The Role Of Limited Partners In Investment Inclusivity

Individuals making most of the large decisions in the investment world – both in venture capital and private equity – are predominantly white, male and Ivy-league educated.

As the investors behind venture and private equity funds – often foundations, family offices, pension funds and (university) endowments – one would think they carry considerable weight pushing for more diversity because it is in their economic interest to do so.

“[LPs] will be the biggest driver of change […] if the GP gets asked the same questions two or three times, it will escalate,” said Helena Hasselmann, Managing Director of Stardust Equity.

According to Hasselmann – at Stardust they ask GPs questions such as how do you intend to recruit more diverse GPs and what is the gender ratio of the management in your portfolio companies?

Based often on a more value-oriented approach, LPs such as the UK’s Government Pension Investment Fund, BlackRock and Standard Life Aberdeen have taken steps to increase pressure on VCs and other money managers, for instance by joining the diversity initiative the 30 percent Club and by including diversity questions in fund due diligence.

One specific change that LPs can and have been pushing for is boardroom diversity in VC and private equity backed companies.

Since 2008, she has been working with big LPs such as CalSTRS or the New York State Common Retirement Fund to install more women in corporate boards of both public and private companies.

For her, one of the challenges in VC and private equity backed companies is the way in which board seats are filled.

Change is coming already from smaller, younger and more private limited partners as they press for female representation and hesitate to invest in all-white-all-male GP teams.

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