he claimed, would help communities disproportionately impacted by COVID-19.
Sharpton further contends that, in light of their documented success, asset managers of color are especially necessary during the global financial downturn.
“It should be more of an incentive to deal with this area,” he said.
According to Golden, the University intends to respond. But, citing the pandemic as a complicating factor, he has not yet corresponded with Sharpton.
“The letter arrived literally on my desk the last day that we were working in the office, and it arrived, you know, in the midst of a serious crisis, not just a financial crisis,” he explained. “So, I have read it, but it has not been the highest priority in front of me over this time.”
While he sent a letter first, Sharpton hopes to meet with Eisgruber or Golden “once we’re out of this pandemic.”
“And if they don’t respond to the letter or agree to a meeting, then we could certainly start a media campaign, and we will,” he said. “One thing is for sure: I will not drop it.”