Funds managed by gender-balanced GPs score 20% higher median returns: Ralph Keitel, IFC

Ralph Keitel at DEALSTREETASIA's Asia PE-VC Summit 2018 in Singapore. Photo: DEALSTREETASIA

Are private equity and venture capital firms losing out by ignoring women in senior management? Lack of diversity and the absence of women decision-makers are seeing funds make less money for their investors, according to a recent joint report by International Finance Corporation (IFC), Oliver Wyman and Rock Creek Partners.

The study, which created the ‘largest unique data set on gender diversity and financial performance for the industry’, shows PE and VC funds managed by gender-balanced GPs (General Partners) had up to 20 per cent higher median returns than male- or female-dominated funds. It validates that male-only PE and VC funds are missing out on promising investment opportunities that may impact their overall fund performance, Ralph Keitel, Principal Investment Officer and Regional Lead for PE funds in Asia-Pacific, IFC, said in an interaction.

This has also resulted in female founders getting less PE and VC capital.

Keitel said that the joint study revealed that for portfolio companies, emerging market female entrepreneurs received only about 7 per cent of investment capital. Besides, less than 20 per cent of senior leadership teams that receive capital are gender-balanced, he added.

Among other major trends in the PE/VC space in the region, Southeast Asia is witnessing the advent of several sector-specific funds, even as similar vehicles from China and India look to invest in this region. IFC, which has often been the early backer of such funds in Asia, will look at similar opportunities in this region while adopting a cautious approach, Keitel said.

“The decision whether to back a sector-specialist depends on several factors, including the GP’s industry know-how, network, and track-record. But we also look at the depth of the target market(s) to ensure there is sufficient deal flow for a niche strategy because, in our experience, insufficient deal flow and thus selectivity is one of the reasons why many sector funds in emerging markets have not yet been able to demonstrate the same outperformance over generalist funds as is the case in developed markets,” he said.

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