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Barings, Muller & Monroe, Neuberger among five firms selected to launch diversity fundraising initiative

The pools in aggregate are expected to raise between $1 billion to $3 billion over the next two years.

To help drive diversity in private equity, minority and women-owned firms and companies need access to capital.

Some large institutional investors have programs structured to feed into diverse-owned managers, but many do not.

National Association of Investment Companies hopes to expand that capital base. The organization, a trade association for minority- and women-owned investment managers, selected five firms as part of a program to launch growth investment pools to back diverse managers and companies.

The pools in aggregate are expected to raise between $1 billion to $3 billion over the next two years, according to Alan Hughes, chief content officer with NAIC.

NAIC chose Barings Alternative Investments, GCM Grosvenor, Muller & Monroe Asset Management, Neuberger Berman Private Equity and Rock Creek Group for the program. The five firms will raise capital from private sector investors to invest in minority-backed funds and companies.

“The ultimate goal of the program is to establish a vibrant growth equity capital industry for minority businesses that produces significant risk-adjusted returns and has long-term sustainability,” NAIC said in a statement.

NAIC received a $1.4 million grant from the Minority Business Development Agency of the Commerce Department to kick off its search for investment managers. NAIC launched the effort, called NAIC Minority Growth Equity Funds Initiative, in October 2019.

“The initiative strives to provide much-needed access to capital for these companies while also identifying viable opportunities for growth investors,” NAIC said.

Rules for what kind of funds will quality for capital from the five funds-of-funds in the program are still being worked out, Hughes told Buyouts. “We anticipate that funds that receive capital will have growth equity strategies that target minority-owned businesses,” he said.

This concentrated effort is necessary to get capital to firms and companies that need the support. “What you will find is there is an exorbitant amount of opportunities out there and not enough capital to address it,” said Mina Pacheco Nazemi, managing director with Barings.

Nazemi said the coronavirus shutdown has only increased the pressure on diverse-owned businesses that were struggling for capital before the lock down. These situations offer an opportunity for investors to step in and support some of these companies and find ways to help them grow.

“This is capital to ensure that some of these businesses are in a position to make it through the downturn, continue to operate and provide goods and services as they always have, and to take advantage of the dislocation to pick up assets, grow platforms and grow businesses,” Nazemi said.

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