The Price of Admission: A Study of Diversity in Mutual Fund Manager Hiring

42 Pages Posted: 12 Jul 2022 Last revised: 18 Jul 2022

See all articles by Fred Dewald

Fred Dewald

University of Memphis

Steve Z. Fan

University of Wisconsin - Whitewater

Linda Yu

University of Wisconsin - Whitewater

Date Written: April 8, 2022

Abstract

We study the differences in hiring between White and minority managers in mutual fund industry over the past 30 years. While our results demonstrate a significant improvement in racial diversity over time, minorities still face higher barriers to entry. Our results indicate that a higher percentage of newly hired minority managers hold doctoral degrees, have attended top schools, and come from quantitative analysis backgrounds. At the fund level, we find strong evidence that larger and more diverse funds are more likely to hire minority managers, which indicates an in-group bias in the hiring process. Given the fact that mutual fund is a traditionally White dominant industry, our findings suggest that minority managers must overcome extra hurdles that are largely beyond their control to be accepted in the industry. We show that differences among hiring White and minority managers are more pronounced in domestic equity funds, while international funds show much weaker or even opposite patterns. As a robustness check, we find that our results still hold regardless of whether a minority fund manager receives an American education. This suggests the culture similarity to clients is not enough to explain the hiring disparity. Our results provide a better understanding of the lack of diversity in mutual fund industry.

Keywords: Mutual Funds, Minority Managers, Hiring, Diversity, Barriers to Entry

JEL Classification: G20, J70

Suggested Citation

Dewald, Frederick and Fan, Steve Z. and Yu, Linda, The Price of Admission: A Study of Diversity in Mutual Fund Manager Hiring (April 8, 2022). Available at SSRN: https://ssrn.com/abstract=4151901 or http://dx.doi.org/10.2139/ssrn.4151901

Frederick Dewald (Contact Author)

University of Memphis ( email )

United States
8152604833 (Phone)

Steve Z. Fan

University of Wisconsin - Whitewater ( email )

800 W. Main Street
Whitewater, WI 53190
United States

Linda Yu

University of Wisconsin - Whitewater ( email )

800 W. Main
Whitewater, WI 53190
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
35
Abstract Views
122
PlumX Metrics