Globally, 69% of the top-performing funds have general partners who are women, and 65% of institutional investors consider gender diversity a key criterion when investing. Research by the International Finance Corporation found that gender-diverse fund management teams deliver an incremental 10-20% in net IRR returns compared to non-diverse teams. Women funders are also two times more likely to invest in start-ups with one woman founder, and three times more likely to invest in a woman CEO.
These statistics suggest the investment industry is at the forefront of diversity and inclusion. However, the reality paints a very different picture. Women hold only 10% of senior positions in private equity and venture capital firms globally, and women-led enterprises collected less than 2.3% of global venture funding in 2020.
These figures reflect a troubling reality – one where immense economic potential is being left untapped due to persistent gender biases and systemic barriers. The McKinsey Global Institute estimates that as much as 26%, or USD 28 trillion, could be added to the annual global GDP in 2025 if women were to participate in the economy at an equal level as men. Unfortunately, there are several barriers and biases preventing women from fully capturing the opportunity to participate as leaders who allocate and receive investment capital.
Overcoming barriers and biases
Addressing the systemic challenges that limit women’s access to funding, networks, and resources requires a concerted effort from industry stakeholders, policymakers, and the broader ecosystem. The 2024 United Nations theme for International Women’s Day (IWD), Invest in Women: Accelerate Progress, was a powerful call to action that resonates deeply with the challenges faced by women entrepreneurs and investors in Africa’s private markets.
In emerging markets like Africa, the barriers faced by women in investment are even more pronounced. Only 10% of private equity and venture capital fund managers globally are women, and in 2017, women made up just 12% of senior investment professionals within fund management firms in sub-Saharan Africa.
However, there are also promising signs of progress. The 2X Challenge, launched in 2018 by a group of development finance institutions, has committed over $10 billion to investments that meet its gender-lens criteria. One notable example is the Alitheia IDF fund, which has invested in several women-led businesses in West Africa and achieved a 25% net IRR in its first fund.
Diversity as a competitive edge
Firms that embrace diversity and inclusion not only do the right thing but also gain a competitive edge. A study by Boston Consulting Group found that diverse management teams generate 19% more revenue due to innovation. Companies in the top quartile for gender diversity on executive teams are 25% more likely to experience above-average profitability. In the private markets industry, diversity can be a particularly powerful differentiator, as limited partners increasingly prioritise it when allocating capital.
This year’s IWD theme underscored the urgency of directing resources, policies, and strategies toward empowering women as leaders, innovators, and decision-makers in Africa’s private markets. Bridging the digital gender divide and leveraging technology will be crucial to accelerating progress.
The path forward
As a global investor services provider, IQ-EQ recognised the need to support the development of diverse fund managers, including women, in Africa. We launched IQ-EQ Launchpad to provide preferential service terms, access to a global network, and tailored support for first-time female fund managers. Through Launchpad, we have had the opportunity to work with several impressive women who are launching their own investment funds in Africa.
While the challenges are significant, there are reasons to be optimistic about the future of gender diversity in private markets. Increased regulatory scrutiny, growing LP demand, and initiatives like the 2X Challenge and IQ-EQ Launchpad are all contributing to positive change.
Let us heed the call to action and take bold steps to channel resources, build partnerships, and drive systemic change. The rewards of doing so extend far beyond the private markets – they reach the heart of creating a more equitable, prosperous, and just world for all.
This article was originally published in Africa Global Funds’ August 2024 magazine.
About the author
Rehma is Managing Director for IQ-EQ in Mauritius. With 20 years’ experience in the industry, Rehma has specialist expertise in business development, product development and structuring, setting up and administration of funds, companies and private wealth vehicles. She holds a Masters of Law (Financial Services Law) from the University of London and is an Associate of the Institute of Chartered Secretaries and Administrators (UK) and a Member of the Society of Trust and Estate Practitioners (UK) as well as of the Mauritius Institute of Directors.
