Improving Opportunities for Women in European Private Equity

Despite some recent progress, the European private equity and venture capital industry is still a male-dominated environment—at least among senior investment professionals. Level 20 was founded with a mission to change that. A not-for-profit organization, Level 20 has a clear goal: to reach a point where 20% of senior positions in private equity and venture capital firms are held by women.

Recent research shows that there is still some way to go before that target is reached. The Debevoise Women’s Review recently spoke with Level 20’s CEO, Jeryl Andrew, and its Chair, George Anson, for an update on how Level 20 is helping the industry to meet the challenge of improving gender diversity.

Level 20 was founded in 2015, by 12 senior women in the private equity industry. They resolved to create an organization to encourage more women to pursue careers in private equity—including the buyout, growth capital and venture investing spaces—while supporting others already on that journey.

In many ways, those founding women started their careers in a different environment than the one that young women experience today. Jeryl reflects on how much the industry has changed: “When I started to work in private equity, it was very different—a small industry managing relatively small amounts of capital, a local rather than a global industry for the most part, and without the clear distinction between venture capital and private equity investment. There were some women in the industry, and some high-profile women at a senior level. However, as the industry has grown so rapidly I believe the percentage of women has fallen, even though the absolute numbers have risen.”

Level 20 aims to tackle that gender disparity from within. George explains the charity’s name: “‘Level 20’ was chosen as it made clear the goal of the organization, namely to see 20% of senior roles held by women.”

There is still some way to go. A 2018 study commissioned by Level 20 found that just 6% of senior investment roles were held by women. The story is a little better for mid-level at 15%, and junior roles at 27%—but Level 20’s members are committed to do much more.

Interestingly, the evidence suggests that larger firms employ a significantly higher proportion of women than smaller firms. “I am hugely encouraged by the numbers of young women entering the industry in the larger firms,” says Jeryl, “and most have a very international profile. It makes me very optimistic for the future. But there is still a long way to go in the smaller firms—our 2018 survey showed that two thirds of small firms did not have a single female in their investment teams.”

Jeryl’s view is that fundamental changes are needed to make real progress. “Financial services is not one of the most popular career choices for young women,” she says, “and we need to do more work to promote private equity as an intellectually challenging, varied and financially rewarding career.” But this alone will not be enough; there need to be structural changes. Firms should recruit from a “much broader educational background,” and some firms have cultural issues to address.

Both Jeryl and George believe that Level 20’s work can help with these cultural issues. Their events help women of all ages build professional networks, while their mentoring programme allows younger women to learn from the experience of others. As George explains, “the Level 20 mentoring programme pairs women working in the industry with both female and male volunteers. In addition to the obvious benefits for the mentees, the mentors also gain insights into some of the challenges faced by women working in the industry.” The use of male mentees is important because, as George notes, men play a major role in championing the “benefits of diversity.” Given their senior positions, they need “to take the lead on initiatives to promote greater diversity and to call out any bad behavior in their teams.”

However, George and Jeryl both acknowledge that these programmes only go so far: “The traditional entry routes into private equity investment roles are from careers that are male-dominated, such as investment banking,” George says. “This means that the pool of available candidates is primarily male. The culture and lifestyle within the resulting strongly male teams is not one that has a particular appeal to women, and this then produces a self-perpetuating cycle of primarily male recruitment into those roles.”

Perhaps fund managers (often referred to as general partners, or GPs) have something to learn from their investors. Level 20’s 2018 report found that 21% of senior roles in investor-side teams are filled by women, above the GP target of 20%. Level 20 points to lifestyle differences as the key driver. George argues that professionals working for the limited partners (LPs, or investors) “are able to have more control over their schedules by, for example, planning overseas trips well in advance rather than trying to manage the pressures of direct deal-doing, which is much more unpredictable. This can be helpful if a woman has to manage family demands as well. There are, as a result, many more role models of successful women in LPs, which helps attract younger women into this work.”

In the end, it is the mindset shift that George suggests is the key to opening the door to change. “It is not a quick fix. To increase diversity and inclusion, there needs to be a positive and permanent change in mindset at the senior level. Then it can filter down within the firm. Just hiring more women at entry level will be doomed to failure if this is not a strategic shift within the decision-makers at the top.”

George, a 30 year veteran of the asset manager HarbourVest Partners, has personal experience of a positive shift in mindset, having witnessed first-hand the benefit of having diverse teams. He says that at HarbourVest, greater focus on gender diversity began when Kathleen Bacon—who later became one of Level 20’s founders—joined in 1992. He notes that a shift in “investment and communications strategies” led to a “more diverse and inclusive team, which had a positive and strong impact on our decision-making and investment performance.”

One way for firms to encourage this internal movement and mindset change, George notes, is through “affirmative recruitment strategies, with a focus on women, or minorities. These may be client-driven, but also relate to the specific marketplaces in which they operate.” He emphasizes that this is not uncommon in the industry as it stands today, since “there are a greater number of GPs that have affirmative recruitment policies… [and] it is not uncommon to see at least 50% of entry level recruitment being women.”

So aside from internal strategies, how can private equity professionals, and the lawyers and other advisers who serve them, directly support Level 20’s hugely important work? First and foremost, Jeryl encourages them to join: “Our member firms are participating in an industry-wide initiative to improve gender diversity, recognizing the need to build a ‘modern’ culture so that the brightest talent continues to be recruited,” she says. Once signed up, firms can join other UK, European and global firms in becoming Level 20 sponsors, where they are offered priority on the mentoring programmes and will be given access to certain sponsor-only events. In addition, members can engage through participation in much-needed research and guidance materials.

George notes that Level 20 now has more than 50 sponsoring firms with very strong engagement, “including involvement on our Advisory Council from several managing partners, and huge support for our mentoring programme with many senior men volunteering to act as mentors, as well as the involvement of many of the junior female professionals in our events. A number of our sponsors also support our events by providing speakers and venues.” These actions of support are not exclusive to GPs; Level 20 has established an official “Supporter” category for LP firms and service providers to provide financial support.

But Jeryl tells us that Level 20 faces the same challenges as any new business: “namely, lack of resources, both human and financial.” Pro bono support from professionals in a number of areas has been crucial, as has the financial support of associate members attending events.

But despite these challenges, Jeryl is very positive about Level 20’s future, especially given its international expansion. “The speed at which committees have been established across what will shortly be 11 European countries has been very encouraging… having such an international group of women involved in our work is invaluable.”

There is clearly much to be done, but there is no doubt that Level 20’s active engagement with the private equity industry in the United Kingdom and elsewhere is building awareness of the ways in which gender disparities in the industry can be addressed.

Kate Ashton is a partner, Simon Witney is a special counsel, Nikhil Subbiah is an associate and Andrew Burnett is a trainee associate in Debevoise’s London office.

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