How are Women Represented in the Private Equity space?

Women in private equity

Encouraging diversity in finance makes a lot of sense. And yet women are still significantly underrepresented in private equity. Currently, just 11% of senior executives in private equity are female - and this figure drops even further when departments like HR and investor relations (traditionally more “female-friendly”) are removed from the picture. At the same time there are some incredibly talented and ambitious women working in the private equity space so is there scope for change?

Where is the problem?

  • Male-dominated industry - Investment banking and asset management tend to be the fields from which private equity talent is drawn and these are traditionally very male-dominated sectors. As a result, there are fewer women making it into private equity in the first place and so less talent to attract along a career path.
  • We tend to hire people like us - This is an issue not just in private equity but any industry where homogenous hiring has resulted in a lack of diversity. Private equity as a sector is only around 40 years old and has been largely run by men in that time. Preferences to hire people who look like us, and that we connect with, have led to people in positions of authority recruiting and promoting others with the same background, experience, gender etc. And so, the cycle continues.
  • Poor perceptions - Private equity doesn’t have a particularly positive reputation in terms of what it can offer for work-life balance, agile and flexible working etc. However, although this is often cited as a reason why there are so few women, many other careers (such as medicine) that have many of the same challenges still attract many more women into the mix.

How can change happen?

  • Attitude shifts - In a survey most LPs agreed that gender diversity improves team quality and dynamics - but only 12% said they believed returns would be better with women in more private equity positions. Studies by McKinsey in 2019 have shown that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile—up from 21 percent in 2017 and 15 percent in 2014. The reality is that more women in senior positions impact positively on financial performance and risk evaluation, so this is an attitude that needs to change.
  • Pushing for change in pitches - LPs have a lot of power to push for greater gender diversity, whether that is raising it in pitch meetings or pushing for transparency over equal pay and including diversity in selection criteria.
  • Female-led firms - We are now beginning to see the establishment of firms led, and run, by women, which will make a huge difference to attracting new female talent into the sector.
  • More intentional recruitment - Many private equity firms are starting to expand recruitment pools from traditional investment banking into management consulting, where there are generally more women. Plus, graduate recruitment is becoming more focused on attracting greater diversity into firms.

The reality is that greater diversity in the private equity space benefits every aspect of the business, from financial performance to team dynamics. So, it simply doesn’t make sense to continue the underrepresentation of women in the private equity space.

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