HBCU students diversify alternative investing with help from Wall Street firms

  • The AltFinance Fellowship introduces more than 100 students at historically Black colleges and universities to a $10 trillion industry that includes private equity, private credit, and commercial real estate.
  • Ares Management, Apollo Global Management and Oaktree Capital Management are spending $90 million over the next decade to fund the exchange.
  • In 2020, black people made up 1% to 2% of investment teams in the private equity industry, according to McKinsey.

Antony Ressler, co-founder of Ares Management, takes photos with AltFinance scholarship students.

Marcus Shaw, AltFinance

The search for bigger profits and top talent is nothing new on Wall Street, but some companies are turning to a nearly untapped resource: historically black colleges and universities, or HBCUs.

The AltFinance Fellowship is the brainchild of top alternative investment firms Ares Management, Apollo Global Management, and Oaktree Capital Management. The three companies are investing $90 million over 10 years in the program, which provides more than 100 HBCU students with paid experience, mentorship and networking opportunities.

Selected students will also receive a scholarship of up to $10,000 if they are in their second year, while juniors and seniors can receive up to $15,000. Partner schools include Clark Atlanta University, Howard University, Morehouse College, and Spelman College.

The program aims to give students of color an opportunity in a booming industry that hasn’t been the most diverse. The private equity, private credit and commercial real estate sector has about $10 trillion in assets under management, according to data provider Preqin. Meanwhile, in 2020, black people made up 1% to 2% of investment teams in the private equity industry, according to management consultancy McKinsey.

“It’s not a charitable activity,” Howard Marks, co-chairman of Oaktree Capital Management, told CNBC. “I think it has socially beneficial aspects. But that’s not the only reason we do it. We also do it because we think it can enrich our organizations.”

Indeed, chief investment officers at top institutional investors said they would allocate 2.6 times more capital to more ethnically and racially diverse private equity teams if they chose between two comparable companies, according to a McKinsey 2022 report.

Marc Rowan, CEO of Apollo Global Management, and Marcus Shaw, CEO of AltFinance

AltFinance also gives students the opportunity to enrich themselves. Alternative investing has exploded since 2000 following the dotcom bubble, according to Preqin. Additionally, employee compensation in the industry can be lucrative even as new graduates begin their careers.

In 2020, the average base salary for associates — an entry-level position — at private equity firms was $137,000, according to data from executive search firm Heidrick & Struggles.

“That’s the potential for generational wealth growth,” Brittany Clark, a sophomore at Howard University, told CNBC.

“Coming from humble beginnings myself, I didn’t know much about alternatives or finance or the jobs and opportunities available to me. said Morehouse College senior Joseph Ramirez. “Now I’m learning the tools to be able to build generational wealth.”

AltFinance CEO Marcus Shaw said the program’s potential impact goes beyond Wall Street.

“The students we have in our program were destined for greatness no matter what path they were to take.” Shaw told CNBC. “But by giving them the opportunity to look behind the veil and see what awaits them in the career of alternative investments, [it] creates another opportunity for them to create wealth for themselves, their families and their communities. There’s a trickle-down effect…that will not only create stronger families for them, but stronger communities.”

Ares Management co-founder Antony Ressler and Apollo Global Management CEO Marc Rowan both said the exchange has the potential to increase representation in the industry in the near term and earnings for long-term businesses.

“We’re a culture of finding what’s not well understood,” Rowan told CNBC. “And more and more that comes from the diversity of perspectives around the table, the diversity of backgrounds and the diversity of ways of looking at things, and then the diversity of the ability to develop [and] convey a message to a diverse set of customers. »

“The more prospects you have, the better off you are as an investor.” Ressler told CNBC. “So the idea of ​​being a more diverse company, for us, is positive. It’s good for business. It’s good for our investment decisions. It’s good for our employee base. And that’s precisely what we think we should be doing.”

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