Combating Racial Bias in Finance

Published February 29, 2024
The Best Outcomes Aren’t Black and White.

In honor of Black History Month, we’d like to focus on two pressing truths in our industry. One truth is that Black professionals face numerous systemic and institutional barriers to success and advancement.  A second and less often discussed truth is that the United States is filled with talented and accomplished Black industry professionals. A challenge for us and others is to participate and lead the intentional dismantling of those barriers while simultaneously seeking and supporting such talent.

We must start by recognizing and combating the racial bias that exists in finance. We can do that by better understanding both intentional and unconscious bias and how it presents in our work and our lives outside work. It is no secret that obstacles to access for Black investors have been in place from the start—from high costs and a lack of access to financial education, to the limited availability of traditional banking and investing resources. In addition, when Black individuals do demonstrate an interest in investing, they often face discrimination in various forms. From the general lack of diversity in the financial industry to educational disparities and racism in the workplace, Black investors are often shut out.

From our work on the ground connecting talent with aligned capital, we’ve identified four pervasive issues reported by Black investors and noted as significant roadblocks to capital.

  1. A significant lack of cultural affinity and competency, particularly in the private-equity and venture-capital space.  For this reason, we often do not see sufficient portfolio diversification in institutional portfolios, which leads to concerns about what the future holds for deal activity and the ability to leverage innovation. This is reflected in the lack of Black unicorns (and thus the potential for an additional route towards compelling portfolio exits).
  2. Marketing constraints. Black investors often have a limited marketing budget or bandwidth to participate at various events where family offices and institutional investors are in attendance.  The costs rarely align with the already constrained or nonexistent budget of small funds.  Such costs contribute to the racial wealth gap. This in turn can make it difficult for those who would otherwise allocate to Black investors, as it then in turn becomes expensive and time intensive to find them.
  3. Perceived alignment. Many Black investors face challenges gathering the 1-2% GP commitment needed to show their alignment (the proverbial “skin in the game”).
  4. Accessing tools of the trade: Attorney fees, errors and omissions coverage, and the capital to build one’s back office or retain creditable service providers (by joining platforms such as Prequin, Pitchbook, etc.) are all required to scale and obtain institutional capital, which continues to be a significant hurdle. 
  5. At Crewcial, we embrace the inherent value of diversity, as we believe variant perception is the secret to investment success. When one sees things differently than the rest of the world—and how the market sees things—the result can be extraordinary return opportunities. Such perception is given form by the community one grew up in, age, ethnicity, and gender—in different ways, all these factors (and various others) influence our worldview. This belief naturally leads to greater manager diversity in our search for exceptional, often overlooked managers thinking outside the box, and allows us to build smarter portfolios by capitalizing on various forms of diversification based on this principle.

To better put our beliefs into action:

  • We hired a dedicated professional, our Director of Diverse Manager Equity, in 2016 to expand our network among Black and diverse investors. This helps us remove and address historical systemic barriers to capital for Black investors. This effort has led to Crewcial creating meetings to provide feedback to diverse managers, anchoring talented diverse managers with low levels of assets under management, leveraging our network of peer LPs through various sources to piece together track records, and initiating reference calls in support of diverse managers we’ve underwritten.
  • We have assisted in upgrading Investment Policy Statements to include more substantial language on manager diversity and/or targeted allocations to increase exposure to such managers across client portfolios.
  • We measure and track diverse manager research annually to include the number of all manager meetings; number of diverse manager meetings; number of diverse manager recommendations; and number of diverse manager hires.
  • We regularly participate in sponsorships, conferences, and panel discussions to share our progress, best practices, and most importantly uncover ongoing challenges to better develop actionable solutions.  Through our partnerships with Culture Shifting Weekend, Women of Color & Capital, BLCK VC Institute, the National Association of Investment Companies (NAIC), the National Association of Securities Professionals (NASP), Seizing Every Opportunity (SEO), the Robert Toigo Foundation, and others who have long worked to address the inequities that exist in the financial services industry, we’ve helped create various opportunities to provide Black and diverse investors with a platform to engage and participate in pitch events, which allows for investor introductions and relationships.
  • We have joined the Investment Diversity Advisory Council (IDAC) as a founding member. IDAC provides an ecosystem of likeminded LPs and is intended to convene institutional investors to discuss ways to promote inclusion across their organizations and in their investment decisions, encouraging measurable progress.

There is no dearth of Black talent, yet such talent will not thrive in environments designed for its lack of success. Much research supports how diversity of thought drives innovation, growth, and better outcomes, and we see this on the ground as well. In the words of Katherine Phillips, Columbia Business School Professor, describing her research on this subject for Scientific American in How Diversity Makes Us Smarter, “Diversity jolts us into cognitive action in ways that homogeneity simply does not.” Or, in the words of Booker T. Washington, “Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed.” The life experiences of Black investors incubate a unique perspective able to provide valuable insight.

For too long Black communities have been denied access to capital and the opportunities to invest. Across our industry, we must shed light on the systemic issues preventing such individuals from accessing opportunities, while providing the tools and platform necessary for success. And while sometimes looking at the long road ahead may seem overwhelming, in the words of Frederick Douglass, “If there is no struggle, there is no progress.”

We can do better, and we will.



1. Assessment

Information Gathering: For investment management, gathering information about the economic environment, market conditions, and potential risks and opportunities.

Assessing Threats: Identify threats, such as market volatility, economic downturns, or changes in regulatory environments that could impact the long-term sustainability of the institution’s community support.



Initiating Contact: Establishing communication with stakeholders, donors, and community members, such as updates on financial performance and community impact initiatives.

Building Rapport & Understand Concerns: Transparently communicating investment strategies, financial goals, and the impact of community-support initiatives. Understanding stakeholder priorities is essential for aligning investment strategies with community needs.

Empathy: Demonstrate empathy by considering the social and environmental impact of investments and incorporating ethical considerations into the decision-making process.


3. Building Trust

Consistency: Consistency in financial reporting, mission alignment, and communication. Trust is built over time through reliability and transparency.

Demonstrating Competence: Showcase expertise in financial management through mission-aligned performance to instill confidence in stakeholders regarding your ability to sustainably support the community.


4. Influencing and Persuasion:

Identifying Common Ground: Find common ground between the institution’s financial goals and the community's needs. Align investments with the mission and values of the organization.

Presenting Alternatives: Explore and present various investment alternatives that balance financial returns with the long-term sustainability of community-support programs.


5. Resolution

Negotiated Agreement: Reach a financial strategy that aligns with the institution’s mission and the community's needs. This may involve adjusting investment portfolios, diversifying assets, or exploring innovative funding models.

Termination: For investing, this means the implementation of the agreed-upon investment strategy and ensuring its continued viability.



6. Debriefing and Evaluation:

Post-Incident Analysis: Analyze the impact of investments on the institution’s ability to fulfill its mandate and sustain community support in perpetuity.

Continuous Improvement: Use insights gained from evaluations to refine strategies, adapt to changing financial landscapes, and continuously improve the institution’s ability to meet its long-term goals.