{"id":27893,"date":"2024-03-06T06:00:16","date_gmt":"2024-03-06T11:00:16","guid":{"rendered":"https:\/\/www.cambridgeassociates.com\/?p=27893"},"modified":"2024-03-06T03:26:10","modified_gmt":"2024-03-06T08:26:10","slug":"in-private-investment-diverse-fund-management-teams-have-opened-doors","status":"publish","type":"post","link":"https:\/\/www.cambridgeassociates.com\/insight\/in-private-investment-diverse-fund-management-teams-have-opened-doors\/","title":{"rendered":"In Private Investment, Diverse Fund Management Teams Have Opened Doors"},"content":{"rendered":"

Portfolio diversification is fundamental to effective investment risk management. The term \u201cdiversification\u201d traditionally includes asset classes, investment approaches, industry sectors, and geographies. But a vital and often-overlooked dimension of diversification is the people driving portfolio decision making. This dimension of diversification may be especially important in private markets because an asset manager\u2019s deal sourcing is often network driven. Greater\u00a0gender, racial, and ethnic diversity\u00a0among asset managers is often thought of as a social initiative when, in fact, it may provide another source of diversification in the pursuit of better risk-adjusted returns.<\/p>\n

According to new research from BCG and\u00a0Cambridge Associates, private equity<\/a> and venture capital<\/a> firms whose ownership is predominantly women or people of color may unlock access to differentiated deal flow (i.e., an increase in the variety of investments in a portfolio) for their limited partners (LPs) and other investors.<\/p>\n

Key Findings:<\/strong><\/p>\n

Of the deals analyzed, 76% were financed exclusively by nondiverse private equity and venture capital firms, 17% of the transactions had deal syndicates with a mix of nondiverse and diverse firms, and 7% were investment rounds completed exclusively by diverse-owned firms. Here is what we found:<\/p>\n