Private equity has a stunning lack of women deal leaders

Our accompanying feature, Women in Private Equity, highlights 10 standouts who discuss mentoring, diversity and the future of the industry.

Kathleen Taylor, who spent years in the senior ranks at Four Seasons Hotels, including as chief executive officer, is often asked what is the hardest decision she ever had to make as a business leader.

While most people usually expect an answer involving a momentous business or political decision, Taylor says it was more personal than that.

The most difficult decision Taylor made in her career was when she and her husband decided how they were going to raise their young family. They were both busy professionals and Taylor’s career with a global hotel company required extensive travel.

The couple decided to rely on a live-in caregiver to help raise the kids. They also had the advantage of a large extended family who pitched in to help when she and her husband were on the road.

“We had a big happy family that was more than willing to take the children whenever we needed them. In many respects, it was fabulous for the kids: they learned to sleep just about anywhere; they were raised and loved by a wide group of people who today they have extraordinarily strong relationships with.”

Taylor, who joined private equity firm Altas Partners in 2019 as chairperson, does not have a conventional family story, and she has faced judgment for her decisions. “We made the choices that were right for our family and our careers. What people struggle with today is a sense of the ideal family; in reality, each family is quite unique,” Taylor says.

Taylor’s story is one shared by many women in corporate America and private equity. Taylor was able to raise a family and pursue her career goals, but she was lucky in that the company she worked for had a progressive attitude toward work/life balance, she says.

The work/family flexibility Taylor worked to achieve helped her maintain motivation and momentum through her career.

Sadly, this flexibility seems like a far-off dream for many women in the business world, in financial services and especially in private equity, outside of the largest firms. This is especially true when it comes to women dealmakers.

Firms not acknowledging the unique challenges faced by their talented female dealmakers, especially when and if they decide to start a family, is part of the explanation for why many drop off the partner track right around mid-career, numerous sources tell Buyouts.

For deal leadership to ever become more diverse, the industry will have to do a better job of supporting women to grow and stay on their career tracks even if they decide to have families.

Partner track

Private equity has made strides in its efforts to attract more women, with many firms broadening their search for talent beyond the traditional pool of investment bankers.
Investment banks and business schools are seeing more women, and overall the outlook for increased diversity in financial services is bright.

The expectation is, with more women moving into the industry early in their careers, inevitably some will make the transition into deal leadership.

“The industry as a whole has come a long way over the last five years. The success of women that are there today, the role models they are, and the focus the firms have on this topic, I expect the pace of change would quicken over the next five years,” says Rebecca Burack, partner at consultancy Bain & Co who leads the private equity practice in the Americas.

Women make up 9.9 percent of partners in the private equity industry, and 6.4 percent of managing partners, according to data provider Preqin’s 2020 Women in Alternatives report. Women make up 19.7 percent of total private equity employees, which has grown from 18.8 percent in 2017, Preqin found.

Overall, women make up 30 percent of junior employees, 25 percent of mid-level staff – which includes senior associates, vice-presidents, managers, directors and principals – and 11.9 percent of employees in the most senior ranks, including managing directors, partners, senior managing directors, managing general partners and C-suite executives, Preqin found.

One glaring gap that still exists in private equity is at the deal partner level, including on investment committees. It is here where there is a dearth of female voices. Even the biggest firms, which have led the way in improving their processes for more inclusive recruiting, continue to have senior deal leadership dominated by men.

“Unless a woman founded the firm, it’s pretty rare to see a woman as a voting member of the investment committee,” says Andrea Auerbach, global head of private equity at consultancy Cambridge Associates.

Some firms are working to correct this. TPG may have the strongest presence of women in deal leadership among big shops. The firm has three women who have the title of partner on deal teams across its private equity platform. A total of 20 women have led or co-led deals across the platform with the title of either partner or principal, and even a few at the vice-president level, according to a spokesman for the firm.

The firm also has open investment committee meetings, in which all investment professionals can participate, the spokesman says.

The importance of mentors

“Private equity is an apprenticeship business built on mentorship and relationship cultivation. It takes years to progress from associate to partner, so we are focused on the development, promotion, and retention of our internal pipeline to ensure women and diverse firm members have equal opportunities to build meaningful careers – more than half of our most recent associate class identifies as a woman or ethnic minority,” says Anilu Vazquez-Ubarri, partner and chief human resources officer at TPG.

Elsewhere, Thoma Bravo has no women on the deal team at the partner level. The firm is bringing in more women at the associate level, with the expectation that the upper ranks on the deal team will achieve more diversity in the future. The firm’s most recent associate group was made up of 50 percent women.

“Our hiring strategy has always been focused on attracting and cultivating young talent and supporting their career trajectory. Our collaborative, entrepreneurial culture has driven high employee retention rates across the firm. As such, the biggest entry point for investment talent at Thoma Bravo is at the associate level,” says Jennifer James, managing director, chief operating officer and head of investor relations and marketing.

Blackstone Group has three partner-level women in private equity, along with a group of female managing directors on the deal team. To diversify the senior ranks on the deal team, the firm has been developing its programs for engagement and retention.

A few of the programs Blackstone established include active networks focused on women, minorities, LGBT+ and veterans. The firm also has mentorship programs, including workshops with the authors of the book Athena Rising: How and Why Men Should Mentor Women.

Vista Equity Partners has four women who are called operating managing directors, which are the equivalent of deal managing directors at other firms. Vista has eight women on the partner track, according to a person with knowledge of the firm.

The push for more diverse investment teams goes beyond issues of equality: the performance of diverse investment teams appears to be stronger than that of more homogenous groups.

In an analysis of 1,250 deals, a study from Oliver Gottschalg, an associate professor at HEC Paris, found that those led by a woman outperformed male-only deal teams by 12 percentage points on an IRR basis and by 0.52x in terms of multiples of invested capital. Deals led by diverse teams also have failure rates 8 percentage points lower than deals led only by men, the study found.

The whirlwind

Lauren Leichtman, co-founder and chair at Levine Leichtman, is one of the pioneers of private equity. To retain talented women professionals, the firm supports women dealmakers who take maternity leave by offering flexible schedules and ensuring that they are able to stay on their career tracks when they return from leave.

“At our firm, if a woman takes three or four months off … the minute they come back they’re going to hit the ground running,” she says. “It’s hard to get someone up and running and get them integrated into your firm. You don’t want to lose that person to someone else.”

It’s important to keep in context that maternity leave (or, more frequently these days, family leave), usually represents a period of a few months. Compared with a successful career of 30 years or so, that’s a drop in the bucket, Leichtman says.

Dealmakers who become deal leads are generally acknowledged to be on the leadership track at firms and potentially headed for the pinnacle at any firm, a seat on the investment committee.

The biggest concern for many female dealmakers taking maternity leave is losing the deal pipeline that they spent years building up.

“The path to being on the investment committee requires you, as a private equity professional, to be a really effective decision maker on investment decisions, and you need to have good deal judgment and an effective voice,” says Lisa Melchior, managing partner and founder of Vertu Capital. Melchior spent years in the senior ranks at OMERS Private
Equity.

At mid-career, “some women opt out. And sometimes the men at their firms who don’t want to lose the woman, and worry about them opting out, offer them roles that are not deal-lead roles, like work in operations, and say, ‘Why not do this instead,’ and at that critical stage, they take those roles. They’re probably not making it back on to the deal lead track,” Melchior says.

Melchior’s own experience was a whirlwind during the years when she was having children and raising a family and maintaining a high-flying career of frequent global travel and long hours.

The life of a private equity mom is manageable, says Melchior, who has three children. But it requires sacrifice and support. Add to these personal and professional challenges the idea that many women feel the need to be twice as productive as their male colleagues.

“I’m going to work twice as hard and be twice as good because I really want to be at the table … if you’re twice as good, they can’t deny you being at the table,” Melchior says.

With that mindset, however, also comes the belief that you have to be perfect. “Women take things much more personally. We’re our own worst critics. You can imagine in an environment where, for every deal I do, there’s 20 that I lose, it’s tough, you have to get over that. You’re not going to make every shot.”

Part of the problem lies with the idea, still prevalent, that women who decide to start families won’t be able to handle the rigors of leading deals. And to be sure, many women who decide to have children choose to step off the partner path for roles with more flexibility.

But the responsibility is on firms that have invested time and resources in talented women deal professionals to give them the flexibility they need to raise families and maintain their careers.

“There are people who are savvy enough to understand that losing out on half the talent in an industry is not a good idea,” says Tiffany Kosch, managing partner and founder of CenterGate Capital. Kosch worked on deals at HIG Capital for eight years.

The question is, when does savvy become the norm and translate to more women at the deal table?

Correction: An earlier version of this story incorrectly stated TPG had six women with the title of partner on deal teams across TPG’s private equity operations. The correct number is three. The article has been updated.

KKR’s family leave policy

KKR offers one of the most robust family leave benefits in the industry. Here’s a sampling of its program:

Paid leave for primary caregivers from 12 to 18 weeks and for non-primary caregivers from one to four weeks.

Family building/support programs like unlimited IVF coverage and donor egg coverage through healthcare plan, infertility management and healthy pregnancy support, egg freezing, surrogacy, adoption reimbursement benefits option, emergency back-up child/elder care services and access to digital mental well-being resources.

Paid childcare travel program for primary caregivers with the option of bringing their baby and childcare provider on essential business-related travel.

Paid breast-milk shipping during business travel.

Up to four weeks of 100 percent paid family caregiving leave for employees who need time to care for a family member.