Why is diverse talent so difficult to find in the private debt industry?
Welcome to the first in a series of data-driven articles analyzing systemic challenges in diversity recruiting within the credit space
Over the past year, the dual crises of COVID-19 and racial injustice have put the private debt industry to a major test. The global economic shutdown triggered by the pandemic resulted in a substantial decline in private debt fundraising in 2020, while the prevalence and pervasiveness of systemic racism and inequality have resulted in increased calls for racial and gender diversity. As private debt firms look back on a full year of shutdown and reflect on their books of credits and individuals managing them, those who failed to improve diversity, equity, and inclusion (DEII) in talent assessment are likely to face an uphill battle to stay ahead of the competition. This piece will examine how large publicly traded asset managers, often referred to as 'Mega Funds,' approach the recruitment of diversity-oriented private credit talent and the challenges they may face.
The Private Debt Talent Landscape
The current amount of private credit funding available is 10% of what will be required to finance future private equity (PE) investments. This suggests that private credit firms have an enormous opportunity to raise capital in the short term, but will require the right mix of talent to effectively do so. However, given the current demand for capital-raising talent far outweighs the existing talent available, recruiters and asset managers are under commensurate pressure to recruit private credit fundraisers while ensuring inclusive and diverse recruitment practices. This is especially crucial given the disproportionate impact of COVID-19 on racially and ethnically diverse communities, which resulted in increased demand for progress on diversity and inclusion from LPs. As GPs rebuild their teams, private debt managers have an opportunity to hit the “reset button” and answer the call for DEI.
Internal Recruiters at Mega Funds Need More Support
In bull markets, recruiting volumes are typically driven by Mega Funds with support from internal recruiting teams. These teams are responsible for prioritizing diverse candidate pools, given the Funds’ diversity and inclusion initiatives to hire more women and people of color, and are expected to be well equipped to attract the right talent in staffing a wide variety of roles.
Internal recruiters at Mega Funds tend to be generalists, often operating with basic recruiting fundamentals and at times partnering with external search firms to tackle nuanced searches in competitive talent markets. However, in the last couple of years, internal recruiters struggled with accessing diverse slates of credit investment professionals for several reasons, especially following the COVID-19 shutdown, which was generally detrimental to internal recruiters.
The private credit talent market became massively competitive virtually overnight in 2020, which was further exacerbated by the complexities introduced by COVID-19, resulting in sought-after candidates spending more time with agency recruiters with numerous opportunities to offer. While Mega Funds were quick to preserve their existing staff by shifting to work from home policies, they were very slow to opportunistically recruit shaken-loose talent. As a result, internal recruiters at Mega Funds were slow to contract the third-party recruiting firms who were best equipped to identify opportunistic, diverse talent.
In the case of the U.S., lay-offs started happening during the spring and summer of 2020, which has resulted in off-cycle hiring, mostly at partner-owned hedge funds and family offices that were able to move quickly. This left some Mega Funds in the unenviable position of having lost some amount of investing staff amid COVID.
Mega Funds rebooted their recruiting efforts in Q4 2020 and are now increasingly looking to replace said laid-off credit investment professionals while remaining keenly aware of the optics of any prior lay-offs. With all of these moving parts, mega-funds continue to rely on recruiters to find the remaining displaced analysts on the market, particularly those not already picked up by nimble partner-owned hedge funds and family offices. It’s fair to assume that internal recruiters are expected to replace non-diverse laid-off credit investment professionals with diverse professionals.
What diversity talent looks for in a private credit firm
Today, Mega Funds still aren’t working with recruiters and continue to miss the majority of candidate flow due to most recruiting in private debt happening off-cycle. Although credit investor hires make up only a small percentage of seats an internal recruiter is expected to fill at a Mega Fund, internally run private credit searches may often exceed thousands of resumes submitted and hundreds of interviews conducted. Hence, if Mega Funds continue to be reticent to use recruiting agencies, an alternative strategy would be to equip the recruitment team with an internal talent acquisition specialist, ideally with agency experience, and a history specific to the private credit market. This would allow Mega Funds to make more efficient use of their time, all while spending less than what they would on agencies over the years.
To help prepare for the candidate search, here is a sample list of due diligence questions on diversity and inclusion that recruiters can expect to receive from institutional allocators, new candidates and existing employees:
- Does the firm have a formal DEI policy or initiative?
- Does the DEI policy, program or unit sit under the HR umbrella? Does the firm have a family leave policy?
- Does the firm track the gender composition of those taking family leave?
- Does the firm have sponsorship or mentorship programs for bright, young diverse talent? Have there been any claims of sexual or general harassment or discrimination?
- What is the current balance of gender at the firm and has there been a change in the last year? Are there clear paths forward for women and persons of color? How does the firm promote diversity of all kinds in the organization as it relates to retention and promotion of professionals at senior levels?
- Has the firm engaged portfolio companies to establish policies or management systems on diversity and inclusion?
Spotlight on Lack of Black & Hispanic/Latinx Representation in Private Debt
DiversityMetrics™ analyzed 1,860 investment credit professionals at the top 20 private debt firms representing a combined AUM of $3.5 trillion. Professionals were categorized according to ethnicity, gender and seniority.


Meanwhile, of the 25 Hispanic/Latinx professionals identified, only 9 were women and only 11 were in senior positions.


Systemic Challenges in Diversity Recruiting
Diversity staffing challenges vary greatly between the aforementioned types of firms; however, the largest bottleneck of attracting diverse talent in the private credit space happens at the most junior levels, for which there are several reasons:
- Private Equity firms historically get the “first look” at high-quality, diverse pools of talent
- Investment Banking is a traditionally white, male-staffed industry. That is slowly changing with internal IB recruiters at the campus level
- Some of the most diverse entry-level institutions are often overlooked by Private Credit internal recruiters and agencies alike, including: Credit Rating Agencies, Accounting Firms, and Consulting Firms
- Campus recruiters at Mega Funds historically focus on target schools that are not historically diverse. That is slowly changing to include highly diverse, new target schools such as HBCUs
- Buy-side firms are historically the last firms to employ internal recruiters and therefore campus recruiters. Diversity recruiting is most easily addressed at the junior levels, which means that campus recruiting is integral and that the buy-side has inherently been late to diversity talent
DiversityMetrics™ provides tools that assist private debt managers with recruiting, nurturing and retaining diverse talent. Diversity and inclusion are no longer moral imperatives, but a business imperative. As offices start to re-open later this year, the private debt industry faces a unique opportunity to build back a more inclusive and diverse workplace. As more firms face the challenge of replacing staff in 2021, our credit newsletters—with the support of DiversityMetrics™ data—will continue to cover the unique challenges different fund types face in attracting, nurturing and retaining diverse talent.
Sincerely,
Sasha Jensen, CEO & Founder
Nicholas Koehler, Head of Private Credit
News Articles on Credit
Here is a selection of recent articles about the private and structured credit space.
Bloomberg: Credit Managers in Europe Stand Out for Lack of Black Workers
Bloomberg: Investors Step Up Pressure on Private Credit to Hire More Women
Business Standard: Global investors flock to private debt space, expect huge demand for credit
Financial Times: Performance test looms for $900bn private debt market
FundFire: Ares, KKR Tap New Investor Enthusiasm for Asset-Based Lending
FundFire: Asset-Based Lenders to Drive Debt Manager M&A Rebound
FundFire: Blackstone Sales Showcase Direct Lending's Fast Rebound
FundFire: Consultants Are Hungry for Private Debt. Here's What They're Looking For
FundFire: New $4.1B Carlyle Credit Line Ties Borrowing Costs to Board Diversity
InvestmentNews: How the pandemic highlights diversity challenges in financial services
Pensions & Investments: Asset owners turn to private credit in quest for returns
Pensions & Investments: Private credit -- accessing opportunities outside the mainstream
Pensions & Investments: Private credit managers supersizing their loans
Private Debt Investor: European direct lending could outstrip US - report
Private Debt Investor: Five reasons why diversity can create value in private debt
Private Debt Investor: LP Perspectives 2021
Private Debt Investor: The implications of fundraising consolidation
Private Debt Investor: Trends to keep an eye on in 2021
Private Debt Investor: Why fund finance is in high demand
Private Equity News: The strengths of the private debt market will enable it to rebound from this recession
Top1000Funds.com: Diversity means embracing whole identity
Wall Street Journal: Private-Debt Funds Withstand Covid-19, but Bigger Test Comes in 2021
About Our DiversityMetrics™ Platform
Since 2014, Jensen Partners has tracked more than 12,000 marketing moves across the alternative investment industry, which gives the firm the depth and breadth of data necessary to find the best talent and make the best recommendations. Jensen Partners has also recently invested heavily in its data capabilities by bringing in expert resources to optimize the firm's market mapping model and identify new opportunities for its clients.
In 2017, Jensen Partners began tracking the diversity of marketing talent to better meet the demand for diverse hires, and in 2021 the firm began tracking the movement of marketers specializing in ESG and impact investing. Jensen Partners makes these data and insights about trends in the alternative investment industry available exclusively in its newsletters.
Our Awards
We are thrilled to add another award to our collection, this time thanks to the readers of Private Equity Wire who named Jensen Partners the "Best Recruitment Company for Investor Relations & Asset Raising" for the second year in a row in their 2021 European Awards. We look forward to continuing to work with alternative investment firms in Europe and around the world, with a renewed focus on helping those firms make measurable and demonstable progress on their diversity, equity and inclusion efforts.

