Women in Private Markets: Six key takeaways

‘A very good year’ to contemplate diversity

“Because if we don’t take a stand this year, we are going to lose ground,” CIBC’s vice chair of capital markets Laurie Mahon warned in her opening remarks for PEI’s Women in Private Markets conference, which was held virtually during the first week of November.

Citing data from a McKinsey report published in September, Mahon said that as many as 20 percent of professional women are considering a downshift or leaving their careers altogether as the pandemic-related stresses of juggling career and family while working from home have taken a toll.

“What happens if that happens is that we will lose a decade of progress and progress has not been wonderful anyway,” she continued.

Not wanting to dwell on the negative, Mahon focused on the positive that has emerged during the crisis.

“I find an interesting thing happens when we’re all in a same size box on a Zoom call – no one is more important than anyone else,” she commented, urging the audience to use their “Zoom voices and take up space in that box”, during the conference, as well as to continue developing their personal brand and to use it wisely when they return to the office.

True diversity requires a holistic approach

“It’s actual diversity of thinking that really matters,” Nic Humphries, a senior partner at Hg said, when discussing diversity and inclusion in the private equity industry.

“I don’t want to downgrade in any way gender diversity or any particular form of diversity,” he added. “I think they’re all individually important. But, ultimately, what they give you holistically is a diversity of thinking and that diversity of thinking is what makes better decisions.”

His co-panellist, Wol Kolade, managing partner at Livingbridge, echoed that claim referring to his own firm and an inclusion initiative it launched, which had a broad mandate. “The minute you start on this [process], you realise that there are so many other things you need to address,” Kolade said. “But, if you don’t have the culture right, the values right, then nothing is going to change.”

While things have changed over the past decade, they haven’t changed enough, AllianzGI’s global head of investments, Deborah Zurkow, argued. “We certainly are doing a lot to bring [female talent] in on the junior level, but sometimes, it’s probably in the middle where we probably need to do more.”

Level 20 chief executive Pam Jackson agreed that the focus also has to be on retaining talent as well as adapting to the needs of a different generation. “We [can]not think about what we would have done 20 years ago,” she said.

Fewer labels for greater impact

“The world is not so simple that we can just label companies” as good or bad, Megan Starr, global head of impact at The Carlyle Group, said during a panel discussion on ESG. She was referring to impact investing and how the sector has limited itself “to a pretty narrow section of the investable universe”.

She urged private investors to start thinking about impact less in those binary terms and more in terms of “impact as change over time”.

Starr pointed to AxleTech International, a company Carlyle invested in five years ago, as an example. The manufacturer of drivetrain systems for heavy-duty vehicles is not a company that would be considered an impact investment. However, with Carlyle’s backing, AxleTech developed an electric vehicle system that proved to be a huge growth market for the Michigan-based company. “We ended up selling that [business] for a really good outcome,” she said.

“And to me that is so interesting – this shift over time as opposed to saying, ‘this is an industrial company so we can’t capitalise it with impact funds’.”

Instead, investors need to look at metrics “like greenhouse gas emission intensity over time and how we think about reducing that”.

FaceTime still key to closing deals

While it’s clear the industry has adapted well to conducting business virtually, video conferencing still doesn’t cut it for all aspects of dealmaking.

“When you’re buying a business and investing in a management team, face-to-face interaction with the management team goes a long way. Fortunately, depending on what jurisdictions we’re looking at, there have been in-person management presentations, even if the rest of the deal has been done virtually,” said Kriti Madan, a vice president at Northleaf Capital Partners.

“The assessment of a management team or large consortium negotiations – when we’re all together as humans, it accelerates decision making. Technology makes that a bit harder,” added Patricia Rodrigues Jenner, a non-executive director at several industry funds.

Macquarie Capital vice president Gemma McRann summed it up nicely: “The final stages of deal closing involving a consortium is where the challenge is. I was one of few people to isolate two weeks to be able to attend a meeting. There is a time and place for in-person meetings still. Origination and due-diligence are manageable virtually.”

Less is more

Government support for renewables has played a key role in the growth of renewable energy markets around the world, according to panellists speaking about the global energy transition. But at least in one market, less intervention may lead to more opportunities.

Across the board, panellists agreed that government support for investments in wind and solar has made renewable power generation cost-competitive with fossil-fuel power production. This support has “brought about the scale that is required to make green energy affordable”, says Erin Eisenberg, a managing director at Macquarie Infrastructure and Real Assets.

But as more capital has flocked to renewables, it has also created stiff competition for assets. “This enthusiasm is a blessing for society, but it also presents challenges,” Eisenberg adds.

Cosima Zoller, vice president of infrastructure debt at AMP Capital, says that a pullback in renewables investment tax credits in the US may actually create a need for more capital in that market. “If the ITC falls away, there will be more of a need to get those projects financed.”

Up in the air

Although infrastructure’s story during the pandemic has largely been one of solidity and resilience, there is, of course, the elephant in the room – airports.

Once considered a trophy asset, some are now wondering whether they are even infrastructure. In a panel on the direction of transport assets, Irina Frolova-Vernède, head of infrastructure asset management at Dutch pension group PGGM, was on hand to provide some nuance.

“Airports are infrastructure, but are they infrastructure investments?” she asked.

If that’s the case, what then for aircraft leasing, a sector which PGGM is invested in through its infrastructure arm?

“The jury is still out, but occupancy remains very high and our investment is holding to the original promise,” she maintained.

An airport owner might tell that jury to rest on the case before making a quick decision.