Walk around the offices of your typical private equity firm and you might notice something missing. Despite making up 50 percent of the population, just one in seven senior professionals in the industry is a women, according to the World Economic Forum (WEF).
In a bid to redress this imbalance the WEF has issued a white paper to identify the negative impact of a male-dominated workforce on the asset class and outline practical ways to redress this problem.
Women in Private Equity: The Limited Partner Perspective plays to every LP’s biggest concern: the bottom line. It reframes the discussion of gender imbalance from a “social issue of fairness” to a business issue: diversification in a private equity investment team yields diversification of investments, benefiting portfolios and LPs. Similarly, being able to access the broadest pool of talent is advantageous, the paper says.
“It’s a long-term view,” Maha Eltobgy, director of private investors industry at the WEF, tells pfm. “More and more women are graduating from business school. If private equity firms don’t access that pool of talent, they’ll be held behind.”
LPs have a strong responsibility to bring diversity to the industry, according to the paper. Their beneficiaries are often diverse groups of retired public employees and that diversity should be represented in the types of investments they make.
The paper recommends that LPs factor in gender diversity when assessing GPs.
“We’re not advocating quotas,” says Eltobgy, “but that LPs ask about diversity when they do due diligence.”
The Washington State Investment Board (WSIB) was central to the WEF initiative. The pension, which has been investing in private equity since 1981 and has a 22 percent allocation to the asset class, is working with its consultant, Hamilton Lane, to find the best ways to include gender diversity in due diligence.
“We’re working to come up with a simple reporting mechanism, not as an excluding factor, but more for GPs to pay attention and to continue the momentum,” says Theresa Whitmarsh, executive director at WSIB.
“This has never been to criticise our partners, but more as an understanding of the real structural barriers and to share best practices so GPs are tackling the problem in a systematic way.”
Sandra Horbach, a managing director at The Carlyle Group says her firm is undertaking several initiatives. Women account for 40 percent of Carlyle’s employees, but Horbach notes there is still work to be done in retaining female talent, given that only 17 percent of senior roles are held by women.
As the issue creeps up the agenda, it creates an opportunity, says Horbach. “For young women, there’s never been a better time to enter private equity because there’s a significant awareness of the lack of diversity,” she says. “You’ll have an abundance of opportunities.”
10 Best Practices
1. Set goals for gender diversity. Start somewhere
2. Leverage scale to take the lead in improving PE diversity
3. Get clear commitment from firm and industry leadership
4. Create a sponsorship path for women associates that includes both responsibility and visibility
5. Include gender diversity components in training and professional development
6. Include gender diversity guidelines in recruiting and hiring practices
7. Extend hiring efforts
8. Develop metrics, policies and values related to gender diversity when conducting due diligence
9. Evaluate progress by gathering feedback and metrics
10. Share best practice or success with industry peers
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: