Private credit began with many of the same gender diversity disparities as other sectors of investing, built on a predominantly male foundation with a glass ceiling. However, the asset class is working on remodelling itself.
Women are a minority in the field of private credit, especially when it comes to senior-level positions. But many women, and the firms they work at, are looking to change that, and show younger generations that private credit has opportunities for them too.
Despite the asset class’s slow pace toward diversity, many women choose not to dwell on the seemingly unhurried pace but focus on the valuable progress that’s been made so far and ways to continue that success.
Barbara McKee, co-founder and managing director at White Oak Advisors, says she doesn’t think the slow growth is due to pushback or discrimination from the industry, but more likely by problems that begin as early as recruitment for junior positions and a lack of education surrounding the asset class, which greatly narrows the applicant pool.
McKee’s sentiments are echoed by other women in private debt.
Katherine Taylor, a director in THL Credit’s direct lending and tradeable credit platforms, says that education about the asset class needs to start early so that the field can build out its “funnel of talent” to include more women, which will enhance diversity further up the totem pole.
Build from the bottom
Taylor says THL Credit hires junior lenders who already have experience from various investment training programmes at banks.
“I’m very concerned and thoughtful of how to build the bottom of the funnel of talent,” Taylor says. “Most private credit firms bring in investment professionals from the analyst or associate level. These people are coming to a firm like ours after already having done a couple years of analyst training at a bank.”
When women miss out on the training and education opportunities relating to the asset class that are needed before taking on these entry-level positions, the results are dire, and cause the applicant pool to shrink.
“You need to target females to actually achieve good gender balance,” Nimisha Srivastava, head of credit research at Willis Towers Watson says. “A historic challenge for asset managers trying to hire a seasoned applicant has been the limited pool of candidates. In order to change this, perhaps managers should focus more on diverse hiring at the junior level first.”
Srivastava says firms may want to try recruiting more women as early as undergraduate level, by either linking up with more women in business clubs or sending senior employees, male and female, to recruiting events at universities. “Had I not been in private equity beforehand, I never would have felt qualified to take a job investing in credit,” Carolyn Hastings, a managing director at Bain Capital Credit says, but her firm now looks to change this perspective.
Hastings says Bain hosts a yearly teach-in programme for women who are college sophomores to learn more about investing and the different businesses at Bain, such as private equity or credit. She adds that they then meet with a panel of associates and analysts where they can talk about what classes they can attend or skills they can look to obtain prior to graduating.
“When we think about recruiting women, education is half the battle,” Hastings says. “Even as someone who has been in the industry for a while, credit still seems a little nebulous about what skill sets you need, what you actually do.”
Taylor says that the presence of mentors will also help steer young women towards understanding what opportunities there are for them in private debt and help grow the applicant pool for junior positions.
“I do believe young women are not being shown these opportunities to the same extent that young men are,” McKee says. “Women are not seeing role models to the same extent that young men are.”
McKee adds that she has seen the presence of mentors grow tremendously since she joined the business 15 years ago, as women who currently work in the field continue to move up into senior roles.
Taylor and Hastings are among the founding members of Women in Alternative Debt, an organisation of women in the asset class, which looks to make connections, including through mentorship.
“One of the goals of WIAD is we certainly have a focus on trying to get senior women to also hopefully elevate the younger women that are coming up in this still relatively new asset class and say ‘look here are some role models to show you what your path could be in this business’,” Taylor says.
Where does the talent go?
However, once many women enter the asset class, hurdles arise. Most don’t make it to positions on the deal side, moving instead into “safe” back-office positions such as marketing or investor relations, and there is a sharp drop-off between these junior positions and senior roles.
McKee says that firms need to make sure they are trying to draw from a diverse applicant pool for all of their positions, so that women in private debt don’t just excel in fields like investor relations but on the deal side as well.
“There is a system here that needs to get addressed,” Taylor says. “How do you encourage women to participate on the investment side? You see a lot more women doing investor relations, legal compliance, fundraising than you see on the investment side. I think that hurts all of us.”
Srivastava adds that they have typically seen more women in back- or mid-office roles compared with the investment side. She adds that she has seen a definitive trend of women dropping out of the field at mid-level positions and this is something the industry also needs to address through better retention measures.
“I think women make especially great investors,” Taylor says. “I think having different strengths and viewpoints is what really makes a great investor. It would be boring if everyone thought about investing the same way. There isn’t one right way.”
April Young, a managing director focused on origination at Hercules Capital, says the main problem is getting women onto the investing side, because even in a non-diverse field, the deal side doesn’t discriminate against women, and needs more of them.
“I have not experienced [discrimination],” Young says. “I’ve found that men have been very open to work with me, with my team. I think if you have you the capacity to lend, and people want it, they tend to be pretty gender-neutral.”
These are all fixable problems, and there are many ways firms can actively work to increase their gender diversity, guide women toward the deal side and retain talent for senior roles. One of the best ways to start is through dialogue and repeatedly questioning the status quo.
“If you believe more diversity leads to better outcomes, then what are you doing about it?” Srivastava says. She asks this question to start conversations with firms which claim to be focused on improving things, but is often met with silence.
Hastings recalls a time that Bain was looking to fill a position, and a colleague of hers was sent a stack of resumes that didn’t include any from women. Hastings says that this doesn’t mean there weren’t qualified women applying for the job, but that their recruiting service wasn’t connected with the women in the industry. The firm stopped using the recruiter.
“That’s the kind of thing that needs to happen,” Srivastava says. “We need to start to see people talking about it and we hope that by encouraging a dialogue we will start to see the statistics of female investors rise over the next few years.”
Young adds that this won’t be possible without men understanding the importance of having women on their team. Young adds that she thinks many of them do realise this and have become more sensitive to it.
“One of the things about Hercules I like is that we have a number of very senior women,” Young says. “If you look across the management teams, there are women in lots of roles. I’ve never experienced any sense that being a woman was a disadvantage at Hercules. In fact, sometimes I think it’s an advantage.”
Firms needs to realise this too. Srivastava says that she has seen firms which have offered return programmes for women who left the field temporarily to either have children or pursue other passions, which train women for a year to enter back into the field with the training and experience they need to be successful.
Taylor hopes to see limited partners and pension funds take a similar stance on gender diversity that they do with criteria like environmental social and governance guidelines, so that it becomes a qualification for them to invest.
But for now, women are focusing on the progress that has already been made and the areas they can work to improve.
“You have all these senior women to serve as role models, to show that you can stick with [credit] and make a long-term career out of it,” Hastings says. “It’s taken 10-15 years to bring them up to senior rank, and hopefully we can serve as role models and examples for the younger women in the field.”
At the very least, these mentors will allow women to think of private debt as a career option.
“When I graduated from college it never would occur to me that I could do these kinds of things. Women today choose not to, but not because they don’t think they can,” Young says. “Good news is the young women today may not choose it, but not because they think they can’t.”