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

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