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Diverse private equity firms more likely to draw bigger bets from institutional investors – McKinsey

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However, the report cited that the consensus among institutional investors that participated in the survey was that the state of diversity in private equity today is “poor.”

“(Institutional investors) believe that private equity firms have significant opportunity to improve the representation of underrepresented groups on their investing teams, specifically on the dimensions of gender, ethnicity and race, socioeconomic background, and sexual orientation,” the report stated. “(Institutional investors) signaled that private equity firms could do more to diversify their (investment committees) and the management teams at the helm of portfolio companies where they hold majority ownership.”

Will Goodwin, head of direct investments at New Zealand Super Fund, commented in the report: “When we look to allocate, we ask private equity funds for statistics on (diversity, equity and inclusion), such as gender pay gap and representation.”

The report also noted that globally private equity firms have almost achieved gender parity in entry-level roles. As of the end of 2021, 48% of all entry-level roles in private equity globally were filled by women — although women only held 34% of entry-level investing roles.

Within the U.S. and Canada, whites held 70% of all investing jobs, with white men more than eight times as likely as white women to be managing directors. Asians held 28% of investing roles at the associate level at these firms, but the percentage of Asian investing professionals fell to 12% at the managing director level.

The report also noted that Black and Hispanic professionals had low representation across all levels of private equity investing and that the industry lacks Black and Hispanic role models in the leadership ranks. Blacks accounted for 7% of entry-level investing roles, about double the share of Hispanic professionals. Hispanics and Blacks accounted for 3% and 1% of leaders, respectively, in managing director and C-suite roles at these firms in the U.S. and Canada.

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