Remember the Ladies

Private Equity Has an Incentive to Prioritize Women

Clients are watching, but at the very least, do it for the returns.
Photographer: Wiktor Szymanowicz/Barcroft Media via Getty Images
At Closing, June 19th
1734.78 USD

The private equity industry has had its struggles in achieving gender balance just like the rest of Wall Street. But it has the most incentive to do so.

Private equity firms struck about $120 billion of buyout deals for U.S. companies last year, according to data compiled by Bloomberg based on pending and completed transactions. 1 Leading the charge were takeovers of Calpine Corp., a Houston-based power generator, fast-casual restaurant chain Panera Bread Co. and office-supplies retailer Staples Inc. -- all three businesses challenged in their own way and ripe for the private equity treatment. 

Powder Conditions

U.S. buyout activity surged last year to near its highest level since before the financial crisis as firms take advantage of record levels of dry powder

Source: Bloomberg

Note: Excludes deals that have since been canceled.

Women didn't get to participate much in this buyout resurgence, though. Data from Preqin, an industry researcher, show that women account for just 18 percent of people working in private equity, and a mere 9.4 percent hold senior positions. Instead, they "dominate junior-level positions" in investor relations and marketing roles -- which are among the lower-paid at these firms. 


Within the private equity industry, women are more likely to have junior-level back-office roles over leadership positions that are more client-facing or directly involved in investing decisions

Source: Preqin, October 2017

Note: Female employees as a proportion of total employees by seniority

It could be worse: These figures look better than the rate of women managing mutual funds, which holds at around 2.5 percent if you ignore the 20 percent of co-gender management teams, as I noted a few weeks ago. But there's still a ways to go to get to parity. That's where client pressure could force faster change. 

Because of the growing body of research showing the financial benefits of gender diversity in leadership teams, institutional investors are already demanding that private equity firms promote more women to senior roles, Carolyn J. Vardi and Eliza McDougall, partners at White & Case LLP law firm, wrote in a recent report. Some state and local government authorities, such as New York City's five pension systems, are using diversity data to decide which private equity firms and other companies to invest with, they noted.

"PE firms increasingly recognize the opportunity cost of gender imbalance."

Industry heavyweights KKR & Co., Carlyle Group LP and Blackstone Group LP are among firms that have already started implementing policies to recruit and retain more women, such as mentoring and efforts to better accommodate parents, the authors wrote. It so happens that each of these three firms is either readying or in the midst of a transition of power from their founding partners to the next generation of leaders. While all of the potential successors are men, they are younger and may help to foster a more enlightened and encouraging approach to changing workplace norms. 

More women running private equity funds could even go a long way toward changing the industry's reputation and ways for the better. We're coming off the year of the "retail apocalypse," in which a slew of retailers filed for bankruptcy or were forced to restructure after being saddled with too much debt. Toys "R" Us, Payless, J. Crew and more ran into trouble. While the origins of this debt seem to have been forgotten or overlooked as Inc. was made the scapegoat, much of it can be traced to leveraged buyouts. Sure, plenty of traditional retailers might not be able to survive in a world of online shopping anyway, but the burden of having to pay all that money back on shrinking revenue certainly hastened their demise and resulting job losses. 

Female investors tend to be more cautious than their male counterparts -- just one of the characteristics shown to aid returns. It could be that their more disciplined, more long-term and less ego-driven approach helps prevent situations like overburdening a target with debt. Millennials may further push things like ESG standards, which take into account environmental, social and governance strategies for corporations to be good citizens. Any push for private equity firms to take a more holistic look at the outcome of buyout transactions -- on employees, communities, industries, borrowers, etc. -- would seem to go hand in hand with promoting more women to leadership roles. 

At the very least, do it for the returns. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. The total includes secondary transactions between private equity firms.

To contact the author of this story:
Tara Lachapelle in New York at

To contact the editor responsible for this story:
Beth Williams at

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