No room for complacency towards diversity in private debt

With uneven DE&I progress and growing LP pressure, the private debt industry cannot afford to rest on its laurels.

Managers’ approaches to diversity, equity and inclusion have come under scrutiny from investors in recent years. According to Private Debt Investor’s LP Perspectives 2023 Study, more than eight in 10 investors consider evidence of diversity and inclusion at the GP level when conducting manager due diligence. 

As Sharadiya Dasgupta, founding partner at sustainable finance consultancy Blue Dot Capital, told PDI in November 2022, LP expectations of GPs have moved beyond developing processes and best practices: “Now we see a shift of focus towards track record and outcomes. Managers are cognisant of that and they recognise that it is now time for the numbers to start doing the talking.”

Having transparent, measurable DE&I commitments is also crucial to attracting talent. Sasha Jensen, founder and chief executive at executive search firm Jensen Partners, says alternative asset managers are working to ensure “the messaging around their DE&I strategies is clear, as this can be key to winning over candidates”. 

There has also been a noticeable uptick in the appointment of DE&I heads to monitor the success of these programmes, observes Jensen. While she expects this additional oversight to lead to more positive, tangible outcomes moving forward, she cautions that there is often a lag between “setting intentions, establishing programmes” and “collecting the data”. 

Yet there are already signs that private debt firms’ efforts to improve diversity are starting to pay off. In the first quarter of 2023, more than half of marketing hires in the asset class were women, according to data from Jensen Partners, which has developed the Jensen DiversityMetrics platform to measure and benchmark diversity in private markets. 

Progress appears to have been slower when it comes to racial diversity, however, with people of colour representing approximately a quarter of hires in Q1. Mapping the market and taking steps to develop a wider talent pool, such as seeking out potential recruits from different educational backgrounds or offering internship programmes, can enable firms to build a more diverse candidate pipeline as well as “identify talent that may not be right for now, but might be right in the future”, says Jensen.