New class of successful diverse-led PE firms will bring true change in DEI

Throughout the month of February, PE Hub is featuring Q&As about diversity, equity and inclusion with private equity professionals who are Black. Today, we hear from Nick Jean-Baptiste, founder and managing partner of Jacmel Growth Partners.

Headquartered in Brooklyn and founded in 2015, Jacmel invests in family-operated, lower-mid-market companies. The firm focuses on “combining traditional private equity best practices with low-cost, high-impact strategies that promote growth while also benefiting employees and their communities,” according to its website. “Since inception, the Jacmel team has invested in eleven companies across five platforms, achieving strong growth, while progressing a range of inclusive economy initiatives, including workforce development, increased Board representation of BIPOC leaders, and educational benefits for employees.”

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?

Making the industry more equitable across the board has been talked about for several years and it’s good to see some progress being made. At the same time, there are quite a few statistics out there that show how early on we are in the process. According to a report by the Knight Foundation, as of 2021, minority-owned fund managers only oversee 0.7 percent of total AUM in the US. So, the industry might get high marks for focusing and discussing the issue, but a low grade in terms of action and making things happen. What we do know is that true change in DEI can take some years to take full effect.

What are PE firms doing right?

Private equity firms have started making a concerted effort to implement diversity programs and equity programs and taking the issue more seriously. In particular, firms are highlighting the increasing numbers of diverse and underrepresented junior team members joining firms, and McKinsey has closely tracked and published research on the progress being made.

In addition, pension funds, endowments, consultants and other large institutional investors have been driving action in the industry by requiring robust DEI initiatives at the firms they invest with. As a result, a greater number of private equity firms are improving diversity within their ranks.

What’s the biggest mistake PE firms make when it comes to underrepresented groups?

It’s promising that many private equity companies are signing pledges, but there isn’t always long-term thinking. But many firms are only focused on new talent, versus a more concerted effort to attract future private equity firm leaders. One key point is that when you have diverse leaders at the highest levels of a company, then you can inspire the next generation of diverse talent. There is progress being made here as well, as tracked by National Association of Investment Companies.

Finally, another area of improvement is within the portfolio companies owned by private equity firms. If DEI is truly a core value for private equity firms, then they can push for substantial diversification within the companies they acquire across senior management and junior ranks.

It’s Black History Month, and PE Hub is showcasing Black leaders in private equity. Please tell us about someone you admire.

I’ve been blessed to have interacted with so many of the Black leaders in finance, and more specifically private equity. The person who has had the largest influence has been and remains Ray McGuire, the former co-head of investment banking at Citigroup. He has been an incredible sounding board, has provided introductions at the best times, and provided advice on how to show up at my highest level.

In addition, I highly admire Derek Jones at GCM Grosvenor. As lead for the private equity diverse manager practice at GCM Grosvenor, Derek holds a very influential seat in the emerging manager private equity ecosystem. It’s been incredible having such a trailblazer as a mentor and friend.

As a private equity investor who is Black, are there any experiences or insights you want to share with PE Hub‘s audience?

The biggest challenges for minority investors are overcoming the status quo and combating implicit biases. This can be hard for everyone to understand, but the additional roadblocks are unfortunately felt by nearly all diverse executives within the industry.

This issue can’t be solved overnight, and it’s great to see all the steps taken to embrace diversity and hopefully create a new class of successful diverse-led firms, where this type of implicit bias is no longer felt or important.

Do you have any advice for PE firms that want to recruit, retain, and develop private equity professionals who are Black?

While DEI affinity groups are a great place to start, private equity firms can make a more concerted effort in inspiring and grooming the next generation of diverse leaders. It should not be a check-the-box exercise. Rather, employers should be very intentional on career paths to see long-term success in retention.

Anything else you’d like to add?

There are a few firms who are taking a creative approach to sponsoring and incubating diverse employees and then helping them launch their own platforms or spin-offs. In my mind, this elevates companies to the status of true supporters of diversity within the industry, not just as a way to benefit themselves.

Overall, we are excited about the advancements we are seeing in the number of diverse owned and operated firms succeeding, and we strongly believe the future is bright.

Editor’s Note: For more PE Hub Black History Month interviews, see our Q&As with:

• Chad Strader, managing partner and co-founder of Red Arts Capital
• Milwood Hobbs, Jr, managing director and head of North American sourcing and origination, Oaktree Capital Management
• Tarrus Richardson, CEO of IMB Partners