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  • 2022
  • Working Paper
  • HBS Working Paper Series

Racial Diversity in Private Capital Fundraising

By: Johan Cassel, Josh Lerner and Emmanuel Yimfor
  • Format:Print
  • | Language:English
  • | Pages:89
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Abstract

Black- and Hispanic-owned funds control a very modest share of assets in the private capital industry. We find that the sensitivity of follow-on fundraising to fund performance is greater for minority-owned groups, particularly for underperforming groups. We find little support for a number of explanations for these patterns: that minority fund valuations are overstated, that minority funds encounter difficulties in hiring personnel, or that deploying capital is more difficult for these funds. We do find that the ability of minority groups to raise capital increases during periods of high racial awareness and when the chief investment officer of local public pension plans and endowments are minorities. Together, the results support the hypothesis that the modest representation of Black and Hispanic-owned firms in private capital stems at least partially from the nature of investor demand, rather than the supply of fund managers.

Keywords

Buyouts; Capital Formation; Minorities; Venture Capital; Minority-owned Businesses; Race; Diversity; Investment Funds; Financial Services Industry

Citation

Cassel, Johan, Josh Lerner, and Emmanuel Yimfor. "Racial Diversity in Private Capital Fundraising." Harvard Business School Working Paper, No. 23-020, September 2022.
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About The Author

Josh Lerner

Entrepreneurial Management
→More Publications

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More from the Authors
  • The Diffusion of New Technologies By: Aakash Kalyani, Marcela Carvalho, Nicholas Bloom, Tarek Hassan, Josh Lerner and Ahmed Tahoun
  • Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation By: Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson
  • Impact Investing and Worker Outcomes By: Josh Lerner, Markus Lithell and Gordon M. Phillips
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