Harassment becoming a due-diligence issue

By James Langton | December 6, 2019 | Last updated on December 6, 2019
2 min read

Potential sexual harassment at fund portfolio management firms is an increasingly important concern for institutional investors as they seek to allocate assets, according to a new global survey.

The latest survey of institutional investors by the U.S.-based Investment Management Due Diligence Association (IMDDA) found that firms are increasingly inquiring about potential sexual harassment issues as part of the fund portfolio-manager due diligence process.

The survey found that 26% of respondents now ask about sexual harassment, up from just 11% in the previous survey (in 2018).

Not only are more firms making possible sexual harassment at investment managers a focus of due diligence, but those inquiries are intensifying.

The survey reports that 76% of investors say they look at social media data and lawsuit history for possible red flags involving sexual misconduct. That is up from 63% in the previous survey.

And, it found that 45% said they would “dig deeper” if prospective fund managers don’t want to answer questions about sexual harassment, up from 18% in the prior survey.

“IMDDA’s second annual survey of sexual harassment demonstrates that the global institutional investor community is continuing its efforts to uncover and react to instances of sexual harassment uncovered during the due diligence process,” said Andrew Borowiec, executive director of the IMDDA.

“The full impact of sexual harassment is, first and foremost, on the victim or victims and that must be addressed,” Borowiec said. “Investors need to maintain their moral and ethical responsibilities while making sure not to ignore fiscal responsibilities. This survey shows we are moving in the right direction.”

That said, the survey also found that firms are more willing to look past sexual harassment concerns, with 9% of respondents saying that they would still invest with a manager that has workplace harassment issues, up from 4% in the previous study.

“The risks of ignoring sexual harassment at investment management firms can be devastating for allocators,” the IMDDA said.

“These risks include negative media coverage, reputational damage, tough questions and actions from investment committees, protests from beneficiaries, and allegations that professionals simply did not do their job,” it noted.

The survey results are based on anonymous surveys of professionals at institutional investors, including endowments, pensions, insurance companies, private banks and fund-of-funds in North America, Europe, Asia and elsewhere.

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.