Friday, October 19, 2012

Private Equity Binders


Private Equity Binders

Over the weeks you may have noticed that I always refer to money managers as males.  This is not a case of sexism.  I’m being accurate.  The core functions of the industry, portfolio management and trading, are dominated by men.   At one point in my career, I oversaw a trading desk managed by five women and one man.  This was a rarity in 1995, and it is still highly unusual.  While I’ve known some very fine female portfolio managers, and a number of female chief investment officers at pension plans and endowments, they are a tiny proportion of the people serving in these roles.  Women tend to get the supporting roles in money management.  Women have much higher representation in sales, marketing, accounting, and client service.

The Decision (1995)

The industry’s employment of African Americans is equally poor and follows the same pattern.   Outside of firms owed by African-Americans, blacks tend to wind up in support roles.  Money management firms like to hire women and African Americans to market to public pension plans, although the money is managed by white males.  The idea is to present a diverse face to pension fund trustees.

Perhaps no area of money management is less diverse than private equity.  At four of the largest PE shops (Apollo, Blackstone, KKR, and Carlyle), there are about 160 managing directors.  Only 4 are women.  None are black.  At Bain Capital, there are 49 senior professionals, of whom only four are women.  Of the 49 professionals, 26 have an undergraduate or graduate degree from Harvard, and 39 went to an Ivy League college.  If I add Stanford, the University of Chicago and few other elite schools to the list, nearly 85% of the senior professionals went to about ten institutions. 

It’s not surprising that Governor Romney did not have any women in his core group of advisors when he became Governor in 2003.  If it’s possible, Bain was even less diverse ten years ago, and his colleagues and competitors were almost entirely white males.  When a private equity manager acquires a company there are all sorts of things that they do not understand.  They hire consultants, who in turn produce, Power Point presentations and binders of information.  So when Governor Romney needed to hire women, he did what any private equity guy would do; he ordered a binder. 

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