Private equity is evolving. More women are coming into the industry, more women are in senior roles and LPs are paying more attention to diversity.
Unfortunately, change comes slowly in an industry that is roughly 40 years old.
“I’ve seen a very gradual, very slow rise in the number of senior women in the industry,” said Ann Berry, a partner at Cornell Capital, who said she saw “no senior women” when she started out nearly 20 years ago.
The PE industry has grown since the 1980s. Currently, about 4,700 U.S. private equity firms own about 32,000 portfolio companies, according to the American Investment Council.
While fund size has grown, the number of women-led PE deals has not. In 2018, female GPs led only 3.1 percent of total PE transactions, down from 4 percent the year before, which was a high point for the industry, according to PitchBook.
The proportion has hovered between 3 to 4 percent over the past decade. In 2008, women led 3.3 percent of PE deals, PitchBook reported.
“If you cut out deals valued at $50 million or less, it would be worse,” a female GP said. Another executive criticized the data, saying many firms do not provide information on who leads deals.
Still, despite the low numbers, most women were positive about the gains women have made in private equity. Asked whether women had progressed in PE, Kristina Heinze, a ParkerGale partner, said “absolutely.”
Heinze pointed to the fundraising success of several firms launched by women. ParkerGale’s second fund weighed in at its $375 million hard cap last year, while 1315 Capital, a Philadelphia growth firm co-founded by Adele Oliva, raised more than $300 million in 2018.
The sixth fund from Scale Venture Partners, co-founded by Kate Mitchell, closed on $400 million in July. And in December, Hollie Haynes’s Luminate Capital Partners collected $425 million for its second fund. The four firms raised a combined $1.5 billion.
“You didn’t see press about female founders in PE 10 years ago,” Heinze said. “I feel like we as an industry are really making progress with women leaders.”
Women may be more visible but their proportion of senior PE roles is still very low. Women comprise 17.9 percent of the more than 280,000 PE professionals globally, Preqin said, the lowest ratio of any asset class.
Women occupy only a tenth of senior roles, nearly unchanged since 2017. Most women can be found in investor relations and finance, Preqin said.
Some firms, despite these depressing numbers, have found a path toward diversity. Carlyle Group employs more than 1,650 professionals across 31 offices. Women represent 42 percent of the overall firm and 23 percent of senior positions in the U.S. (Women are 20 percent of senior roles globally.)
More than half of Carlyle’s recently promoted partners were women. Carlyle also has Sandra Horbach, perhaps the most prominent woman in PE, who co-heads the firm’s $38 billion U.S. buyout fund.
Blackstone Group, meanwhile, has nearly 2,500 people spread across 23 offices globally. Nearly one-third (30 percent) of its professionals are women.
While the exact number wasn’t available, Blackstone has “more than doubled” the number of female investment professionals over the last five years, a second source said. The number of women managing directors and partners has also doubled during that period.
Female representation among Blackstone’s incoming analyst pool hit nearly 40 percent in 2018, up from 15 percent in 2015, even as only 30 percent of the applicants were women.
Vista Equity Partners, the tech-focused buyout shop led by Robert Smith, employs about 400 people in the PE firm and Vista Consulting Group. About 40 percent of both firms are women; women also make up 23 percent of senior positions.
At TSG Consumer Partners, four of the firm’s 10 partners are women. More than half, 30, of the firm’s 48 employees are female.
Cornell Capital, founded in 2013, is more than 50 percent female. Four of the firm’s seven partners are women. Cornell, which invests in sectors such as consumer, industrial and financial services, closed three deals in 2018. All were led by women.
TPG, after being publicly scolded by an LP for its “stunning” lack of diversity, is fast-tracking women and ethnic minorities into its partnership ranks, a KPMG report said.
Last year, John Russell, vice chairman of Oregon Investment Council, rebuked Jim Coulter, TPG’s co-founder, during a meeting after noticing the low number, just two female executives, among TPG’s 37 executives in a leadership photo, Bloomberg reported.
It’s unclear how the change has affected TPG’s personnel ranks. TPG has been focused on increasing diversity and inclusion at the firm for a number of years, a third source said, and the effort was not in response to the Oregon meeting.
Just not that into you
The lack of women in PE is a problem that has flummoxed many.
Most executives blame the so-called funnel, which refers to the number of women entering the field from investment banks, for the low numbers. Investment banks serve as feeders to buyout shops, which value the modeling and financial skills of banking analysts.
About 2,100 IB analysts are newly minted each year, according to a recruitment firm. About one-third of each yearly class is female. Roughly a third of the female banking class will ultimately accept roles in PE. Of the PE associate ranks, women end up representing about 15 percent to 20 percent, which may account for the dismal number of women that end up in senior ranks.
Women are not applying for as many jobs as men. Consider the experience of ParkerGale, which gained notoriety in 2016 when it hired a female associate who did not come armed with an IB background. Cass Gunderson spent nearly three years at ParkerGale and is now pursuing her MBA at the University of Chicago Booth School of Business.
ParkerGale in 2018 looked to add two professionals: a post-MBA principal and a pre-MBA associate. The PE firm used a search firm to fill the spots. The recruiter sent out more than 2,700 emails for both spots —1,749 for the principal and nearly 1,000 for the associate.
Only 10 women replied to the principal position and 11 answered for the associate, Heinze said. Of those who did reply, most weren’t interested in the job.
“It blew me away,” Heinze said of the low response rate. “It’s got to be a perception problem. … This is the best job in the world. You get to meet so many different people. No two days are ever the same and it’s a constant learning and development experience.”
One reason for the lack of responses? Women’s lack of confidence. Men are trained to be confident and aggressive and will apply for a job anywhere, Heinze said.
“Women feel like they have to be 110 percent qualified before they even apply,” she said. (ParkerGale filled the principal position.)
Some women opt out after banking for other careers like startups, graduate school or other roles at financial firms like IR, a recruiter said.
The hard-driving lifestyle of private equity execs, which includes long hours and unpredictable travel, is not attractive to some women.
“The other issue is that there aren’t a lot of senior role models for women, so it is difficult to imagine a part for yourself when you are a junior woman with no senior women examples of how to manage juggling it all,” the source said.
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