The Institutional Allocators for Diversity Equity and Inclusion (IADEI), a consortium of over 500 asset owners seeking to drive diversity, equity, and inclusion in asset management, launched its research library and presented the results of its private equity diversity literature review.
On the surface, a clear consensus in support of DEI emerged from IADEI’s literature review of 146 papers on private equity—with 115 papers supporting DEI, 4 opposing it, and 21 inconclusive. The group calls for more rigorous research examining a broader range of dimensions of diversity across a broader range of private equity sub-asset classes to better establish a correlation between DEI and risk-adjusted returns.
Some of their conclusions include:
* Diversity is correlated with stronger risk-adjusted performance.
* Diverse teams may improve decision-making due to diverse perspectives, skills, and abilities.
* Diversity is associated with improved risk management. In particular, diversity is associated with a higher likelihood of deal closure in mergers and acquisitions.
* There is statistically significant evidence that fund-level investment performance is negatively correlated with sexually predatory and/or discriminatory behavior.
IADEI is calling on academics to research the impact of racial, ethnic, and cultural diversity on private equity returns and the impact of multiple facets of diversity on buyout and growth equity as well as other asset classes beyond venture capital. They particularly note that not only is diversification the only free lunch in finance, but the benefits of diversity are a universal first principle that applies to all walks of life. Therefore, the responsibility rests with the DEI skeptic, not the champion, as to why an exception has to be made when the diversity conversation pivots to race, gender, and sexual diversity.
You can read more on this HERE.