In terms of building diverse teams, part of the challenge is that the demand for people outpaces supply, Haas said.
There’s a bit of a chicken-and-egg dilemma here. One reason the pool of diverse candidates in private equity is so shallow may be because the industry has been so homogeneous for so long.
Haas said Cyprium has worked with a new startup known as the Finance Farm League that helps connect undergrads of color from regional schools and historically black colleges and universities and match them with job opportunities.
But a big challenge, said Cyprium founder John Sinnenber, is that firms like his are competing against all of the several thousand other PE funds out there, including the Blackstone and Carlye groups of the world.
Firms are also generally evolving in how they think about who might fit in the PE ecosystem.
This means looking at candidates from less traditional career paths besides the common route many take to the PE business through the investment banking sector, said Maureen Leitch, director of global talent management for Riverside.
She said Riverside, the largest PE firm with roots in Cleveland, is making efforts to connect with diverse candidates earlier in their careers in finance school and looking beyond finance disciplines more regularly.
In many cases, there’s a learning curve to tackle.
“We have often found that diverse candidates are not even familiar with what private equity is,” Leitch said. “So part of this is education, building up the Riverside brand and nurturing those connections. PE has been this very private, elite sector, and we are trying to help break that cycle.”
So why does diversity in the PE business matter?
Many firms seem to acknowledge this is just the right thing to do, especially as the country continues to reckon with its history of racial and gender inequality.
But there’s also a clear business case to be made. Various studies show that diverse businesses don’t just make better decisions, they make better investments.
And in the PE world, diverse teams are more likely to invest in diverse companies. That’s the sort of trend that can help support the generation of wealth minorities in particular have been sidelined from — something that has inspired funds like Mezzanine and Fvlcrum that want to channel capital to woman- and minority-owned businesses.
Pointing to studies that show America is on track to be minority white by 2045, Marques Martin argues that ignoring diverse companies and the broadening racial wealth gap could be economically perilous.
“I think these factors have mobilized folks to say that we have got to figure out a way to start getting capital and opportunities in the hands of people who are ultimately going to be the majority of our country, because if we don’t,” he said, “the risks that poses to our country are too significant and dire to think about.”