With the improving economy and the subsequent uplift in M&A and deal flow, the demand for junior to mid-level staff from the buy-side is on the rise. Overall recruitment has grown by nearly 38% since 2011 in the EMEA region, but women still make up less than 15% of all buy-side recruits.
This year, buy-side firms including Private Equity, Venture Capital, Pension Funds, Sovereign Wealth Funds, Hedge Funds and Asset Management recruited a total of 236 candidates from investment banks and consultancies, up from 213 in the 2012-2013 cycle and 155 in the 2011-2012 cycle. Of these, female recruits only comprised 14.8% of all recruits to the buy-side in the 2013-2014 cycle, which represents a decrease of 2.4% from the previous year.
We see strong demand for qualified female candidates from buy-side clients with many placing diversity at the top of their recruitment agenda. So why is the gender gap still so vast in this industry?
Culture is a major deterrent for junior women considering a profession in finance, especially when weighed against the prospects of having a sustainable long-term career and/or a family. A career in finance requires total dedication and long hours in the office, leaving little room for work-life balance. Since women are relatively new to the industry, many firms have limited internal structures to accommodate women on maternity leave or with young families. Further, male-dominated environments in finance facilitate every day banter about sport, cars and a host of topics which can leave women feeling like outsiders. In the UK, just under 30% of all finance and investment analysts are women (ONS, August 2014, Employment by Status, Occupation & Sex), and most women opt out of finance as early as university based on negative perceptions of the industry. The limited number of women within finance at mid to senior levels, also means a shortage of role models for junior female professionals to take inspiration and guidance from.
The lack of women on the buy-side is also a symptom of the current recruitment process. Buy-side firms are seeking candidates with two to three years of finance experience, particularly investment banking. Shortlisted candidates undergo a series of rigorous interviews usually culminating in the satisfactory completion of a complex case study which draws heavily on that experience. Those with investment banking backgrounds, who already function in a high-stress work environment and have relevant financial modeling experience, perform comparatively better in the case study than management consultants or even accountants. However, the emphasis on financial modeling at the junior level skews the emphasis from other areas of the investment skillset, such as strategic thinking, communication skills and leadership ability that come into play over the longer term.
This emphasis on finance experience immediately puts junior professionals with different yet also valuable experience at a disadvantage. Young women are under-represented in the banking pools from which buy-side firms hire the majority of their candidates, often choosing to start their careers in industries like management consulting, which is an experience that also benefits successful buy-side investors.
Depending on the year, the incoming analyst class from investment banks ranges from 450 to 750, of which no more than one-third are female. Employers have been increasingly open to hiring bright analysts from consulting firms, where there is a stronger concentration of women, because they can bring with them sectoral knowledge relevant to portfolio companies. MBA graduates from leading business schools are also desirable recruits.
Many in the industry acknowledge that private equity and other buy-side firms will need to consider a greater range of backgrounds if they hope to make meaningful gains in diversity and remain competitive recruiters of the best talent. Last year, elite business schools around the world reported a dramatic 50% drop since 2006 in the number of students choosing investment banking in favour of consultancy and entrepreneurialism.
Graduates, male and female, indicate that work-life balance and the ability to make a difference are greater considerations than money in choosing a career, which means that finance will need to rethink its offering.