Private markets investment firms have been blaming a lack of diverse talent for their DE&I inadequacies for years. But that excuse is no longer being tolerated.

From cultivating a pipeline of entry-level candidates to securing hard-to-find senior, diverse executives, ensuring your approach to recruitment and talent development is as inclusive as possible is a critical DE&I starting point.

“Attracting diverse talent can be tricky,” says Riverside’s Dörte Höppner. “Private equity tends to attract more male candidates, so a special focus needs to be placed on the hiring process. The full support of recruitment agencies is needed. But it also starts earlier, with getting diverse students and young professionals interested in a career in the asset class.”

Myriad organisations have sprung up to help firms foster relationships and build awareness with prospective talent from secondary school onwards. KPMG, for example, engages with organisations such as STEM Women; It’s Not Just for Boys; The City Afro-Caribbean Network; Rare Recruitment; SEO London; AuthentiCity and the Social Mobility Foundation and UpReach, which work with students from lower socio-economic backgrounds, according to partner and head of deal advisory for KPMG UK Liz Claydon.

Meanwhile, larger firms have also started developing internal programmes. KPMG runs its own Women in Deals and Black Heritage Talent insight initiatives. Partners Group has launched a summer internship programme and Blackstone has expanded its on-campus recruitment to include historically Black universities and women’s colleges.

But identifying candidates is only part of the problem. Firms must also adapt the way they engage with these potential employees. “It is critical to meet people where they are and to start by sharing why investment management is such a rewarding and impactful career,” says Katherine Jollon Colsher, chief executive of Girls Who Invest.

“When speaking to a Gen Z audience, it’s important to underscore that the decisions investors make can have a major impact on both the global and local economy, rather than merely creating alpha for clients.”

In addition, firms are rolling out organisation-wide training and reinventing their selection processes to mitigate the effects of unconscious bias. First, according to Emily Bohill, managing partner at real assets executive search firm Bohill Partners, this means making sure that the hiring panel is itself diverse.

Carlyle, meanwhile, now favours more structured interviews, with the firm providing greater clarity around key competencies to avoid subjectivity. “It is important to lay out objective measures,” adds Apax’s Johnathan Medina. “For example, in interviewing candidates, we give graduates models or case studies to crank through and we evaluate them on the outcomes.”

Well-defined criteria are key, not only for recruitment, but for career progression. “We have developed clear definitions for performance by function and level which promote our ability to create equal development opportunities,” says Brookfield’s Lori Pearson.

Cultivating internal diverse talent is preferable, after all, when diverse recruitment challenges increase with seniority. For mid-level positions upwards, the answer, it seems, is getting tough with recruitment agencies.

“It is not just about equal opportunity. You have to mandate the recruitment company to deliver at least a 50:50 shortlist when it comes to diverse candidates,” says Isabel Rodriguez, investment director at Nuveen’s renewables platform Glennmont Partners. “They will always push back and say there is not enough talent to choose from. But you have to hold firm.”

Realistically, there is a shortage of senior diverse candidates with direct industry experience in some instances. That means increasing the acceptance of lateral hires.

“The hardest part of our job is working with our clients to figure out what is truly important to succeed in a role and encouraging them to be more open-minded,” says Tania Azad, a partner at Bohill who leads the firm’s DE&I recruitment efforts.

“What are the essential skills? Does the right candidate really need all of this incredibly specific experience in a niche sector? We have seen a small uptick in acceptance of more creative hires, but often, clients feel most comfortable when hiring in their own image. In asking the right questions and gently pushing boundaries, we are slowly starting to see less resistance to profiles which previously might have been prematurely dismissed.”

TPG’s recruiting efforts – supported by partnerships with Girls who Invest, Access Distributed, SEO, MLT and Toigo, among others – have ensured 50 percent of the firm’s last two associate classes are either women or racially or ethnically diverse.

The good news is that a commitment to hiring outside the normal recruitment channels can bear fruit.  Take TPG. TPG Capital, the firm’s flagship private equity fund, filled only 50 percent of its associate classes in 2018 and 2019 through the typical recruiting pipeline.