Private Equity And Female Diversity

An EY survey of private equity firms across Asia, Europe, and North America showed that 83% of them have focused on improving front-office gender diversity over the past decade. A solid majority (63%) also sought to include more women in back and middle-office roles.

Two main factors play into the increased focus on recruiting women in private equity.

First, there is mounting pressure on private equity firms to improve diversity, including of the gender variety. Investors are a large source of this push, motivated by the rise in incidents and claims of sexual harassment and gender bias across industries. Many investors now approach private equity firms with specific questions about diversity-related statistics and initiatives as part of their due diligence.

Second, private equity firms are realizing that hiring women is simply better business. A recent study of California-based firms including major players Apple, Google, and Visa, for example, showed that firms with more women in top-executive and board roles delivered much higher returns on equity and assets than the average company in the sample. A McKinsey study suggests firms in the top 25% for gender diversity among executives are 21% more likely to enjoy above-average profits.

These factors, taken together, should suggest that women are being recruited in much higher volumes in private equity and related industries. That is not quite the case.

In 2016, only about 7% of senior leaders in buyout firms were women, down from 2014 figures. Our own 2019 research suggests women pursuing entry-level private equity roles have comparable to slightly better academic qualifications than their male counterparts. The below tables provide academic data on candidates who pursued private equity associate investment recruiting for summer 2018 and summer 2019 start dates.

2016 Undergraduates (Started Summer 2018 Private Equity Associate Roles)

2017 Undergraduates (Starting Summer 2019 Private Equity Associate Roles)

1. This column shows the mode in the data set (i.e. the most common school the group of candidates graduated from). In 2016, the top three represented universities for male candidates were 1) University of Virginia, 2) New York University, 3) Indiana University and for female candidates were 1) Wharton, 2) NYU, 3) University of Virginia. In 2017, the top three represented universities for male candidates were 1) New York University, 2) Wharton, 3) University of Michigan and for female candidates were 1) Harvard University, 2) New York University, 3) University of Virginia.

The lack of gender diversity in private equity is not a problem exclusive to private equity and many high-powered industries face similar critiques. In fact, another McKinsey study shows that addressing gender inequality fully by closing the gender gap across all sectors could add as much as $12 trillion to the global GDP by 2025. Our clients have had success hiring talented and qualified female candidates by following a multi-pronged approach:

• Recruiting year round at the entry-level for traditional candidates: Many female and other diversity investment banking, consulting or private equity candidates do not recruit on-cycle during the initial rush. If you are recruiting your entire crop of investment associates during the on-cycle wave, you are undoubtedly missing a considerable portion of the talent pool.
• Actively marketing directly to the female candidate pool: Leveraging marketing events to target top-tier diversity candidates is often used to increase competitive positioning with qualified female candidates who have multiple options. These marketing events can be done in smaller settings or larger venues depending on client preference and team availability.
• Evaluating non-traditional profiles: There is a wide talent pool of candidates who do not conform to traditional talent pool parameters who can be viable sources of hiring talent. GoBuyside’s technology allows for the identification of these high caliber hidden gems through aptitude testing and other proprietary tools.
• Hiring with a "best athlete” mentality: Widening the compensation and title parameters for mandates to accommodate professionals at different hierarchies in organizations can lead to better results. Given the limited pool of diversity talent, this "best athlete” hiring mentality can lead to increased assessment of qualified female candidates during a search process.
• Integrating technology into the recruitment process: It is still baffling how little process organization, analytics, and tracking are used in private equity recruiting. Firms of all sizes often simply outsource recruiting with little to no oversight over their talent pipeline. GoBuyside’s platform provides clients with clear transparency and data that allows them to garner insights and track pertinent information on their hiring processes over time.