Rendel Solomon had it all – he was a managing director for asset manager Muller & Monroe in Chicago. He was a lively presence at private equity industry conferences. Rising from humble beginnings, he was a great American success story.
But after the deaths of George Floyd and Breonna Taylor at the hands of police and the wave of protests that shook the nation earlier this year, he turned a corner. Buyouts got the chance to speak with Rendel about why he made the decision to move on from the private equity industry and focus his efforts on racial equality. (To listen to the podcast version of this conversation, click here).
What brought you to the decision to leave a successful career in private equity?
I’ve enjoyed my time in this industry. I’ve learned so much, met some amazing individuals, and worked with tremendous organizations. However, I do think the industry as a whole still has a lot of work to do as it relates to diversity and inclusion, and quite frankly, I just kind of got tired of the struggle and the fight within the industry, as well as the constraints placed on me related to the struggle and fight outside the industry. So, from education to housing to health care to criminal justice, I just began having this intense desire to do more than what I was capable of doing while working full time in this role.
I think the industry has an opportunity, and I think it plays a role in these issues. I’ve just decided that me being inside of it in this way wasn’t the best format to use my time and talent and treasure. I don’t know exactly what the next steps will be and I’m looking forward to taking some time off to reflect, read more, network and continue to learn as we seek how to really address these significant issues.
What is at the front of your mind as you make this decision?
Blacks in this country have had significant challenges. I grew up low income on the West Side of Chicago. My late mother at the peak of her career might have been making $40,000, which I thought was an extremely low income. I came to learn it was actually a bit higher than the median for my neighborhood. Yet somehow on a very low income this woman was able to get three kids through school, through college, and one through grad school. I think about the challenges that she must have faced and what she had to endure to do so, and I am grateful and thankful and prayerful that I had that opportunity, that me and my two sisters are all first-generation college graduates in my family, going all the way from my grandmother picking cotton in Mississippi in the 1950s before she made the journey north with my grandfather during the Great Migration.
My success is not enough as it relates to the plight of African-Americans across the country. In fact, at times I feel that my continued success actually exacerbates the issue. I used to believe that if I just went to school, got good grades, came out, got a good job and made good money, that I could somehow make all of that stuff go away, all the bad stuff that happens for Black people, and I realized that I’m seriously limited in what I can impact in that way.
What do you think are the major obstacles faced by African-Americans in professional settings?
We often hear the jokes about not talking politics in the office, and that actually saddens me a bit because it’s discussion about things like politics that add to the richness of who we are as individuals when we’re inside of an organization. So, wherever you go, you’re essentially bound by the rules of that industry or that organization as it relates to how you express your viewpoints. It reminds me of something that Michael Jordan said in his documentary where he was asked to endorse a Democratic candidate. And you know, I’m a Jordan fan, I am from Chicago, I was a teenager in the 90s when the Bulls were winning their championships, but he said something early in his career when he was asked to endorse a candidate, I believe a Democratic candidate. His response to that was no, and his rationale was because Republicans buy shoes, too.
I don’t begrudge Michael Jordan his decision, I use the example to show something any of us as African-Americans face inside of organizations or as entities where we’re making the decision between our livelihood and who we are as individuals. We’ve all had that moment where we want to say something, perhaps about society, perhaps about racial injustice, and the fear is that if we say that thing, it could have a detrimental impact on our career, or somehow negatively effect the firm.
How do you think the private equity industry is doing at addressing diversity and inclusion?
I think the industry is doing a good job at talking about diversity and inclusion. But quite frankly, if I can be candid, there’s probably not enough action. I am a retired engineer who now works in or was working in the financial services industry. The real question is are the numbers really moving? We still have senior leadership teams that are all white male, boards that are all white male, investment staff that is all white male. There are specific institutions both in terms of limited partners and general partners that are taking active steps to improve diversity, in terms of hiring and asset allocation. It’s a small subset of the overall asset class that’s doing real active work, not just talking about it but doing some active work.
How do you think biases play out when it is time to start doling out commitments in the private equity space?
The tricky part about implicit bias is that it’s just that – it’s implicit. And the fact that it’s implicit then makes it hard to prove that there actually is bias here, because it’s not that someone is saying or doing something that’s explicitly biased. “Hey you, woman, hey you, African-American, I don’t think you know how to invest well.” No one’s ever saying that!
Here’s how implicit bias rears its ugly head: “We don’t allocate capital to firms less than a billion dollars.” If an institution says that, and you have a group, namely women and diverse-owned firms who historically have not had a chance to grow their firms, you create a system that automatically keeps them out of the process of having an opportunity to manage that capital. Now, there may be some logical reason, I guess, reasons for putting a cap or increasing the amount of AUM a firm has to have. Maybe there’s more institutional stability, they have more resources for hiring and talent, but it just becomes this circular effect that further and further limits opportunity for diverse firms.
Another form of implicit bias, and this is something that is said often in the industry whenever the issue of diversity is brought up, whether it’s a consultant or an allocator, the immediate response is, well, we can’t really consider that, we have a fiduciary responsibility. That one I’ve never understood, because in no other area of business do you not assess all the risks, it’s all part of a big risk component, the size, the track record and everything else. But for some reason, when it’s brought up that diverse firms don’t manage much capital for the organization, the response is we can’t find any, we have a fiduciary responsibility, we can’t look at that. And that’s frustrating.
What role do you think private capital has to play in solving some of these issues of racial inequality?
Private capital is going to be crucial in addressing these systemic issues. This doesn’t absolve corporations and governments of their responsibility, but I think all three have to work together to find long-lasting solutions. How do we create new systems, long-lasting solutions to address these issues, recognizing that if all of those groups do better and have more resources, theoretically, it should only serve to further bolster our economy?
But that shouldn’t be the only reason to do it. It should be done because it’s the right thing to do, period, full stop. But because of our capitalist society and metrics and numbers and shareholder value and public companies and bottom line and net IRR and multiples, once all that data starts to get thrown in, somehow this idea of diversity and inclusion starts to get looked at as a detractor from those things, as opposed to something that is going to lift all of those numbers up.
So, I think that the role of private capital is to continue to create ecosystems, new structures that are going to advance this cause of diversity of inclusion. I know you guys talk a lot about ESG and its advent, it’s been around for a while, environmental social and governance concerns, to the extent that those types of principles become infused in the private capital process, I think that is one of the most significant ways that private capital can play a role in addressing racial inequities.
What strategies do you propose the PE industry adopt to alleviate some of these problems?
Without transparency there’s no way to move towards action. Let’s talk about DAMI for a second, the Diverse Asset Managers Initiative. They send a survey out to investment consultants each year to inquire about their diversity statistics. In 2018, 11 out of 20 consultants responded. And in 2019, 9 out of 35 responded. To me, that’s abysmal. It’s a survey. It’s just information. It’s not even forcing an allocation or forcing any kind of hiring decisions.
As it relates to GPs, I propose the SEC modify their filing information for registered advisers to report on the diversity of their staff at every level of the organization. You want to be registered each year when you fill out your form ADV? Submit your diversity stats at senior leadership, midlevel, and junior levels of the organization. Again, it’s just disclosure at this point. We just want to know the numbers. If you do that we can begin to truly see the depth of these issues.
For limited partners, there should be a clear sense of investment processes for investment managers. Too often, these processes have been opaque and only those with the right connections understood how to get through a process or even how to enter a process. Certain public pensions plans have really been at the forefront of addressing diversity and inclusion. I’ll call out New York State Common Retirement Fund, the state of Connecticut, California State Teachers’ Retirement System, all the Illinois pension funds and the New York City pension systems. They’ve done a much better job of being transparent about their processes but also creating opportunity for diverse managers. And I think to the extent that spreads to other allocators, we’ll start to see more progress in that area.
This has been edited for length and clarity.