LPs and GPs drive conversation on diversity

Speakers at the PEI Women in Private Equity Forum agreed momentum from both sides is 'unstoppable'. The question is what they hope to achieve and how quickly they get there.

Private equity limited partners and general partners are increasingly embracing diversity and inclusiveness and taking tangible action on these issues.

“It’s definitely an agenda for LPs – it very much depends on which part of the world they are in – and it is certainly increasing,” said Jim Strang, managing director and head of Europe at the $394 billion alternative investment manager Hamilton Lane, during a panel at the PEI Women in Private Equity Forum 2018 in London on Wednesday.

“On the GP side, it feels like top of the market is moving first and fastest. You certainly see most of the major firms in Europe switched on to this.”

Strang added: “The heartening thing is that the momentum is unstoppable. It’s not as if it can slow down or change direction. It’s a question of how quickly they [LPs and GPs] get there and whether [they] have a real sense of what they are really trying to achieve.”

Ashley Knight, an investment associate with Mercer, said her firm has seen much more demand for diversity both in data gathering and when it comes to “where LPs are actually putting their money”.

Knight said GPs are “embracing diversity and doing a lot of detailed reporting to their LPs in terms of how they are integrating parts of their firm”.

On the LP side, she noted that Nordic pensions are becoming more selective and investing in women-led businesses, while one large pension fund in New York will only invest in funds that report this information.

David Jeffrey, partner and head of Europe at StepStone Global, also noted in the panel that private equity’s historical context is important to understanding diversity within the industry.

“Private equity in the 1970s and 1980s was very male dominated and making money was the end-all and be-all… There wasn’t a concept of sustainable investing, it was all about a singular purpose in a very successful manner.”

The overall industry has become much more nuanced in recent decades, he added.

“There are far more constituents involved in the overall business we now operate in – whether that’s media, regulators, governments or millennials. And that’s why these things become more important.”