Funds With Gender-Balanced Leadership Generate Higher Returns

Funds With Gender-Balanced Leadership Generate Higher Returns

Private equity and venture capital funds with gender-balanced senior investment teams generated higher returns compared with funds that have mostly male or female leaders.

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.

«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, in a media statement.

The report, published by International Finance Corp (IFC) in partnership with investment firm RockCreek and consulting firm Oliver Wyman draws on gender diversity and performance data from more than 700 funds and 500 portfolio companies.

Women Underrepresented 

Currently, 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.

«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,» added Lankes.

Outperformance At Portfolio Companies

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.

However, its analysis of private equity and venture capital funds in emerging markets found that just 7 percent of this capital is invested in women-led companies.

Data Collection

Private equity, a critical channel for delivering capital to promote private sector growth, accounts for more than $3 trillion in global assets under management. 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.