Building a more inclusive economy and closing the racial wealth gap will require getting many more Black professionals into fields like investment. In our commitment to helping further the careers of Black investors working in private markets, our Private Equity and Principal Investors Practice convened its first Black Investor Professionals Forum, which drew 150 people in the sector for a virtual panel discussion on increasing diversity within private equity.
We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you. Please email us at:
McKinsey_Website_Accessibility@mckinsey.comShelley Stewart, a McKinsey partner and co-leader of the McKinsey Black Network moderated a panel on increasing racial diversity within private equity.
The event—which featured our global managing partner Kevin Sneader, Chicago Teachers’ Pension Fund Chief Investment Officer Angela Miller-May, CDPQ Head of Real Assets and Private Equity and CDPQ Infra President & CEO Macky Tall, and Connecticut State Treasurer Shawn Wooden—was open to professionals at all tenures in the industry. According to McKinsey partner and co-leader of the McKinsey Black Network Shelley Stewart, the forum hopes to “offer the next generation of Black financial leaders insights, advice, and a network of professionals like themselves with whom they can learn and connect.”
Private equity has an outsized ability to shape the global business community, and increasingly, research is showing the benefits of allocating capital to funds run by managers from diverse backgrounds. “Last year in North America alone, over 3,000 private equity firms controlled $1.9 trillion of assets under management,” said Kevin Sneader during the event. “These firms own over 20,000 companies and employ approximately 9 million individuals—presenting an opportunity to narrow the existing gender and racial inequalities and set a standard that others can emulate.”
Here, according to the event’s panelists, are three ways to advance diversity in investment.
Diversity efforts must be proactive—and sustained across all levels of an organization
The decision to increase diversity should come from the top down—think boards of endowments, foundations, and pension funds, for example, which can hire more diverse leaders to ensure they build and sustain a strong pipeline that advances diversity throughout the organization. “We need to tackle diversity from different angles—these are the managers of tomorrow, who need to get experience in sourcing deals and exiting,” said Angela Miller-May. “So far efforts in the industry have been reactive, not proactive. There has to be intention, and also accountability.”
Check biases of perceived risks
The panelists discussed the often perceived risk in investing with managers from minority backgrounds. “In my view, this is rooted in institutionalized bias and racism,” said Shawn Wooden. “We need to call it what it is.”
Our research shows that the more diverse organizations are, the more they are likely to outperform their less diverse peers. For financial services companies, this could mean an additional $60 billion in revenue from Black customers each year if Black Americans reach wealth parity with white Americans. “The best investment teams are those able to say they have covered all angles in terms of their investment strategies and decisions,” said Macky Tall. “That requires diverse thinking. I always say that our true asset is not the billions of dollars we manage—it’s the people.”
Use ‘onliness’ as a source of strength.
Black investors may sometimes find they are the only person of color in the room. That may cause uncomfortable feelings of “onliness,” said Mr. Tall. He encouraged Black investors to “be confident” in the differentiated experience they bring. “You have competencies, skills, and a perspective to bring to the table,” he said.
Ms. Miller-May echoed this sentiment. “There are always going to be people who expect less from you,” she said. “Focus on being yourself, overdelivering, and really dismiss the negative noise. Grow in your career and grow in your network. You never know where opportunities are going to come from.”