Moving toward gender balance in private equity and venture capital

EXECUTIVE SUMMARY

Women are significantly underrepresented among the investment decision-makers at private equity and venture capital firms, as well as in the leadership of companies that receive this investment capital. Women hold only 10 percent of all senior positions in private equity and venture capital firms globally, and women-led enterprises collected less than 3 percent of global venture capital in 2017 (Preqin 2017; Zarya, 2018).

These firms provide a unique and sizable source of capital for entrepreneurs in emerging markets. Although this asset class represents a small portion of total global assets under management, it provides entrepreneurs access to funding when public equity markets and debt may be less viable sources of capital. Private equity and venture capital represent approximately US$3 trillion of more than US$75 trillion global assets under management.1 Nearly US$800 billion is dedicated to funds investing in emerging markets (Preqin 2018a, 2018b).2

Our research examines gender balance—defined as leadership teams with at least 30 percent of men and women—in private equity and venture capital funds and the companies they invest in within emerging markets. Our focus includes East Asia (including Southeast Asia), Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, South Asia, and Sub-Saharan Africa.We explore the relationship between gender balance and fund performance, and the roles that general partners, the vehicles investing private equity and venture capital funds, and limited partners, the source of capital, can play in alleviating gender gaps in investment funds and their portfolio companies.

We find that the gender gaps in the representation of women as allocators and recipients of capital put access to financing at risk for female entrepreneurs and may reduce investment returns for funds. Given that private equity and venture capital are still nascent in many emerging markets, changes made now can have a significant impact in the long run to move the industry toward gender balance. This would impact General Partners and Limited Partners, as well as entrepreneurs receiving capital to grow their businesses. This report answers three questions:

• How gender balanced are leadership teams of General Partners, which allocate capital, and of portfolio companies, which receive investments?
• Are there benefits of moving leadership teams toward gender balance within General Partners and portfolio companies?
• What can General Partners do to move toward gender balance in their leadership teams and those of the portfolio companies they invest in?

To answer these questions, IFC, RockCreek, and Oliver Wyman used gender data across thousands of General Partners and portfolio companies operating in emerging markets. We gathered performance and gender diversity data for more than 700 funds and 500 portfolio companies. We analyzed this database along with survey responses from more than 500 General Partners and Limited Partners and interviews with more than 50 industry practitioners and academic experts.

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