Private equity industry challenged on lack of diversity

Private equity industry challenged on lack of diversity

18-10-2019 | Insight
Improving diversity is of rising importance in the private equity industry, an annual Robeco ESG report indicates.
  • Silva Dezelan PhD,
    Dezelan PhD,
    Director Sustainability, Private Equity

Speed read

  • Private equity industry characterized by lower diversity
  • Female participation is much lower than in other asset classes
  • Industry initiatives to boost recruitment and improve image

Diverse representation is still relatively low compared to the broader asset management industry, and even lower when compared to other industries, according to the Robeco Private Equity ESG report 2019.

“Being multi-dimensional by nature, diversity does not have a single definition,” the report says in the introduction to a chapter in the report entitled ‘Diversity and inclusion in private equity’.

“It might encompass readily detectable attributes, such as gender, race, ethnicity, etc., underlying attributes that are detectable only after getting to know an individual (such as personality, personal style or values) or attributes related to both of these categories, such as education or occupation.”

However, one key issue that can be analyzed fairly simply is the gender imbalance at the top of the industry, as much more reliable data and media coverage is available for this than for other forms of diversity. Research by the alternative assets data provider Preqin and the accounting firm KPMG shows that:

  • Only 17.9% of private equity employees worldwide are women. This is the lowest figure of any alternative asset class and is unchanged from 2017
  • Less than one in ten (9.9%) of senior roles at private equity firms are occupied by women, and just 5.2% of board members are female, up from 4.1% in 2017
  • Only 7% of private equity firms have a female chief executive officer or chief investment officer, compared to 27% in venture capital. The number of women CEOs is unchanged since 2016, while the number of female CIOs has decreased.

“Various reasons have been put forward to explain the low female representation,” the Robeco ESG report says. “The gender imbalance is rooted in the perception and the image of the industry, the recruitment process, career advancement opportunities, the work-life balance and the workplace culture in private equity firms. The gap starts with the number of women who are recruited for entry-level positions in private equity, and then widens during career advancement.”

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates

Barriers and ways to overcome them

The bias towards requiring prior experience in banking or consultancy – even for entry-level positions – is one factor hampering recruitment, the Robeco ESG report suggests. Another is the perception that the private equity world has a less conducive work/life balance, which puts off many female candidates. A lack of provision of maternity leave and inflexible working practices further prevent women from climbing up career ladders, the report says.

The industry therefore needs to raise its game, starting with a greater awareness, the research referenced in the Robeco report suggests. “Both general and limited partners can play a role and take action to help remove the barriers that keep the gender imbalance in private equity in place,” it says. “To start with, some of the barriers – such as those related to closed networks, unconscious biases, or lack of diversity commitments – call for joint efforts from multiple stakeholders.

Citing recommendations from within the industry for how to address the gender imbalance, private equity firms are advised to:

  • Expand the pipeline in recruitment and integrate diversity aspects in the hiring process through university level internships
  • Set diversity quotas for the list of candidates, and use a mixed interviewer group, including senior female representatives
  • Improve talent retention through unconscious bias training and fast-track women and diverse candidates for partnership considerations to create clear possibilities to reach the next career level
  • Create an open and non-hostile work environment and an inclusive culture in which a diversity of backgrounds are free to compete
  • Adopt a much greater flexibility with respect to working time and place

Investors who commit funds to private equity firms – known as limited partners – can also play a role, the report says. “Limited partners can advocate diversity and push the agenda by asking questions about what private equity firms are doing to increase diversity in their investment teams in the due diligence process and in the advisory board meetings,” it says.

And the signs are encouraging, as a KPMG survey on women in alternative investments showed that 75% of investors reported plans to challenge investment firms on their gender diversity in the coming year, up from 60% in 2016. Some 42% said they would require firms that manage money for them to improve diversity, up from 11% in 2016.

Initiatives to improve diversity

Robeco’s own engagement program with its private equity partners is raising the issue of diversity this year. An analysis of responses to the 2019 ESG survey showed that the majority of general partners (71%) have some diversity-related activities or initiatives in their own firms, or in their portfolio companies.

However, just over one fifth of the managers have a diversity policy, principles or standards in place. This could be in the form of a separate policy document, or included in the firm’s code of conduct. About one third of the managers engage with their portfolio companies on diversity in some way. For example, 20% of the responding managers focus on building more diverse boards in their companies.

Meanwhile, there are various initiatives to improve diversity, such as Level 20, a not-for-profit organization set up in 2015 to inspire more women to join and to succeed in the private equity industry. Other groups include the Private Equity Women’s Initiative and the Association of Women in Alternative Investing, among others.


Important information

The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).

This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.

This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.

I Disagree