Private Equity Has Arrived, and Left Its Women Behind

Women’s reaction in the private equity industry in the US to the lack gender diversity… and the lack of equal opportunity chance at senior management level

Two decades into her career, Hollie Moore Haynes realized she’d reached a limit: She was never going to lead a private equity firm run by men. So earlier this year, she left Silver Lake Management, where she was a managing director, and founded Luminate Capital Partners.

“Being a first-class citizen at a big firm as a woman is a huge challenge,” the 43-year-old Harvard and Stanford graduate said. “I wanted to build something that I own.”

Haynes is rare in reaching the upper echelons of private equity. Across the 10 biggest firms, women account for an average 10.9 percent of senior managers, up from 8.1 percent in 2012, according to data compiled by Bloomberg.

Gender inequality has long been a problem in the 40-year-old industry, where most firms are run by their male founders. Only a handful of women hold senior positions, with fewer in investing roles, even as private equity has grown in influence since the financial crisis by wresting power from Wall Street. Private equity firms oversee $3.8 trillion in assets, up 68 percent since 2008, and employ one out of every 25 U.S. workers through companies they own.

“The industry just can’t ignore the need for further diversity,” said Andrea Kramer, the head of the global fund investment team at Hamilton Lane Advisors, which analyzes and invests in private equity funds. “It’s critical. Private equity’s influence has grown as certain pockets of capital have come in to replace banks.”

Blackstone, Warburg

Blackstone Group LP, the biggest private equity firm by assets under management, has the largest proportion of female executives at the managing director level or higher, data analyzed by Bloomberg show. The company, founded by billionaire Steve Schwarzman, has 58 women, or 15.7 percent, in senior roles.

Warburg Pincus, whose president is former Treasury Secretary Tim Geithner, has the least. Of 70 partners across the firm, two are women.

TPG Capital doesn’t list executives on its website and declined to say how many women hold senior positions.

Female representation in the top ranks of private equity is worse than in investment banking, where women hold about 16 percent of senior positions, according to Catalyst, a nonprofit group that advocates for more opportunities for women in business.

It also trails the 14.8 percent of senior professionals in venture capital, data from research firm Preqin show. That industry — which funds early-stage businesses, typically in technology — became a flash point for inequality issues this year when Ellen Pao and Kleiner Perkins Caufield & Byers went to trial in a gender discrimination lawsuit. The firm was found not to have discriminated against Pao.

Rife Harassment

There’s clearly been progress in finance since the 1980s, when open harassment was rife. According to Connie Bruck’s 1988 book “The Predators’ Ball,” prostitutes were hired for Drexel Burnham Lambert’s annual conference in Beverly Hills catering to the buyout industry.

Alisa Wood encountered a hint of that culture in 1999 during her first college internship with a trading firm. When she walked onto the floor of the New York Stock Exchange, a man asked whether she was there to find a husband.

“If I was looking for a husband, I wouldn’t look here,” she replied.

Wood, 36, is now one of the top women at KKR & Co. In an interview, she said starting out as a woman in finance wasn’t easy. After working in investment banking, she joined KKR in 2003 — then a firm of fewer than 100 people — and was one of the only female executives in its New York headquarters.

Addressing Imbalance

KKR and most of its competitors understand the need for more female employees and have recently put programs in place to address the gender imbalance.

Some have made more progress than others. Several firms have sold shares to the public and diversified their businesses beyond traditional buyouts, requiring more senior non-investment staff.

KKR’s Henry Kravis and George Roberts said in 2012 they were pleased by the pipeline of women rising up the firm’s ranks. At the time, 4 of 71 senior managers were female. Today, it’s better: 12 of the company’s 93 executives are women.

Warburg Pincus, which is owned by its partners, saw its proportion of senior women decline in Bloomberg’s analysis. The firm is “redoubling” efforts to improve early recruitment and internal retention initiatives for young and mid-career women, said Chris Turner, its chief administrative officer.

Biggest Issue

“We’re very focused on expanding on the success we’ve made in recent years, particularly in increasing the number of female professionals at the firm,” Turner said.

Across private equity, the “single biggest issue” in increasing gender diversity is getting more women to apply to enter the industry, said Joan Solotar, Blackstone’s head of external relations and strategy and its highest-ranking female executive.

“Out of the roughly 1,000 applicants applying to the associate position, only about 100 were women,” Solotar said. “How are you going to get to 30 percent if only 10 percent of applicants are women?”

Firms are seeking ways to expand the pool of women vying for private equity jobs at both the analyst and associate levels — positions that can eventually lead to managing directors or partner posts. Some, like Warburg Pincus, are increasingly recruiting analysts from industries besides investment banking, the traditional private equity feeder, such as consulting.

Young Mothers

They’re also adding to campus outreach to get to know women earlier. Blackstone has a program to target female undergraduate sophomores for a summer internship.

The incoming analyst class across Blackstone’s units is 16 percent women, up from “significantly” less, Solotar said. About a quarter of the company’s summer interns will be female. A steering committee for women’s issues meets four times a year and an internal group called the BX Women’s Initiative hosts networking, career development and social events.

Schwarzman, the firm’s chief executive officer, told employees last week that Blackstone’s paid maternity leave policy would extend to 16 weeks from 12 weeks.

“Low turnover reduces costs and turmoil to the business,” Schwarzman said in an e-mail to the firm, a copy of which was obtained by Bloomberg. “Having policies that support the recruitment and retention of great women is good for business.”

Carlyle Group LP’s analyst class that will start in 2016 is 40 percent women, the company said. At the senior level, women fill 14 percent of roles.

Glaring Situation

Seeing women succeeding in senior roles is essential to keeping younger women in the industry. When these women work their way up to partner, the efforts will pay off, said Anita Woolley, a management professor at Carnegie Mellon’s Tepper School of Business. Studies show that organizations with more women in senior management perform better, said Woolley, though companies don’t reap those benefits until women represent about 30 to 40 percent of management.

It’s little surprise, then, that limited partners — the investors in private equity funds — are applying more pressure on firms to increase diversity. Public pension funds have also asked whether the people managing their money should better reflect the makeup of the LPs’ constituents.

“The LP side of the market, who’s investing in this asset class, is made up of a very diverse group of individuals,” said Hamilton Lane’s Kramer. “They often sit across from the firms and see a very homogeneous team. That is a glaring situation.”

Role Model

Parity may be unattainable for financial firms — as well as companies in many industries. “By nature of the fact that there’s going to be women who want to be stay-at-home moms, we’ll never be at the ranks 50/50,” said Blackstone’s Solotar.

Haynes, who left Silver Lake, saw little opportunity to reach the very top and wanted to focus on buying smaller companies that aren’t core to the Menlo Park, California-based firm’s strategy. Luminate Capital, which she formed in January, acquired software maker PDI earlier this month.

Though she remains an adviser to Silver Lake, which has an above-average 16 percent of senior roles filled by women, she’s most excited about being a role model to younger women joining her firm.

“I don’t know whether I need to do anything different than just give them a shot,” Haynes said.