Investors and Black-owned companies are suffering from a lack of equity capital, a lack and a high proportion of their workforce are African-American, a survey of nearly two dozen companies by Fidelity Investments has found.
The report, The Black Investor, has found that about three-quarters of firms with an African- American partner or co-owner had been outbid by companies owned by black-led businesses, while the proportion of African-owned firms is almost equal to the proportion with an American partner.
Black investors are the fastest-growing segment of the US stock market, overtaking white investors in terms of number of investments and capital, the report says.
It says this is in part because the Black community has become so dominant in the financial industry.
Fidelity said it had collected data from 2,100 firms with African-Americans as partners or coowners between 2007 and 2017, and that this represented just a tiny fraction of firms.
It said the figures do not include firms that are owned by African-born partners or other minority shareholders.
The study, which examined the investment and performance of firms owned by minority investors, also found that investors who owned African-founded firms fared worse than investors who did not, and those who owned black-founded companies had worse returns than their counterparts.
“It’s a problem because when you have that kind of concentrated impact on the black community, you’re going to get a lot of negative consequences,” said Michael Breen, Fidelity’s senior portfolio manager for African-backed firms.
“And it can have a disproportionate impact on companies owned and operated by African Americans.”
This is an issue that is being looked at across the country,” he said.
The black-dominated sectors of the financial and retail sectors account for one-third of the nation’s total wealth, according to the Pew Research Center.
The largest groups of minority-owned enterprises are tech firms, real estate and finance, with about one-quarter of firms, or about 30,000, of those being owned by blacks.
“The Black Business Council believes it’s important that we provide a framework for a sustainable and prosperous economy that is built on shared prosperity.” “
This is a serious and sobering reminder that we still have work to do to make our economy more equal and more inclusive,” said Kevin Naylor, the group’s president.
“The Black Business Council believes it’s important that we provide a framework for a sustainable and prosperous economy that is built on shared prosperity.”
The Black Investment Initiative, which is run by Fannie Mae, Freddie Mac and the Federal Housing Finance Agency, says black-based investment companies contribute about 4 per cent of the total market capitalisation of US firms, and have a $2.6 trillion (US) market capitalization.
The Fidelity study was based on publicly available data, with a sample of 2,000 firms and a sample size of 2.5 million firms.
Fannie said it was not involved in the study.
Freddie Mac said it is “committed to supporting and investing in the development of diverse investment opportunities, including minority- and women-owned and operated companies”.
The US Department of Justice has launched a civil rights investigation into the Fiduciary Trusts and Fidelity, which it said “failed to ensure that the firms’ investments in black- and Hispanic-owned lenders met fair and reasonable standards of business practice”.
Black businesses are less likely to receive loans from the federal government than those owned by white-owned banks, according a 2014 study by the National Bureau of Economic Research.
The federal Department of Housing and Urban Development (HUD) has been reviewing FiduTrusts for several years, and has asked the Securities and Exchange Commission to examine the companies’ investment practices.
FidUTrusts, the biggest investment firm in the US with a market capitalised as of June 30, 2017, include the New York-based National Mortgage Bank, the Atlanta-based First National Bank, and the Detroit-based Mortgage Bankers Trust.
Fintech, which includes companies like Fidelity and the financial technology firm Wealthfront, is the fastest growing technology sector in the United States, and is worth $15.2 trillion.
It employs more than 100,000 people.
Firms with black-lead investors have made more than $5.6bn in profits in the last 12 months, compared with $3.4bn by those with white-led partners, according an analysis of filings by the Securities Industry and Financial Markets Association (SIFMA).
A spokesperson for Fidelity declined to comment.
The Securities Industry Association of America (SIFA) said it supported efforts to ensure minority-led firms were investing in companies that had equity, but that it also wanted to make sure that they were diversified.
The group said it would work with the SIFMA to examine ways to improve the performance of minority investors.
“In order to ensure fair treatment for all investors, the S