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BofA’s $2bn bond to fight inequality includes private equity focus

It’s not clear if the investments would be in the form of direct investments alongside GPs, or passive stakes in private equity and venture funds.

Bank of America’s $2 billion bond float to invest in minority-owned business and financial institutions will include investments in private equity and venture funds that back minority-owned companies.

Bank of America is one of many large financial institutions and corporations making financial commitments to increasing diversity in the business world.

The bank has not revealed details about how the proceeds will flow into the private equity industry. A BofA spokesman declined to comment. Proceeds generally will be used for various projects, including fair-housing-related financing and deposits in Black and Hispanic financial institutions.

Private equity has been slower to move in major ways to boost inclusion in the industry. Bank of America’s bond float may help. The bank expects to use proceeds to invest in private equity and venture capital funds that invest in black and/or Hispanic-owned businesses, according to the bond prospectus.

It’s not clear if the investments would be in the form of direct investments alongside GPs, or passive stakes in private equity and venture funds.

Minority-owned firms have been slowly on the rise in the industry. Vista Equity Partners, led by Robert Smith, has grown to nearly the levels of some of the largest firms in the market. Other minority-owned, popular firms include Clearlake Capital and Siris Capital.

Limited partners also have established programs to back newer, smaller managers, which often include diverse firms.

Stronger pushes toward diversity and inclusion won’t come until GPs feel pressure from their LPs on the issue, sources have said in past interviews.

“Until Americans are willing to put their money where their mouth is, you won’t see much change,” Andre Rice, president of fund-of funds Muller & Monroe, said in a June interview. “We’ll only see changes if those who hold the purse strings use that lever … there are some who are exercising that power.”

Earlier this year, the National Association of Investment Companies selected five firms as part of a program to launch growth investment pools to back diverse managers and companies, Buyouts reported in June.

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.