Publications
Publications
- 2022
- HBS Working Paper Series
Racial Diversity in Private Capital Fundraising
By: Johan Cassel, Josh Lerner and Emmanuel Yimfor
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.