Return on Inclusion | November 21, 2022

VC Include’s Bahiyah Yasmeen Robinson on three drivers of inclusion alpha (podcast)

David Bank
ImpactAlpha Editor

David Bank

ImpactAlpha, November 21 – Bahiyah Yasmeen Robinson is nearly one-third of the way toward her goal of seeding 100 women and historically underrepresented fund managers by 2030.

But “seeding” is not enough for the founder of the nonprofit accelerator VC Include and the for-profit Include Ventures, a fund-of-funds and direct investment vehicle that has raised more than $20 million toward a $250 million target. 

The goal? “To make sure that they build resilient, institutional-grade asset management firms,  that they’re growing from a Fund I, to a Fund II and a Fund III,” Robinson says on ImpactAlpha’s Agents of Impact podcast, recorded during Include’s recent gathering in Berkeley, Calif.

Include aims to increase 10-fold the 1.4% of U.S. assets under management that are entrusted by investors to firms owned by women or people of color. 

“It’s not enough to just raise your first fund. It has to be value-creating, alpha-generating and you’re supposed to be able to raise your second fund and your third,” Robinson says.

The dozen managers in Include Ventures’ latest cohort bring the platform’s portfolio of fund managers to 32, including 10 diverse-led climate funds that received $100,000 in operational funds through VC Include’s Climate Justice Initiative.

The newest cohort is distinct in that all have raised at least some capital and are in position to close their funds in the next 12 months. In coming weeks, ImpactAlpha will present podcast interviews with some of the managers, including Aisha Weeks of the Dearfield Fund for Black Wealth, Toussaint Bailey of Uplifting Capital, Eunice Ajim, Ajim Capital and Himalaya Rao of The BFM Fund.

Generating alpha

A growing body of research suggests that diverse-led fund managers are able to outperform less diverse firms, including by identifying underappreciated markets or opportunities and spotting entrepreneurial talent that may have been overlooked by other investors. 

Robinson said a second source of outperformance is in backing so-called “first-time” fund managers who traditionally have had difficulty making it through the screens of most institutional limited partners. Many of VC Include’s managers in fact have a track record, either as operators and entrepreneurs or as investment professionals in other firms who are now spinning up firms of their own.

The third element stems, in part, from the historic tendency to underestimate founders and fund managers of color. 

“I talk about it as underpriced or mispriced product in the market, whether it’s undervalued and at a lower valuation or what as an investor I call a discount,” Robinson said. “More traditional venture capital and private equity firms just don’t understand that market opportunity like we do.”

Raising a first fund is only the beginning of the challenges diverse managers will face. Research in 2019 from Illumen and Stanford SPARQ found that racial bias in asset management, implicit or otherwise, is systematically excluding Black fund managers from securing allocations. The kicker: The bias is actually worse against high-performing fund managers. Even for first-time managers that get a boost, bias seems to increase as managers of color achieve stronger credentials. 

“They’re losing out on alpha, because of their implicit bias,” Robinson says. “We’re trying to change hearts and minds around where the opportunity set is, and that everyone will benefit by investing in high-performing, outperforming diverse and women-led managers.”