Private equity and venture capital funds with gender-balanced senior investment teams generated 10 percent to 20 percent higher returns compared with funds that have a majority of male or female leaders, according to a report released today by IFC, a member of the World Bank Group.
The report, Moving Toward Gender Balance in Private Equity and Venture Capital, explores the link between financial returns and gender diversity; the lack of women in the industry; and steps needed to achieve gender balance. The study—which also analyzed companies receiving private equity and venture capital funding—found that gender-diverse leadership teams at these portfolio companies also outperformed their less-diverse peers by up to 25 percent.
IFC collaborated with investment firm RockCreek and consulting firm Oliver Wyman to produce the report. The research was supported by the Government of Canada.
Women are 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. The report found that women make up only 11 percent of senior investment professionals in private equity and venture capital in emerging markets, which is roughly comparable to the 10 percent observed globally. The study—which analyzed private equity and venture capital funds in emerging markets—also found that just 7 percent of this capital is invested in women-led companies.
“At IFC, we have witnessed great benefits from gender diversity—financial returns for companies and positive social benefits,” said Hans Peter Lankes, Vice President, Economics and Private Sector Development at IFC. “As the largest investor in emerging markets’ private equity funds, we will use these findings to promote gender diversity in the industry and we hope that others will follow. This simply makes business sense.”
The report draws on gender diversity and performance data from more than 700 funds and 500 portfolio companies; survey results from over 500 fund managers and institutional investors; interviews with more than 50 investors and gender diversity experts; and case studies of more than 10 private equity and venture capital funds and institutional investors that are addressing the gender-imbalance in their own work.
Private equity accounts for more than $3 trillion in global assets under management. It is a critical channel for delivering capital to promote private sector growth. This report comes at a time when IFC is increasingly expanding its work in closing gender gaps through investments, with recent commitments to quadruple annual financing dedicated to women-led businesses and achieve a 50 percent share of women directors where IFC has a board seat.