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Study shows Race influences investment decisions

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Race influences investment decisions:   The report notes that of the roughly $70 trillion of financial assets currently under management, less than 1.3% are run by women and people of color.

<p class=”canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm” type=”text” content=”“A&nbsp;comprehensive data set&nbsp;of every venture capital organization and investor since 1990 shows that the industry has remained ‘relatively homogeneous’ for the past 28 years, particularly white and male,” the study notes. “Women represent only 8% of investors. Hispanics make-up just 2% of venture capitalist investors and fewer than 1% are black.”” data-reactid=”17″>“A comprehensive data set of every venture capital organization and investor since 1990 shows that the industry has remained ‘relatively homogeneous’ for the past 28 years, particularly white and male,” the study notes. “Women represent only 8% of investors. Hispanics make-up just 2% of venture capitalist investors and fewer than 1% are black.”

Lack of diversity in the industry makes it difficult for investors to tackle their bias, leading to decisions that could cause them to lose out on money.

“I’ve observed investors leaving money on the table because they underestimate the value of funds managed by people of color and women,” said Daryn Dodson, founder and managing director of Illumen Capital.

“At the top level we’d expect about $35 trillion to be allocated differently if women and people of color were representative relative to the full talent that we’d expect just by the distribution of population,” Dodson explained. “So we feel like this is a massive problem.”

But why?

While lack of diversity in the industry is partially to blame, it isn’t the only reason investors are less likely to place money in funds run by minorities or women. Dodson says that people also have an “inability to see value when race and gender are present.” It’s clear this bias needs to be addressed, as Dodson explains that reducing bias can “lead to higher returns” when it comes to investing.

The study also found that asset allocators have difficulty gauging the competence of racially diverse teams. When assessing strengths and weaknesses, investors were able to better predict future performance for white, male-led funds than funds run by women or minorities.

And paradoxically, investors exhibited more bias towards racially diverse teams with stronger performance, choosing to give greater benefit of the doubt to weaker teams.

“At stronger performance levels, asset allocators rated white-led funds more favorably than they did black-led funds when evaluating investment skills, competence, and social fit,” the report noted.

But the researchers couldn’t clearly determine why that might be the case, positing it might be down to the fact that investors hadn’t had enough experience with diverse teams.

Solving all of these problem isn’t just a matter of increasing diversity among leadership of institutional investors.

“Investing experts advising on the study believe that research, awareness-raising, professional training, and coaching as well as intentional changes to long-time industry practices, can improve the future make-up and impact of the investment community, changing the power dynamic to one that is more equitable and culturally significant,” the study noted.

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Welcome to Lindas Embroidery 15k Designs Collection ! | Linda's Embroidery Designs



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Warren Buffett favorite investing strategy is gaining steam

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Traders work on the floor at the NYSE in New YorkReuters


Value investing, the strategy of stock picking popularized by Warren Buffett, is having a moment.

“Despite struggling in early October, Value recovered and ultimately outperformed, advancing 0.9% in October, and remains ahead in November,” wrote a group of Bank of America Merrill Lynch analysts led by Savita Subramanian.

Value investors pick stocks that they think the market is underestimating, and are thus trading below their intrinsic value. This trend outperformed momentum investing, another strategy where investors look to capitalize on market trends.

“We think this trend could continue,” the analysts wrote. That’s because value stocks are inexpensive relative to stocks that fit into the momentum category, and recent stabilization in macro data paints a positive picture going forward, according to the analysts.

In addition, value investing looks more stable than quality investing, according to BAML. “Quality has led in 2019, but now looks risky,” the analysts wrote. “It’s expensive, crowded and likely to lag if macro data inflects higher.”

Value, on the other hand, performs well in “early cycle” environments, which the analysts think is the next market phase.

“The only time in history that value has gotten this cheap was in 2003 and 2008, when Value outperformed Momentum by 22ppt and 69ppt, respectively, over the subsequent 12 months,” the analysts wrote.

In addition, value stocks could outperform even if the broader market stumbles, according to BAML. “When value’s shrank to all-time lows in Sep. 2000, value outperformed by 24ppt in next six months but the S&P 500 sported losses,” the analysts wrote.

Here are the seven main reasons to favor value, according to Bank of America Merrill Lynch:

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