Over the past few years, the private equity industry has seemingly become more self-aware regarding its gender diversity problem. More women’s groups and diversity-focused conferences are cropping up, and firms like The Blackstone Group and KKR took steps this past year to make their benefits policies more attractive to top female talent, hoping to recruit more women and retain those they currently employ.
But the statistics show that the issue runs deeper than a few improved HR policies can solve. Across the 10 biggest buyout shops, 9 out of 10 senior managers are men. In Europe, women hold only 5 percent of senior industry roles today, according to Invest Europe (formerly known as the European Private Equity & Venture Capital Association). Rarely has pfm visited a mid-market shop with more than one female senior partner.
Evening out this playing field is undoubtedly a difficult task. But women’s groups throughout the private equity industry are hoping to address it. Most recently, London-based Level 20 launched into the sphere, with the goal of boosting the 5 percent figure to an ambitious 20 percent by the year 2020.
Level 20 is targeting what it believes to be the source of the issue keeping women from moving up into senior private equity roles: the executives in mid-level positions who don’t have role models. With so few women in senior roles above female private equity professionals, it is hard to imagine their careers moving forward in the industry, says Level 20 chair and Sofina SA non-executive director Hanneke Smits.
“We’re focusing on mentoring women mid-career, people who are one to five years away from possibly being promoted to these senior positions – women the industry might be at the risk of losing,” says Smits.
A new kind of network
Level 20 was formed and seeded by 12 senior women representing both GPs and LPs, many of whom joined private equity in the 1990s when women were a “rare species” in the industry.
Although there may be a shortage of women in the industry, there are many women’s networks and events offering opportunities to come together and discuss solutions – organizations like the Women’s Private Equity Network, the Women’s Association of Venture & Equity and the Private Equity Women’s Investor Network (PE WIN).
However, when Smits and her co-founders began thinking a few years ago about how their organization would run, they knew they wanted it to be different. First of all, the focus would be on the individual members themselves and their personal career trajectories. The nonprofit would not be affiliated with any particular firm, and membership would be individual-based, rather than firm-based.
Second, they did not want to have a commercial focus or offer conferences, deviating from many similar groups.
“Conferences that only focus on this topic don’t achieve a lot. What ends up happening is that the audience is mostly women, and the speakers are largely women, and you’re preaching to the choir,” says Smits. “Networking is important but that alone will not solve the issue that exists today.”
Instead, Level 20 is taking on mentoring as its top project. The group’s Mentoring Advisory Council, made up of senior HR professionals at firms like Cinven, CVC and Advent, brings together mentees one-on-one with mentors (both male and female) who hold senior roles at different firms. The pairs will meet up at least five times throughout the year, and the mentors will provide guidance to demonstrate mentees’ options for upward mobility and ways to combine their personal and career goals.
The first year of mentoring started this September with 20 pairs, including mentors like Veronica Eng, founding partner of Permira.
“At the end of the day, women’s careers are complicated, and I think many women, whether they look to women in their own firm or within the industry, they need to know that there is a way to do it,” says PE WIN chair Kelly Williams.
Williams has been in close contact with the Level 20 founders throughout the past year as they looked to launch the new organization, providing her expertise from the eight years PE WIN has been up and running. Her group, which focuses on raising the profiles of senior-level women in private equity firms, has amassed to 300-plus members across the US, Europe and Asia.
“Our missions are very complimentary,” says Williams, noting the two groups will likely collaborate on events.
Assessing the impact
Level 20 argues that increased participation by women in the private equity industry is important, especially in leadership positions, because it will lead to not only sustaining but also improving investment performance.
A study from the McKinsey Institute backs up their claim, noting that companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians. Level 20 is currently working to compile its own statistics on the subject.
However, LPs may not put much stock in gender diversity’s impact on performance. A December 2014 Coller Capital survey of predominately male investors found that 88 percent of LPs don’t believe a higher proportion of women in senior positions at the firm would directly impact returns. Those that did (12 percent) said it would make a positive difference.
Outside of performance, a majority of LPs (60 percent) do believe the firm benefits “more broadly” from gender diversity, the study found, in areas like “team quality” and “team dynamics.”
Some LPs have vocally contradicted that 88 percent majority. The chief investment officer of the California State Teachers’ Retirement System Christopher Ailman, for example, is looking for more women in senior roles at the private equity firms with which his pension invests, and before the launch of Level 20, he unknowingly advocated for their method of improving diversity.
“I wasn’t a fan of the idea of quotas, but if you look at Europe and the 30 Percent Club, it is working. And if the industry is just content to tread water on this issue a policy response like quotas may be what we need to do to get the numbers up,” Ailman said in April on a panel at the Milken Institute Global Conference.
To 20 and beyond
A quota is the second big piece distinguishing Level 20 from similar groups. The nonprofit has a quantifiable goal and a timetable for achieving it. While 20 percent may seem like lofty a target, it is not unprecedented. The aim is reminiscent of the group mentioned by Ailman, the UK’s 30 Percent Club. Launched in 2010, the 30 Percent Club has a goal of achieving 30 percent women on FTSE-100 boards by the end of 2015. Currently the figures stand at 26 percent, up from 12.5 percent at the project’s start.
So, can Level 20 really move the needle and quadruple the percentage of women in senior roles in the next five years?
“I don’t see why not,” says Williams. “Certainly there are enough junior women in the industry. If they are applying their approach to mentorship and guidance and if they have positive outcomes in early days, I don’t see why they shouldn’t be able to attain that.”
Smits admits “it does feel ambitious,” but adds that you need to have ambition, “or you never get anywhere.”
An important piece of reaching that goal will be scaling up the mentoring program, which is already attracting more mentors from the industry who are eager to help. Although it’s not yet definitive how many mentees will pass through the program, Smits notes that “20 per year will not be enough.”
The group will also be moving beyond the mentoring to retain talent by collaborating with career centers at leading business schools in order to attract women into the industry, something Smits notes she has not seen happening systematically.
“We want to educate and demonstrate that private equity is exciting and rewarding, both financially and intellectually,” says Smits.