Written by PER’s Head of DACH Rupert Bell
The private equity industry at large is pushing a number of initiatives to achieve a greater proportion of women in investment teams. Monochrome firms lack diversity and this leads to weaker decision making, so beyond the purely ethical perspective, there is a commercial upside to this initiative.
Within Germany, Munich is now the most significant city as a base for buyout firms, and yet I struggle to think of more than half a dozen women here in investment teams, and two of these are yet to start in their new jobs. There has probably been more movement out of private equity by women than into it in the last 12 months.
Our client base across the country is putting pressure on us to find more women candidates, yet the reality is there are very few women in the traditional pool, namely bulge bracket investment banks or top tier consulting firms, who wish to pursue private equity as a career. The numbers in the analyst pools at banks, for example, are very thin. Based on recent PER research, we believe there are now just three woman at second year analyst level in bulge bracket banks in Frankfurt, including one on rotation from London. With a significant number of buyout firms now planning to hire ‘women or nothing’, there simply aren’t enough to go round, even if 100% of the women applying for roles are successful. Demand far outstrips supply.
The industry itself must bear much of the responsibility for this. We all know the job can be intense when a deal spikes, but too many firms have engendered a culture of being permanently on standby for the sake of it, to prove a macho commitment to the cause, disconnected from actual requirement. Moreover, many interview processes are guilty of focusing rather more on how answers are delivered than their actual content, and so lean towards more assertive, masculine candidates.
What does this mean for your hiring plans? It need not mean you have to compromise on quality, though there is a risk of this. But it could require you to be more creative if you wish to bring woman into your investment teams. For example, one client is exploring making offers to high potential new graduates, backed by an understanding with a friendly investment bank to provide a two year training contract, on the understanding the woman will be released direct to the firm when this completes. Other firms are contemplating creating an analyst class, targeted mainly at women, to bring them into the firm earlier and allow time for them to acquire hard skills. This may be more complicated than it first appears as most buyout firms simply do not have the resources to provide granular training in the same way as a large bank.
What about looking outside the traditional candidate pool? Last week I met a young lawyer who has several years of M&A experience working for mid cap buyout firms, from origination to execution. She didn’t join a bank after graduating as the market had collapsed, but has focused on the same type of transactions since then. Of course, she won’t have the same depth of modeling experience as a banker, though she has the core skills from previous banking internships, and she showed all the brains and commitment to get up to speed fast, if given the chance and she brings other talents as well. Most of all she is very bright, highly motivated, with great people skills and a strong sense of what makes a good deal work. She needs an employer with a bit more patience, prepared to help her develop in the areas where she has had less technical experience, and I have no doubt she would be a great asset to several mid-cap funds. Could you consider hiring someone like this?
Traditionally this has not been a role that lends itself to part time working, but does that assumption have to hold? As teams have grown and work processes become more structured, can colleagues switch in and out on a regular basis to allow women more flexible working arrangements to deal with family responsibilities?
There is no right answer to these questions and in truth some firms have simply decided this is not a priority for them, seeing it as a luxury problem. But others, particularly the larger cross-border funds and those which are themselves listed companies, are under increasing pressure from their investor base to address the issue proactively. In the UK, Level 20 has been established as a mentoring and lobbying group to promote career opportunities for women in private equity, harnessing a network of senior professionals; the project is now expanding into other key European markets. Elsewhere, we are seeing more informal activities, often at a grassroots level, where women are coming together to share experiences and to find ways to influence their firms in the right direction.
This is one of the rare issues where funds need to collaborate with their direct competitors. At PER we have an important role to play, not just in identifying star women to join private equity, but in helping those already working there to take up leadership positions, including evolving thinking and practice in recruitment and retention of women. We can also help the firms re-think how they go about hiring to make their processes more user-friendly to female candidates (without making them necessarily easier) and how they keep the women they have already.
Every day we talk to firms right across the industry, large and small, progressive and conservative, spread by strategy and geography, and we hear opinions developing and ideas coming to the surface. We welcome the chance to engage with your team and explore how you are tackling this subject, to share ideas and experiences and see how we can help private equity investors unlock this incremental talent pool.
About the author: Rupert Bell has over 20 years experience in European private equity, as an investor and since 2010 as the head of PER’s office in Munich. In the DACH region around 50 of the 300 placements made over the last six years by Rupert and his team have been women.