The following excerpt is from McKinsey & Company Quarterly.
Our new report The state of diversity in global Private Markets: 2022, builds on prior McKinsey research on diversity in the workplace to explore diversity in the global private markets industry, with a focus on private equity (PE) firms and institutional investors (IIs). We surveyed 42 PE firms and IIs around the world and conducted interviews with several industry leaders to supplement the data we received back from these firms. Participating PE firms directly employ more than 60,000 people globally.
This report provides insights into three areas for the industry: a view of IIs’ evaluation of diversity on investing deal teams today; II’s preference toward more diverse deal teams when allocating capital to PE firms; and today’s baseline of diversity for PE investing teams in terms of gender diversity for the Americas, Asia–Pacific (APAC), and Europe, and ethnic and racial diversity for the United States and Canada.
Key findings include:
- Chief investment officers (CIOs) of leading IIs said they would allocate twice as much capital to the more gender diverse PE firm if choosing between two otherwise comparable firms. More ethnically and racially diverse PE deal teams would receive 2.6 times as much capital.
- While 23 percent of all investing roles are held by women at PE firms globally, by the managing director level, only 12 percent are women.
- PE firms’ employee diversity varies widely. At diversity leaders, 32 percent of MDs are women and 32 percent of MDs are ethnic and racial minorities. Diversity laggards have no women and 2 percent ethnic and racial minorities at the MD level.
- Geographic differences are also notable. PE offices in the Americas have the highest share of women in the C-suite and possibly the fewest obstacles to advancement for women; APAC leads the regions in investing women’s representation in the middle of the corporate ladder; and Europe leads slightly at entry-level investing roles.
- Even when they make it to senior investing ranks, women and ethnic and racial minorities may still not hold the same position of power as their counterparts. PE investment committees (ICs) report 9 percent women globally and 9 percent ethnic and racial minorities in Canada and the United States—three to eight percentage points lower than their share of investing MD roles.
Given data collection limitations, this report remained largely focused on gender and ethnic or racial diversity within PE firms. We recognize there are several other categories that contribute to the diversity of employees. Future reports hope to broaden the categories examined, as well as expand to include PE firm Portfolio Companies, among other segments within private markets. The inaugural survey findings highlight the importance to IIs of having diverse talent in PE and the progress the PE industry has made over the course of 2021 (for more, see sidebar “Institutional investors in the private market ecosystem”). It also provides clear areas of focus as the industry continues to prioritize diversity, equity, and inclusion.
Read full article here.