Team diversity impacts fundraising prospects - AVCJ Forum

While there is a general awareness of the need for increased diversity within the industry, institutional investors are driving it up the agenda, noting that the presence of concrete policies on DEI factors into overall environment, social, and governance (ESG) assessments.

“Over the last 12-18 months, a focus on the ethnic diversity side of things has emerged in the US. That's causing a lot more LPs, especially US pensions and endowments, to focus on this issue and they are asking managers to report on specific metrics," said Lydia Hao, a managing director at Harbourvest Partners.

"The attention that LPs are bringing to this issue is pushing managers to think about their diversity and inclusion metrics.”

She cited a recent McKinsey & Company survey of more than 40 firms that found LPs today are likely to allocate twice as much to GPs with ethnically diverse and gender-diverse teams versus those without. This is underpinned by the premise that teams conforming to this profile have delivered superior returns.

Jessica Espinoza, CEO of the 2X Collaborative, a global industry body for gender lens investing, added that her firm has raised USD 11bn for women founders since its inception in 2018, exceeding the initial target of USD 3bn. She observed that diversity at board level leads to better implementation of policies in areas like climate change, and this resonates with LPs when they think about DEI.

Further, Espinoza noted she has seen a lot of innovation in Asia around enhancing DEI metrics. For example, GPs are experimenting with linking carried interest to gender outcomes.

For many Asia-based investors, the current DEI priority appears to be gender. Sarah Pang, head of ESG and sustainability at Affinity Equity Partners, said that her firm now has a policy of shortlisting at least one female candidate for every open role.

However, attrition of female staff at the vice president level remains a challenge, and GPs have responded through initiatives such as flexible working arrangements. Diana Dawson, a managing director at TPG, observed that her firm now covers travel expenses for caregivers who accompany mothers for the first 12 months post-pregnancy.

There is already some evidence of success. For example, China-focused Fountainvest Partners found that 40% of its vice president and director-level promotions this year were women.

"It's a big, big thing because traditionally it's at that level we tend to lose women. We typically have more women at the analyst and associate level, but as they mature and have life choices to make, we tend to lose them," said Amy Fong, COO of FountainVest.

Harbourvest has also made progress, with women accounting for 50% of its 1,000, 40% of its senior leaders, and 28% of its managing directors. Hao said this was the result of "years of effort."

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• Topics
• Central Asia
• South Asia
• GPs
• LPs
• Fundraising
• TPG Capital
• Affinity Equity Partners
• HarbourVest Partners
• AVCJ Events
• Fountainvest Partners
• diversity & inclusion (D&I)