McKinsey Study Looks at Diversity in Private Markets

A recent McKinsey study titled “The state of diversity in global Private Markets: 2022” explores diversity research in the global private markets industry, with a focus on private equity firms and institutional investors. This report provides insights into three main areas: how institutional investors evaluate diversity on investing teams; a preference toward more diverse teams when allocating capital; and an analysis on diversity for PE investing teams in terms of gender. The study found institutional investors are increasingly asking for and receiving diversity data from PE firms seeking to raise funds. As part of the study, McKinsey researchers asked ten institutional investor CIOs with AUM ranging from $20 billion to $460 billion to allocate a fixed amount of capital between two hypothetical private equity funds. When two firms had identical metrics except for the investing team’s diversity, on average, the CIO would allocate twice as much capital to the team with more gender diversity and 2.6 times as much to the team with more ethnic and racial diversity. The study found, however, that in the United States and Canada white professionals hold 70 percent of all investing jobs, with white men being more than eight times as likely as white women to be Managing Director. The study notes that more consistent metrics and industry benchmarks are needed to track progress, but that “the value to be gained by taking effective action could motivate sustained focus on the goal.”