Prudential Financial announced Wednesday it is making a $200 million commitment to private equity investments constructed with a diversity, equity and inclusion lens.
The investments, made through the Prudential DEI Portfolio, will focus on limited partner stakes with substantial ownership and/or management by women and minorities, particularly those raising capital for first or second funds.
The effort is made to confront the structural barriers within private equity that prevent women-led and diverse teams from raising sufficient capital in support of their first funds. As such, only 1.3% of the investment industry’s $69 trillion in assets under management is managed by women or people of color.
This is despite the fact that, according to the International Finance Corp., gender-diverse fund management teams deliver an incremental 10%-20% more in returns compared with non-gender-diverse teams.
PGIM Investments Vice President Cherrise Cederqvist, who is leading the DEI Portfolio program, said the aim is to improve equity opportunity.
“Our goal in managing the DEI Portfolio is to provide equity of opportunity for segments that often face challenges in the fundraising process, while also maintaining the rigorous investment standards we’re known for,” she said. “Ultimately, we expect the investments made through the DEI Portfolio to result in greater representation and increased assets under management for women- and minority-owned investment firms over time.”
The DEI Portfolio Investment Steering Committee, led by a diverse group of executives across Prudential and its global asset management business, PGIM Inc., will govern future investments and evaluate funds based on specific factors, including diversity of fund management ownership, diversity of the portfolio management team and impact of the investment strategy on diverse populations.
Providing capital to early-stage managers complements Prudential’s existing investments in later-stage alternative asset firms owned and operated by women and minorities. The company currently oversees nearly $1.2 billion in AUM invested in well-established private equity funds, hedge funds and real estate funds whose management teams have a substantial or majority ownership by an ethnic minority or woman.
Lata Reddy, senior vice president for Prudential’s Inclusive Solutions organization, said the announcement shows the company’s commitment.
“We are committed to meaningfully developing and growing women and minority managers by ensuring the selection process is equitable and inclusive across the full spectrum of early- and late-stage funds,” she said. “By providing intellectual and financial capital, and by serving as an advocate for this segment, we are seeking to break down the structural barriers that prevent diverse-led teams from raising capital.”