Every March for the last 12 years, a few hundred women who make their living in the private markets have convened in sunny coastal California for the Women’s Private Equity Summit. This has always been an important and fruitful gathering – an unmatched opportunity to network with peers, mentors and mentees, and to hear from the female luminaries who have and are currently carving pathways for the rest of us. But, this year, the event felt especially significant.
The conference took place amid a smattering of recent studies on the topic of women in the private markets, including one from Preqin reporting that women still only account for 18% of the asset class, and that the percentage of senior female investment professionals hasn’t budged since 2017. The IFC also reported on gender balance, finding a great discrepancy between the numbers of men and women in the private markets, with men attributing that fact to difficulty in finding female talent and/or low levels of interest in PE by women. Women, on the other hand, see the issues having been created by a lack of prioritization by PE firms, difficulties in recruiting and hiring practices, and issues with retention.
With this narrative as the backdrop, it’s probably not surprising that the issue of gender diversity came up in many of the keynotes, panels and breakout sessions; however, it was not the primary focus of the conference.
Speakers from all varieties of LP and GP firms offered candid views on the shape of the market and what keeps them up at night (or not!):
- Co-investing: LPs discussed importance of CI and several have upped Staff delegation authority to facilitate growth of their CI programs.
- Secondaries: As the market has evolved, some LPs are using secondaries differently than in the past – instead of to mitigate the J-curve, as a way to access high-quality GPs.
- Private Credit: Substantial growth of the asset class and a proliferation of funds to choose from is driven in part by LP demand due to current yield component, j-curve mitigation, strong returns and downside protection in the context of being in late innings of the cycle.
- Do terms still matter? Yes, yes, yes – although hot button terms vary by LP.
- Concerning trends: The use of bridge financing when used specifically to enhance a fund’s IRR; the increase in sponsor-to-sponsor deals, and the worry that not all of them are value-added; the amount of product proliferation, which has seen some GPs move (too far) away from their core competencies.
- …and encouraging trends: A growing focus on institutionalization of operations and technology and how outsourcing their tech and data helped them manage expenses and ensure that they don’t miss investment opportunities [we at HL especially loved hearing that one] and a “return to customer service” – LPs today seem to be feeling the love.
Pockets of discussion around diversity and the panel moderated by Hamilton Lane’s Head of Product, Jackie Rantanen, titled “What Does It Take to Build a Diverse Firm?” offered honest exchanges unique to an event like this one. A few core themes punctuated the conference narrative:
There has been progress. For those in positions of power (ahem, LPs) it was encouraging to hear that they haven’t forgotten the age-old adage that money = power. The ability to write big checks enables one to be a loud voice in facilitating dialogue around the topic of diversity. One positioned it as “if not me, who?”
LPs are also quick to acknowledge that there has been progress, however incremental. While some might look around in a meeting and see only two women, others point out that 10 or 15 years ago there wouldn’t have been any. Some LPs now include a section on D&I in their DDQs, and while investors don’t yet seem to be making decisions based on the answers to those DDQs, 10 or 15 years ago the questions weren’t even being asked.
“If they can’t be moved through intellectual conviction and heart, let them be moved through DDQs!”
But not enough. One panelist put it bluntly: The reason we’re all here is because no one is winning, and the onus is on each company and team to help each other and seek best practices. There was also discussion of the post-#MeToo trend of men shying away from one-on-one interactions with women. This was met with concern, with all participants agreeing that this could stall progress.
So what’s next? Firms and teams can learn from each other how to move the needle. The takeaway was clear: We aren’t going to change the world unless we change the face of investing. Until the people in positions of power change their mindset and priorities, the industry won’t change. Conferees suggested a variety of actionable tactics:
- There is good reason for firms to focus on fostering a diverse and inclusive culture, because data has shown that investment outcomes are better when there is diversity of thought and background.
- When we talk about diversity as a business imperative, the men show up. It’s important to talk about it in the same breath as you talk about everything else – revenue, margins, cost basis and diversity.
- Embed goals and metrics within incentives and business planning – at the end of the day, that’s how progress is made, and “what gets measured, gets done.”
- As a representative from one leading firm said, get on a focused path and do not leave it to luck. The culture of a firm may be inclusive, but that doesn’t deliver results unless the firm is deliberate about inclusivity.
- The “retention” piece is absolutely crucial, and the onus falls on managers to take accountability – including with tangible metrics – and learn how to check in on and have honest conversations with their teams.
- Retention programs and proactive diversity mentorship programs seem to be utilized by many of the firms at the forefront of this effort.
- Still, this is more art than science, and what works for one firm may not work for another.
- However, everyone agreed that if diversity isn’t a stated business priority, with authentic, proactive investment from senior leadership as well as all managers, real progress will be hard to come by.