What drives diversity hiring in the mutual fund management industry?

Abstract

Although labor force racial diversity has improved significantly over past decades, minorities remain underrepresented in finance. A lack of racial diversity is particularly worrisome in prestigious occupations. This paper examines diversity hiring in the mutual fund industry from 1991 to 2019. Our results reveal that minority managers are more likely to have attended top schools and have quantitative backgrounds. We find strong and persistent evidence that large and racially diverse funds are more likely to hire minority managers. We suggest that minority managers pursue higher levels of credentials to overcome in-group bias and homophily in the mutual fund industry.