Mequon-based Capital Midwest Fund is now investing with a newly announced diversity, equity and inclusion (DEI) initiative in mind.
As part of the DEI initiative, CMF will proactively invest in female founders and racially diverse founders. CMF will also work with its portfolio companies to develop DEI initiatives at the company level.
Michael Harper, partner at Capital Midwest Fund (CMF), was previously a trustee for Milwaukee County’s pension plan, which is where he first realized the lack of diversity and inclusion in asset managers that were being hired locally.
“It became a priority from the perspective of a fiduciary to address (that lack of diversity) in terms of policy and looking at ways to increase the number of asset managers that were diverse,” Harper said.
After officially joining CMF last year, Harper continued his mission to address diversity and inclusion. He said a major part of CMF’s DEI plan is addressing an equity component often lacking in other initiatives.
“The major equity component that is missing is in ownership and economics. A lot of (DEI) efforts will go forward and say, ‘Well we’ve hired more women.’ Okay, that’s what you should do, but where did you hire them? Did you hire them at staff level, or did you hire executives?” said Harper.
He said to really produce results, a DEI initiative should address opportunities for mobility, pay equity and shared economics. CMF’s commitment to DEI is further reinforced by CMF itself being minority-led. Two of the three partners of CMF’s recently announced fourth fund, Alvin Vitangcol and Harper, are minorities. CMF’s fourth fund closed last November with over $41 million raised.
“As far as our initial investment in Fund 4, one of our first investments was with a female founder. If anything is evidence to our commitment, it’s our first investment with Shoptelligence out of Michigan. It’s a level of intentionality when it comes to finding talent and you have to want to broaden your views,” Harper said.
CMF, across its first three funds, has 13% of its investments in female-founded/female-led companies, and 24% of its investments in minority-founded/minority-led companies. This compares with U.S. startup benchmarking, based on 2018-19 data provided by Diversity VC in its Diversity in U.S. Startups report, of 11% female-founded/female-led companies and 28% minority-founded/minority-founded companies.
“We have unintentionally done a reasonable job with DEI historically, at least compared to the industry benchmarks, but a more intentional DEI strategy will provide more opportunities for female and minority founders, while we maintain our core investment criteria, which has led to success in past investments,” said Alvin Vitangcol, partner at CMF.
CMF this week is submitting their DEI plan to eVestment to be used as a platform to assist other investors with identifying asset managers who are also focused on DEI. CMF is also working to become a signatory to the Institutional Limited Partner Association’s Diversity in Action pledge. They have already pledged to follow the UN Principles of Responsible Investment.
