Women and minorities have often been overlooked in the world of business, finance, and investing. Women like Emilie Cortes are looking to change that. With a vast amount of experience in the world of finance, investing, and running a business, Cortes is in a unique position simply because she is a woman who has served in all of these capacities.
Through her own experience, Cortes is now able to help bring light to the issues that many other women and minorities will face when it comes to the business world. She also offers solutions that can help make a difference and may change the way that investing is done in the future.
The Early Life of Emilie Cortes
Emilie Cortes was from South Texas and grew up in a lower-middle-class family. She recounts being comfortable with a roof over her head and food to eat but never having extras for things like new clothes and luxuries, like graphing calculators for trigonometry class. Due to that upbringing, she decided to go into finance to better handle her own finances and to improve her life.
Before going to Haas, she went to American University for her undergraduate studies. After receiving her BS in International Business there, she was accepted into Berkeley Haas School of Business, which is where she met Keitha. During business school, Emilie calls a story about being one of the fastest test-takers in the class, leading her classmates to assign her the tongue-in-cheek nickname of “secret genius.” While this is a funny story, it also demonstrates the ways that classmates unconsciously judged her intelligence due to her appearance.
Cortes’ Professional Career
Emilie’s early career focused more on technical finance, though there were several pivots throughout that time ranging from private company valuations to large structured credit deals to managing $7 billion in institutional assets. From there, she bought and managed a women’s adventure travel company, Call of the Wild Adventures, before going overseas to help manage and run a safari and trekking company in Tanzania with more than 200 employees.
While she felt rewarded by her contract to professionalize this family-owned trekking company, she decided to return to the world of finance with an eye toward impact. . Her first role back was as Chief Financial Officer for Toniic Institute, a non-profit that promotes impact investing globally. During that time, she and Tracy Gray, another Haas alum, wrote the article concerning diverse investing and the importance of investing in women and people of color (known as “BIPOC”), rather using the entrenched traditional investment criteria that structurally prohibit capital allocation to women and BIPOC.
How to Promote Diverse Fund Managers in Investing
Cortes decided to focus on foundations as they have one major problem – their investments often harm the very mission for which the organizations exist, including structures and heuristics that disadvantage the same populations their grants intend to support and empower. Only 1.7% of all $70 trillion of investments in the U.S. are controlled by women and BIPOC combined! The people in control of assets are overwhelmingly male and white, to the tune of 98.3%. The investment team that does the work are mostly white males too and will invest based on the conscious and unconscious biases of white male investors. This props upgender inequality and systemic racism within the foundation’s investments.
Cortes and Gray joined together to isolate and reveal five structural barriers and solutions that are action-oriented and can be implemented today. By enacting these changes, foundation investment committees, internal investment teams, and external investment advisors can dramatically improve outcomes for women and BIPOC fund managers and entrepreneurs, including:
Reframe The Misconception of Risk
There is a bias in the investment world that thinks white males are less risky than women and BIPOC. However, there is no research that supports this sentiment nor demonstrates outperformance of funds led by white men. Quite the contrary – extensive research exists demonstrating outperformance of diverse investment teams. Anecdotally, for example, all the financial companies that needed a bail-out during the 2008 recession were run by white males.
Rethink the Criteria
Foundations do not realize how traditional investment criteria create structural barriers for funds led by women and BIPOC. Criteria such as minimum investment sizes (often $100 mill), that teams must have worked together and invested together, and that the manager has a track record that can be ported from previous firms to their new endeavor, all disadvantage those fund managers who do not come from wealth to invest together, call on friends and family for early-stage capital, nor can they survive for years on their own savings while fundraising. Such criteria are designed to provide the investor comfort, but there are no studies that show fund managers that have invested together, for example, outperform those that do not.
Confront Any Blind Spots
The talent pipeline is often cited as the main obstacle for investors to find enough fund managers for consideration who are run by women or BIPOC. Instead, foundations and investment advisors continue to return to the white managers in their network or only using a small pool of funds that are already oversubscribed from diverse managers who are considered “safe.”
The best solution to help with this is to expand your network. Asking for referrals, developing new relationships, and attending events that feature diverse managers (such as VC Include, Gender Smart Investing Summit, SheEO, Private Equity Women Investor Network, Latinx VC, and Black VC).
Be Better Than Other Investors
Foundations are in a unique position to provide catalytic capital to women and BIPOC. One could say that “foundations should take more risk for the sake of higher impact;” however, this implies again that funds run by diverse managers are riskier. Let’s say that “perceived risk” was actually real, it is hypocritical to have one side of the house, the investment team, working against the programming side of the house making grants aligned with the foundation’s mission.
One could even argue that a foundation and its advisors are violating fiduciary duty principles by having investments that harm the mission of the charity, especially those with a mission of addressing gender and racial inequality. Foundations are in a unique position to demonstrate fiduciary duty includes aligning investments with their mission and illuminated this approach to all other types of investors.
Fire the Advisor
The right advisor can make a world of difference to your investment portfolio, but they can also be the biggest hindrance. If you feel that your financial advisor is not on the same page with your investment objectives, then it is time to pick someone else. There is no wrong time to find the right financial advisor who starts with your values and then selects appropriate investments, not the other way around. Investing with environmental, social, and governance objections is now the mainstream as widely accepted principles.
Putting It All Together
Foundations and other conscious investors must be the leaders in investing in diversity. Investment capital is critical to propel gender and racial equity in all areas of our economy, and that starts with how capital is allocated to fund managers and entrepreneurs who are diverse.
Do you have a story about a time when you had to work harder, despite your good track record or performance, to get the same results? What solutions do you see to the problem that were not discussed above?
Leave a comment below and check out the podcast from Emilie Cortes and Keitha Pansy to learn more about this concern in the investing world.