The statistics are discouraging. Women globally hold 18 percent of roles in private equity and 9.4 percent of senior roles, according to a 2017 PricewaterhouseCoopers report. This figure is even worse than venture capital (11.5 percent women in senior roles) and hedge funds (11.2 percent).
Encouragingly, pressure is ramping up from all sides for firms to address gender diversity seriously — and not just for optics. Funds with gender-balanced senior investment teams see better returns, according to a March 2019 study from the International Finance Corporation and Oliver Wyman. The study found returns were 10 to 20 percent higher for gender-balanced teams than majority male or majority female senior investment teams.
“LPs pushing for diversity is the most powerful way to encourage change, and that’s finally starting to happen,” says Liz Griggs, founder and managing partner of Grantchester Group, which invests in healthcare and energy companies.
The Roots of the Imbalance
“The private equity industry has always been male-dominated, as demonstrated by the names that established and built it up in the 1980s and 90s: Kohlberg, Kravis, and Roberts. All were men, just like Steven Schwarzmann, the Blackstone founder, or David Bonderman, James Coulter, and William S. Price, the founders of the Texas Pacific Group,” notes the PWC report.
Many of the original founders of today’s private equity firms are still in positions of leadership. “Private equity is an apprentice business. Most people hire and invest in people who are similar to them — which in the case of private equity happens to be mostly white men. Then the standard perpetuates itself,” says Suzanne Yoon, founder and managing partner of Kinzie Capital Partners, which invests in lower-middle market companies in the consumer, services, and manufacturing industries.
In addition, women may be reticent to apply for jobs in an industry with so few examples of female leadership, compounding the problem. When private equity firm adventur.es, which invests in North American companies with owner earnings of $2.5 to $14 million per year, was looking for a new CFO, they received over 300 resumes — but not one of them was from a woman.
“We went as far as doing a text sentiment analysis of our job description to figure out if there was some sort of inherent bias in it,” says Emily Holdman, vice president at adventur.es. “We’ve tried to integrate things like using the female gender when explaining things to show inclusivity, but still the ratio is insane. We get female candidates for fewer than 5 percent of any jobs that we post on our website.” This figure is even more striking given that adventur.es has a female president — a relative rarity — and an explicit focus on encouraging diverse applicants.
In order to achieve gender diversity at the senior level, building a pipeline of junior talent is important. But there’s an inevitable time lag while these women gain the skills and expertise to move into leadership roles. Plus, it’s not guaranteed that they’ll stay in the field if there isn’t a clear path to the top and they don’t have mentors to support them. “Retaining women isn’t just about providing opportunities for advancement, but also real mentorship as well at every level. I’ve been really fortunate in my career to have some great mentors — many of whom were men — who were instrumental to me growing as a professional,” says Amber McCants, managing director at private equity firm IMB Development Corporation.
Pressure at the Top
“When a woman becomes a partner or managing director or even a senior portfolio manager, people tend to think she’s made it. But often it brings with it new challenges and a sense of isolation. You become a peer to the men who may have mentored you along the way, or even senior to some of those men, and the dynamics start to change. That can be very challenging,” says Kelly Williams, founding chair at Private Equity Women Investor Network (PE WIN), an organization for senior women leaders in private equity.
Many women think about leaving, or do leave, the industry at this point. “Women at this level are well-paid and have a sense of autonomy, but often feel that they’re not involved in creating the overall culture of the firm — they don’t have a say when it comes to hiring or firing or compensation, for example,” says Williams.
In response, PE WIN started an initiative three years ago called Project Pinklight to encourage senior women to start their own firms rather than leave private equity behind. Project Pinklight includes an in-person bootcamp in which would-be founders receive feedback on their pitches from LPs and GPs. To date, 11 female-led firms have graduated from the program and together closed on a total of more than $400 million.
Yoon went through Project Pinklight in the process of founding Kinzie Capital Partners in 2017. “I was really good at doing deals, but I had to learn how to run a firm,” says Yoon. Kinzie closed its debut fund this June, after making three minority investments with her partners outside the fund over the past few years.
Project Pinklight, and PE WIN more generally, grew out of a recognition of the unique pressure on senior women in the industry. “Whether you succeed or fail, there’s always the fear that people will attribute it to the fact that you’re a woman, and in my case a woman of color,” says Yoon. PE WIN continues to be an important pillar for her. “You need support around you and a brain trust of people who are rooting for you and whom you can have really frank conversations with. I’ve had a lot of male mentors as well, but I would not have had the courage to leave and start my own firm without my female mentors and friends,” says Yoon.
PE WIN is unique in that it focuses on women in the top ranks of private equity, but there are a number of other organizations focused on women in the field, including Exponent Women, Women’s Association of Venture Equity (WAVE), and multiple local women-specific ACG chapters.
Expanding the Ranks
Farrah Holder, a director at IMB Development Corporation, took a few twists and turns on her way to private equity. She started out in investment banking after college and went to business school with the goal of investing in and growing minority and women-owned businesses (MWBE).
However, seeing the lack of diversity at the professional levels in most private equity firms did not make PE seem like the most accessible path to achieve this goal. Instead she worked in marketing and business development for a number of companies before starting her own consulting firm. As luck would have it, she eventually connected with the investment industry when IMB, which has an explicit focus on investing in MWBEs, became a client. Through her consulting work, she went on to join the IMB team as an investment professional.
Such a varied career background is not necessarily typical for the private equity field. But being more open to career-changers with complementary experience may be one of the most feasible ways to expand the ranks of mid- and senior-level women in private equity at this point in the game.
The executive ranks are particularly challenging for women outside the industry to break into. “The issue is that you have to bring an asset with you. Partners do not want anyone to join at the partner level if they don’t bring an asset with them — they don’t want to take away from the pie they’ve built,” says Grantchester Group’s Griggs. “But there are women who have been in related industries, who have 20 years of operating experience or asset management experience and who can bring revenue generators with them.”
Griggs’ firm is currently implementing a strategy to make finding these women easier, by acquiring a large global women’s executive talent firm and setting up a pipeline with private equity firms looking to diversify at the leadership level. “There are so many talented female operators of companies at senior levels that could really add value to a private equity firm. They’re great at running companies and they’re great operators, and we can and should bring them into the private equity fold.”