Takeaways from the PEI Women in Private Equity Forum

More than 150 people gathered at the third annual event in London last month for lively discussions around realising growth through diversity.

1. Gender-diverse portfolio companies can perform better
In her keynote presentation, Désirée van Boxtel, pictured, one of the founders of Karmijn Kapitaal, which only invests in gender-diverse portfolio companies, shared some research which found these businesses deliver a return on equity of 10-35 percent higher than the industry average.

2. The ‘carrot’ approach is more effective than the ‘stick’

If LPs want to encourage their GPs to have more women in senior roles, they should do it as part of a dialogue, panelist Marta Jankovic, senior sustainability specialist and head of ESG integration alternatives at APG Asset Management, told delegates.

“We’re not saying that someone who doesn’t have a female partner right now is a GP that investors shouldn’t commit to. What we’re saying is that you have to start to think about what is your strategy to promote female staff and provide the right supporting environment for it? It’s not a stick approach, it’s a carrot approach.”

3. Don’t wait for the ‘right’ time
Hazel Moore was seven-and-a-half months pregnant when she co-founded investment bank FirstCapital. “If not now, then when?” Moore asked delegates. “There is never a good time.”

In her closing keynote on day one, Development Partners International co-founder Runa Alam said women who get to a point in their lives when they’re considering cutting back to make more time for family should instead consider taking a promotion.

“Every time I got pregnant I took a promotion or I started a company,” Alam said. “I instinctively felt that by having that more senior position, even though I had to work as hard, my schedule was more in my control.”

4. AIFMD means a more targeted approach to fundraising
Speakers on the fund manager panel pointed out that the added regulatory burden of the Alternative Investment Fund Managers Directive means GPs need a more structured approach to fundraising, and consider whether that one investor in a particular jurisdiction who may or may not make a commitment to their new fund is worth the extra cost involved in marketing to them.

“If they decide that the regulatory burden of going to a particular country is too onerous then they can look at who are the actual investors that we would look to go to there?” said Victoria Waddington, a director at Aerius Associates.

“It’s really important to think of that in the lead up to the fundraise because different countries have different regimes, there are different rules depending on where the manager’s based, depending on where the fund’s based, depending on what size your fund is. So I think it’s really important to find an approach that meets the commercial objectives of who you actually intend to market to.”

5. Small funds will outperform large ones
Narcisa Sehovic, a senior investment manager at Aberdeen Private Equity, told the fund manager session that the toughest challenge in the future will be to deploy capital at the larger end of the market.

“I firmly [believe] the smaller funds in the lower mid-market are going to significantly outperform the larger funds,” Sehovic said. “Let’s see if I’m going to be right.”

6. Top managers can’t rest on their laurels

The closing LP panel highlighted a “broken correlation” between track record and future performance. Firms that have historically performed well can’t hide behind their past successes; they must demonstrate a desire to continue improving, by focusing on growth and operational value creation.

7. More research needs to be done
On the sidelines of the conference, Eileen Fargis, co-head of IFC Asset Management’s African, Latin American and Caribbean Fund, told PEI more studies need to be done to drive the message home that diversity leads to better decision-making and stronger returns.

“There are statistics that indicate that companies with diverse executive teams and diverse boards do make better decisions and are on the whole more profitable,” she said. “We say that, and yet I’m not sure people necessarily believe that. They need to see the studies, they need to understand that’s really the case, they need to understand risk is mitigated by different points of view.”

Fargis added that if more studies were done to prove these outcomes “it would be a lot easier for LPs, for instance, to impose standards and say, ‘We require you to have diversity on the board because it’s been scientifically proven to show better outcomes’”.

8. ‘Credentials give credibility’
DPI’s Alam – who began her career at Morgan Stanley and has an MBA from Harvard Business School – advised women embarking on a career in private equity to develop strong credentials to get ahead.

“An education, having that and performance as credentials, it’s very important,” she said.

9. Gender diversity is everyone’s responsibility
IFC’s Fargis and Ruth Horowitz, chief operating officer at IFC Asset Management, told PEI that the responsibility of addressing the lack of diversity (of every kind) within the private equity industry lies with every member of the private equity community.

“If we make this a ‘woman with children’ issue I don’t think it ever gets the right kind of traction,” Horowitz said.

“If we make it that you want to have the right kind of life for what you choose to do, then you get men on board, you get women who don’t have children on board, you get a whole different group of people on board.”

Horowitz added that there are “many men who are going to want to be home with their children”, as well as those that need flexible work arrangements to take care of elderly parents or fulfil community interests.

“You’ve got to make this a lifestyle issue, period. It can’t be a women’s issue.”