Aug 17, 2020 · 52m · capital-allocators
Diversity, Equity & Inclusion 2: Kim Lew – The Opportunity and Challenge (Capital Allocators, EP.152)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Kim Lew, Chief Investment Officer of the Carnegie Corporation of New York, exploring her personal journey through institutional finance, actionable strategies for building diverse investment teams, and empirical frameworks for evaluating external asset managers.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 18.9% of the talking time here. How this is scored →
Ted as informed peer 4.5 Guest teaching 5.7 Guest disagreement 1.1 Ted pushing back 0.4
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 33:45 Kim calls out underlying bias in return distribution skepticism
Kim forcefully rejects a peer CIO's doubt about diverse manager returns, stating that doubting equivalent performance distributions implies an underlying belief that minorities and women are inherently less capable.
Hardest push from Ted ▶ 36:40 Ted challenges the thesis on outsized alpha in emerging diverse firmsTed presses Kim on why allocating capital to emerging minority managers generates a higher return given that private equity and active management are mature, consolidating industries.
Biggest teaching moment ▶ 23:15 Kim dismantles collegiate sports screening shortcutsKim systematically demonstrates how standard allocator filters like collegiate lacrosse experience create unconscious racial barriers, offering restaurant work coordination as an overlooked proxy for teamwork.
Ted holds their own ▶ 36:22 Ted articulates structural market maturation across alternativesTed leverages his deep institutional industry knowledge to question whether mature asset class dynamics and fee pressures impede new entrants regardless of diversity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Northern Trust Front Office Solutions Sponsorship | 0 | 0 | 0 | 0 | Ted opens the episode with sponsor acknowledgments and frames the DEI mini-series as an educational initiative following Black Lives Matter protests. As a solo introductory monologue, all interactive metrics are baseline zero. | |
| Kim Lew's Upbringing and Dual Cultural Identity | 4 | 5 | 0 | 0 | Ted prompts Kim to discuss her childhood navigating dual African American and Chinese immigrant parentage. Kim details how she proactively disclosed her background to weed out prejudice early. | |
| Childhood Encounters with Systemic Bias in the Bronx | 3 | 6 | 1 | 0 | Ted asks whether racial bias felt pervasive growing up. Kim educates him on the necessity of 'the talk' in Black households and recounts police interrogating her as a suspect after a stray bullet entered her Bronx apartment. | |
| Navigating Early Career Microaggressions and Sexism | 4 | 6 | 1 | 0 | Kim distinguishes between race and gender dynamics early in her career, detailing overt sexism at Chemical Bank where male executives casually suggested 'putting Kim on the table' to win deals. | |
| Business School Isolation and Cultural Barriers | 3 | 7 | 2 | 0 | Kim recounts overt racial slurs on her first day at Harvard Business School and peers rationalizing state lotteries as the sole hope for minorities, explaining how isolation chills classroom participation and networking. | |
| Transitioning to Non-Profit Allocation at Ford and Carnegie | 5 | 4 | 0 | 0 | Ted probes Kim's career pivot to foundation endowments. Kim explains the generational and non-adversarial environment at the Ford Foundation under Clint Stevenson, contrasting it with Carnegie's collaborative culture under Ellen Shuman. | |
| Cultivating Diverse Teams and Cognitive Pluralism | 5 | 6 | 1 | 0 | Kim discusses building cognitive diversity at Carnegie, including hiring an Asian male with fund-of-funds experience to introduce devil's advocacy and balance an all-female team. | |
| Evaluating Manager Biases and Eliminating Screening Shortcuts | 6 | 8 | 2 | 1 | Kim critiques institutional shortcuts in manager screening, such as using collegiate lacrosse as a proxy for teamwork, and illustrates how alternative proxies like service industry experience capture similar traits without excluding minorities. | |
| Portfolio Diversity Scorecarding and Performance Linkage | 6 | 7 | 1 | 0 | Kim explains Carnegie's portfolio scorecarding process, revealing an unexpected empirical finding: managers who ranked highest in historical and forward-looking performance independently held the highest diversity scores. | |
| Carnegie's Manager Diversity Rating Methodology | 5 | 5 | 0 | 0 | Ted asks how Carnegie operationalizes its diversity metric. Kim outlines their 1-to-3 grading methodology focused on ownership, senior decision-makers, and trajectory over time. | |
| Debunking Return Dispersion Myths in Diverse Sourcing | 5 | 8 | 4 | 0 | Kim recounts confronting a skeptical peer CIO, arguing that believing diverse managers have worse return distributions logically implies assuming minorities are fundamentally inferior, whereas structural barriers actually weed out mediocrity. | |
| Uncovering Outsized Alpha in Emerging and Diverse Funds | 7 | 6 | 2 | 4 | Ted challenges Kim on why early-stage minority managers offer better opportunity given industry concentration and passive tailwinds. Kim clarifies the distinction between macro industry impact and finding nimble alpha. | |
| Illiquid Assets, Network Bottlenecks, and Apprenticeship | 6 | 5 | 0 | 1 | Ted and Kim discuss network bottlenecks in private equity and venture capital. Kim notes the necessity of institutional apprenticeship programs to build access networks for spinout firms. | |
| Industry Leadership, Mentorship, and Pipeline Organizations | 4 | 5 | 0 | 0 | Kim highlights her board and mentorship involvement with SEO, Toigo, NASP, and Girls Who Invest, invoking Michelle Obama's dictum that sitting in a position of power without advocating for others wastes the seat. | |
| Dismantling Scarcity Mindsets in Institutional Finance | 4 | 7 | 3 | 0 | Kim diagnoses zero-sum scarcity mindsets as the core barrier to DEI progress. She references HBS historically adding an entire section to expand minority admissions without reducing existing slots. |
Statements from this episode (23)
Lew on navigating mixed-race identity across different racial communities
“Being half black and half Chinese brings with it two very different stereotypes, and sort of navigating through that meant different things to different people, and so I could find myself in an uncomfortable position everywhere. It could be uncomfortable in th…”
Lew: Positive Asian stereotypes provided early access and advantages
“I'm also painfully aware that the positive stereotypes of being Asian also helped us In those environments, like it gave us access to a lot of things, or people assumed, like they assumed I was good at math for some reason, and so when I was good at math, peop…”
Lew: All Black Parents in Urban Areas Have 'The Talk'
“I don't think that there's any Black parent, especially a Black parent living in the neighborhoods I lived in, who don't have the talk with their kids about what it means. To be an African American, especially in a place like New York City, where they don't ta…”
Lew: Alienation and Self-Doubt Severely Hinder Class Participation at HBS
“It's really hard to do well at HBS if you don't speak up in class. If you have so much self doubt and you are always wondering about whether someone is perceiving you as not belonging there or less than, it's much harder to speak up than it is when you feel li…”
Carnegie deliberately hired an Asian man to diversify a female-heavy team
“And honestly, we started with trying to add a man. Because our team was so heavily women, and I said that in a conference one day, because Ken Lee was the hire, and he's a, obviously a man, and he's an Asian man, and at a conference, I said he was our diversit…”
Kim Lew: Understanding diverse perspectives gives investors an edge
“There is going to be advantages to those who take the time to understand that not everybody thinks like you. Not everybody has your same shared experience, and so the reaction to this thing is not going to be the same. And so you can leverage that to make good…”
Lew: Slow turnover and concentrated portfolios hinder foundation manager diversity
“The turnover in our portfolios is really slow, so if you're not purposeful and deliberate about it, it's difficult for it to happen, and I also think we have really small teams, so we're always trying to have really concentrated portfolios, and so all that sta…”
Screening talent using elite sports like lacrosse inherently disadvantages diverse candidates
“Well, if that's your bias, you are going to disadvantage people of color. Let's just instead think about what Someone being on the lacrosse team tells you about them, and is there another proxy for that? That is more applicable for a person of color, or a pers…”
Diversifying large asset managers creates more impact than funding emerging ones
“I'm actually Of the belief that the bigger impact will be on getting the large firms to be more diverse. That has a bigger overall impact than funding diverse managers. Although I think the more bang for the buck is finding these new diverse managers to suppor…”
Carnegie found a direct correlation between manager performance and diversity scores
“There was a direct correlation to the highest ranked members of our portfolio. Those with the highest scores also had the highest diversity scores, and those were done independent of each other, and it was good to see, and it was good for us to then go back an…”
Carnegie evaluates asset manager diversity using a one-to-three scoring system
“We only score, it's one, two, or three. So it's sort of a blunt instrument. So I don't want to imply that it's not. One is you have diversity in your team. You have either ownership, decision-making of women and underrepresented minorities in your leadership. …”
Carnegie expects all portfolio managers to achieve a diversity score of two
“We don't want anybody in the portfolio not to be at least a two over all the different metrics, but it's about being better.”
Research shows diverse manager return distribution exactly matches general funds
“The research has shown that the distribution in diverse and women managers is exactly the same as the distribution in the general funds without a diversity lens.”
High fundraising hurdles should make funded diverse managers perform better
“Arguably, they should be better because it's so hard for a diverse talent to get capital. If you do, chances are you're good, right? Like you may not be great, but you probably weed out all the average because there's not a lot of rich dads who give their dive…”
Lew: Diverse fund challenges stem from sourcing and business-building, not investment ability
“I do think there's a sourcing issue, and there's a business building issue, but I don't think there's an investment issue.”
Lew: Outsized investment returns come from new perspectives unearthing untapped inefficiencies
“The best returns comes with out of the box thinking. These large firms are already seeped in how they do things. They have an established playbook. They will continue to execute on that playbook. Hard to compete with them on the playbook they have established.…”
Lew: The biggest opportunity for diverse perspectives is in illiquid alternatives
“That said, probably the biggest bang for the buck is in alternatives. It's probably in illiquid asset classes. It's in people who think differently about venture or private equity and Even probably real estate on some level.”
Lew: Bank and PE analyst programs remain critical for diverse networks
“It's still important for people to have programs that cultivate diverse talent at investment banks, at commercial banks, at private equity firms as analysts. I mean, that's still hugely important because that's where the networks come from.”
Lew: Most successful Black and Hispanic bankers have links to SEO
“They had a phenomenal alumni network, just all the highly successful people who are Black and Hispanic people have come out of the investment banking industry since that era. Most of them have some links to SEO.”
Lew: Scarcity mindset is the biggest barrier to diversity in finance
“I think it's the perception that the pie is shrinking. It's the biggest obstacle, right? Like it's really hard to For people to think outside of themselves when they feel threatened. If you think as a person in a position of power, if you think that in order f…”
Harvard Business School historically increased Black enrollment by adding a new section
“The way that they were able to increase the number of black students at HBS is by adding a new section. So no one felt threatened. We just have a brand new section. It's not like all the African-American people are in that one section. We sprinkle them through…”
Lew: Managers should own self-interest instead of feigning LP alignment
“I think my biggest investment pet peeve is one, when you have a conversation with a manager about alignment,
And they try to pretend that they either don't understand it or that they are aligned.
You know when you're not aligned.
You know when you're propos…”
Investment mistakes often stem from expecting flawed managers to eventually change
“I think every one of my investment bad mistakes are things where there was something about it that wasn't quite right, but I thought they just need to be shown the way and they will change that thing.
People only change when they want to change.
You can't ma…”