Today we are featuring Chad Strader, managing partner and co-founder of Red Arts Capital, a Chicago-based PE firm, in our continuing Black History Month series of interviews with private equity professionals who are Black.
Red Arts Capital, which invests in the logistics sector, was formed in 2015 by Strader and Nick Antoine. Strader leads the management and development of the firm’s investments. Before forming Red Arts, Strader held finance and accounting roles at PepsiCo, among other previous experiences.
Over the last couple of years, PE firms have talked a lot about making the industry more inclusive for people who are Black and/or members of other underrepresented groups. In your view, how are PE firms doing when it comes to diversity, equity and inclusion? If you had to give the industry a letter grade on this today, what would it be?
We can’t comment on what all other PE firms are doing specifically; however, the data for the industry is clear that the diversity found at private equity firms is not reflective of our country’s general demographics. Based on the 2022 data from McKinsey & Company, PE is behind corporate America in ethnic diversity in the C-suite, and the ethnic diversity within PE has low representation from Black and Hispanic and Latinx populations. We believe that in order to encourage diverse talent to join the private equity community, there needs to be influence and representation not only at the top but from all backgrounds and walks of life. This is why we take our position as leaders so seriously, we understand the responsibility of influence, and hope to motivate the future generation of this industry.
What’s the biggest mistake PE firms make when it comes to underrepresented groups?
Red Arts Capital believes that DEI initiatives should be a priority. Our perspective is that diversity isn’t just the right thing to do, it’s also good for business. Diversity of thought and experience gives teams an advantage. With that belief, we take the approach that diversity on our team is imperative in an increasingly mature and competitive private equity landscape. There’s always room for improvement but, in addition to being a Black-owned business, we are proud that our company is 50 percent female.
What are PE firms doing right?
Overall, we’ve seen that institutional limited partners are doing the work of finding and investing with diverse managers that should eventually lead to more diversity in the industry as other investors catch on to why diversity matters. In our personal experience, we’ve seen the impact of our influence primarily in the hiring initiatives across the businesses we work with. Also, the 2022 data from McKinsey & Company shows that US PE firms have increased their percentage of ethnically diverse talent and women employees, surpassing corporate America at their junior levels. This is a good indicator to us that the future of this industry looks more inclusive.
It’s Black History Month, and PE Hub is showcasing Black leaders in private equity. Please tell us about someone you admire.
Of course, Reginald Lewis has been and continues to be our shining example of excellence in private equity. Over the years, we have been fortunate to get to know other great investors and leaders in our field who we hold in high esteem such as Kneeland Youngblood (Pharos Capital Group), Marty Nesbitt (The Vistria Group), Stefan Kaluzny (Sycamore Partners) and Ray Whiteman (Stellex Capital), amongst others.
As a private equity investor who is Black, are there any experiences or insights you want to share with PE Hub’s audience?
As an investor, Black or not, stay focused on your work and delivering results for your limited partners. And in the process, do your best to encourage and inspire others. As mentioned earlier, we feel that diversity of thought is the key to meaningful work and making an impactful difference, and the only way to do that is through education and empowering the people around you. All of us have some responsibility for making a change.
Do you have any advice for PE firms that want to recruit, retain and develop private equity professionals who are Black?
Culture is important. In our opinion, if the culture does not embrace diversity of thought, experience and background, retention of diverse professionals will be difficult. Seeking out diverse talent from various backgrounds and walks of life will only benefit workplace culture and improve the input of unique perspectives and ideas. The first step should be identifying where diversity is lacking, and taking proactive steps to recruit.