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A Closer Look At The Representation Of Women In The Alternatives Space.

The most recent Preqin Women in Alternative Assets Report shows that the global female participation rate in the Alternative Assets class stands at 20.9%, an increase of only 2.10% from 2017. These figures not only highlight the current and historical lack of female representation in Alternatives, but also sheds a light on the slow rate at which women are entering this space. When narrowing it down to global Private Equity participation, women currently represent 20.50% of those employed in the space, up 2.61% from 2017. Although this is a shift in the right direction – a different picture emerges when looking at the roles occupied by women in Private Equity. As it currently stands, women make up 12.90% of senior management globally, from 9.41% in 2017. However, women in junior positions increased from 26.4% in 2017 to 32.10%, a significantly higher rate than that of senior positions. This indicates the continued underrepresentation of women in senior positions signaling the lack of women representation in decision-making positions.

Locally, it is encouraging to see that women participation in the asset class is not only moving in line with the global trend, but currently surpasses it. The 2021 SAVCA Private Equity Industry Survey reported that women made up 43% of Private Equity professionals. However, of the SAVCA members that are Fund Managers, only 9% were owned by women. To put this into perspective, out of 130 Fund Managers, a mere 12 were owned by women. To be sure, whilst progress is being made – it remains at a paltry pace.

This is despite various studies showing that Alternative Fund Managers with women-led and mixed-gender teams outperform their predominantly male counterparts. For example, a study by Goldman Sachs found that 48% of women-managed funds outperformed during the market low caused by Covid-19, compared to 37% for all-male funds. Another report by McKinsey found that companies with more women in senior management positions tend to perform better than those with fewer. This, for me, highlights what is often overlooked, that is, the differences in how men and women think and operate and the benefits that can be derived when we harness views from both sides as part of the investment decision making process.

Research has shown that gender diverse teams are less likely to rush into an investment and are seen as more risk averse (or more likely to take on suitable levels of risk) as opposed to their all-male counterparts - making the investment decision-making process more robust as all risks are assessed and more time is spent researching prospective investments. Furthermore, women are inherently steadfast, and studies have reported that they are less likely to walk away from investments in a time of crisis. Interestingly, women are often described as emotional, however, it is this very same quality that proves extremely important in negotiations as it aids in communicating effectively, defusing conflict, and reading in between the lines.

 

It is this emotional intelligence that is essential to building cohesive partnerships, trust, and goal congruency – which are all so important to achieving strategic objectives. When taking the above into consideration, one can see the immense benefits of gender diversity in a team and how it improves decision comprehensiveness.

So why then are women severely underrepresented in Private Equity? Indeed, the above statistics at a minimum highlight the vast disparities between the participation of men and women in Private Equity. The contributing factors vary from gender bias, the remuneration gap between men and women, the power dynamics within majority male-run Fund Managers and the misconception that women are only suitable for administrative roles. Most women are aware of these hurdles and studies suggested that this often leads to them exiting the industry or adopting a passive approach, instead of articulating their views. At the same time, women are often faced with the challenge of having to find the balance between displaying ambition while being “agreeable” enough, lest they are labelled too “aggressive”. Unfortunately, the result of this often leads to the false impression that women lack confidence and cannot negotiate or lead deals. This is a fallacy.

All this considered, one can only be enthused by the observed increase in women-led South African Private Equity Managers coming into market. For example, these include trailblazers such as Mahlako, a 100% women-led Infrastructure Fund Manager, who are spearheading mission-critical infrastructure investments and are inspiring a generation of young women to consider a career in the asset class. Moreover, there has been an increase in the hiring of women professionals in senior positions by predominantly male-led teams. This increases the number of seasoned women deal-makers, which will be beneficial to the growth of women-led Fund Managers. It is also pleasing to see the concerted efforts by SAVCA to support women-led Managers. An example is the launch of the MiDA Advisors and SAVCA 13-month Women Empowerment Mentoring and Incubation Fund Manager Programme (WE>MI) which is supported by the United States Agency for International Development (USAID). This programme aims to assist women led Fund Managers with skills development through mentoring and potential access to investment funding. Crucially, it is also great to see investors at the forefront of meaningfully bridging the gender gap by insisting on investments in women-led teams as part of their investment principles. This has been one of the biggest catalysts in driving gender diversity within the Private Equity space as it has highlighted to Fund Managers the need to reconsider and reconfigure their organisational structures.

 

In conclusion, we are making progress - but the pace is paltry. The reality is that the industry will not transform overnight, and the gender diversity struggle will continue for some time to come. Bridging the gap requires a collaborative effort from all participants in the space. There is light at the end of the tunnel as investors take more active and deliberate steps towards ensuring that women are meaningful participants in their investments.

Michelle Bholosha, Investment Professional, Thuso Incubation Partners