Diversity & Inclusion: An interview with GCM Grosvenor
Investor Perspectives on DEI
February 2, 2021
Peter Braffman, Managing Director, Real Estate Investments at GCM Grosvenor, has been tracking emerging manager and diverse manager performance for the past decade.
He opens up his data demonstrating there is no sacrifice of returns by an investment in diversity and that diverse real estate managers consistently perform relative to the traditional benchmarks.
Braffman notes that the devil is in the details, of course. To get better, the industry needs to agree on definitions and standards, and increase transparency by reporting performance regularly and consistently.
Speaking with Zoe Hughes, CEO of NAREIM, Braffman highlights how he looks for managers who aren’t only great investors, but who treat their employees the same way LPs underwrite managers, as fiduciaries.
The interview is being published alongside the release of the 2021 NAREIM-Ferguson Partners D&I Survey.
Key highlights from the interview with GCM Grosvenor:
No sacrifice of returns for diversity. GCM Grosvenor’s study of upper quartile IRRs of 264 diverse real estate managers from 2012 through 2018 found that in six out of seven years diverse managers saw an IRR or MOIC outperformance above the Burgiss real estate benchmark.
The industry needs to agree on definitions and standards, such as what constitutes a diverse firm — is it by ownership of the carry or management company?
Reporting needs to be more regular and consistent. Data should be reported quarterly and by a greater number of managers. Values should be reported as “as of” rather than projected, and fees as net rather than gross.
GCM Grosvenor evaluates managers not only on the ability to underwrite, invest and be a great investor, but also whether they are a great fiduciary and will provide transparency at both the financial and human capital levels.
The industry will only become diverse when the junior pool is diverse. When juniors get trained, develop skills and develop networks, they either spin out and create their own firms and jobs, or they stay and run the firm.
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Since 2017, NAREIM has produced a Diversity & Inclusion (D&I) Survey for members through its Compensation benchmarking. In 2021, NAREIM unveiled a dedicated D&I survey in an effort to help the entire industry become more diverse.
Diversity is not just about gender or ethnicity. It's also about diversity of thought and the diversity of ideas within a team. Diversity is about having, and listening to, the different voices at the table to better prepare an investment firm for managing and executing upon situations, such as those we face today.
As part of NAREIM's work focused on Diversity & Inclusion, we invited institutional investors to talk about their perspectives on diversity and inclusion and how they are working with investment managers to deliver lasting change for the industry. Enjoy the conversation.