Nov 1, 2022 - Economy & Business

Few private equity firms place women in important investing jobs

Data: McKinsey & Company; Note: Responses received as "other/not reported/prefer not to answer" were excluded from the analysis; Chart: Tory Lysik/Axios Visuals

Women land 48% of entry-level roles in private equity, finds a new report. So you'd think the industry was nearing parity. Think again.

The big picture: The percentage of women in private equity who hold investing roles at these firms is much lower, according to data out Tuesday morning from McKinsey & Co.

  • At the entry level, women hold 34% of investing roles and 57% of non-investing roles.

Why it matters: Investing is where the power lies. Investing staff are the ones making decisions on where these firms allocate capital, explains David Baboolall, an associate partner at McKinsey and coauthor of the report.

  • It's valuable to look at investing roles separately because "in PE firms — and many other private market firms — an unspoken hierarchy often exists," the authors write.
  • Investing roles pay a lot more, as well. "These are the people who make the real money," notes Axios' Kia Kokalitcheva.
  • The imbalance keeps pay gaps wide (no matter the level of pay transparency).

Key point: At the top of the PE hierarchy is the investment committee — "the intellectual backbone of PE firms," the report argues.

  • Women make up only 9% of investment committee members, McKinsey found.
  • Women of color hold only 1% of those roles.

By the numbers: McKinsey surveyed 31 private equity firms and 11 institutional investors, and more than 300 PE employees answered questions about their workplace experience.

  • People of Asian descent hold 28% of all associate-level investing roles, but lose ground after that. The number drops to 12% at the managing director level.
  • Black and Hispanic investing professionals are at single digits — 3% and 4%, respectively, in investing roles— and those numbers are constant across all levels, with no drop-off.
  • "If I were a Black person looking at PE, I don’t think I would see a lot of people who look like me, and I don't know if I would want to work there," a human resources officer tells the report authors.

What to watch: Institutional investors, which PE firms raise capital from, told the consultants that they'd be more apt to invest their money with firms that are diverse.

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