Diversity in Private Equity: whose problem is it, anyway?

March 11th, 2022

Diversity in Private Equity: whose problem is it, anyway?

International Women’s Day provided an apt moment to reflect on private equity’s diversity deficit, and who’s doing something about it.

There’s invariably a dual edge to International Women’s Day. As well as being a global celebration of achievements, it serves to underscore the many gender inequalities that remain to be solved.

In our industry, the occasion is a particularly bittersweet one. While most private equity firms have at least made a start on diversity and inclusion, the top tiers are still overwhelmingly male.

Fewer than 10% of partners are female, according to Prequin’s Women in Alternatives report. The proportion slips to 6.4% for managing partners.

Breaking that bias isn’t merely the right thing to do: it’s also a hard-headed way to get business results. And that goes well beyond achieving a gender balance.

Diversity adds value

“It’s easy to pick on gender or ethnicity, because you can see them,” says Ruby Sheera, DRAX MD for technology and tech-enabled businesses. But breaking down bias goes wider than those two factors, she emphasises. “There are lots of reports out there that will tell you diversity, and a diverse-thinking team, gives you better results.”

One of those reports tracked portfolio company valuations between two rounds of funding or liquidity events. Those with gender-balanced leadership teams typically achieved increases 10 percentage points higher than their less balanced peers.

Ruby’s point is echoed by Samuel Robberts, who leads our work in predicting the value of leaders in any business environment.

“The contribution every individual has to make in a successful leadership team is nuanced and complementary,” Samuel says, “and the best teams, in our analysis, are the most diverse.”

Ditch the groupthink

DRAX is leading the field in supporting businesses to build such teams, not least through tools such as its Leadership Dynamics product. This takes an objective look at the experience and behaviour of management teams.

“Leadership Dynamics removes any bias from the hiring process,” explains data and communications analyst Susannah Lower. “It gets rid of the potential for groupthink, or people hiring in their own image.”

Better business practices alone won’t achieve diversity for the world, just as gender inequality isn’t an issue only for women to resolve. These are societal issues that demand universal leaps of imagination and understanding.

In the meantime, however, DRAX is doing its bit by to break the bias on business boards. It’s also continuing to celebrate International Women’s Day, while looking forward to a time when it won’t be necessary.

As Ruby Sheera says, the annual event’s existence is evidence of how much work remains to be done: “I’d like to see my daughter grow up in a world where we don’t have to make a point of this day.”

We've invited a selection of our team to offer their perspectives on how to create a more gender-balanced world in honour of this year's International Women's Day theme, #BreaktheBias, and in a continuing effort to create a more inclusive and varied workforce.

Watch our video here:

DRAX will be supporting donations to Safer Places, a domestic abuse support services charity that provides basic essentials to families in need, as well as counselling for abuse survivors and providing them a secure place to stay


Read More on DE&I here:

Halma’s DEI – taking risks to get results

Should your next CFO be a female? Examining behavioural differences between male and female CFOs

Private Equity looks to shift the diversity dial

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