Private Equity’s Future is Diverse: Why DEI Will Matter More Than Ever in 2025  

There are lots of articles online proclaiming that DEI is “dead,” but Private Equity didn’t get the memo. 

In 2025, PE firms are facing a perfect storm: younger generations inheriting massive wealth are demanding diversity in their investments, while major institutional investors like pension funds (which provide billions in capital to PE firms) are setting strict diversity requirements before investing. 

Add to this the mounting evidence that diverse leadership drives higher profits when PE firms sell their companies, plus new reporting requirements and the rise of emerging markets where deal-making demands diverse cultural understanding, and suddenly DEI isn’t just a nice-to-have—it’s a competitive necessity. 

The Hard Numbers Behind DEI’s Impact on Private Equity

Let’s cut through the warm-and-fuzzy perception of DEI and look at the cold, hard cash. Carlyle’s 2020 data revealed that private equity-backed portfolio companies (companies owned by PE firms, also known as PortCos) with diverse boards saw 12% higher earnings growth than their non-diverse counterparts. That’s a make-or-break margin in investment. 

Limited Partners (LPs), the investors who provide capital to PE firms, are also putting their money where their values are. Sixty-five percent of LPs prioritize diversity, and institutional investors are willing to put 2.6 times as much capital into gender-diverse and racially diverse PE firms when choosing between otherwise similar options. This industry shift is reflected in hiring practices too, as Shelley Heckenkemper, Human Resources Director for Argonaut Private Equity, notes: “It is important to me to partner with a search firm that has a commitment to diversity and will bring qualified candidates to the table.” 

Why These Numbers Matter

This isn’t just about optics. Diverse groups make better decisions with less cognitive bias. As Heckenkemper explains: “Interviewing a diverse set of candidates helps expand and provide a better representation of the candidate pool. I always want to speak with people who have varied backgrounds and experiences—it generally makes for a better conversation. These conversations can ultimately lead to a more effective hire.” More diverse leadership teams are also better at self-policing, which means fewer HR nightmares and less misconduct. In fact, there’s statistically significant evidence that fund-level investment performance tanks when sexual predatory and discriminatory behavior runs unchecked, something that becomes less likely the more diverse your leadership is. 

The impact extends to deal performance too. Diverse deal teams are more likely to close successful mergers and acquisitions, and a 10% increase in diversity in venture capital correlates directly with improved deal performance. Why? Because diverse teams bring different perspectives, challenge assumptions, and spot opportunities that homogeneous groups miss. The Credit Suisse Research Institute backs this up: organizations with greater diversity consistently show better EBITDA margins and higher capital returns than their less diverse counterparts. 

DEI in Private Equity Faces an Uncertain Regulatory Future

The regulatory landscape is changing too, and it will continue to change in 2025. While the SEC’s 2022 proposed rules focus on fee and performance transparency rather than DEI directly, they signal a broader trend toward increased reporting requirements.  

Similarly, the EU’s Alternative Investment Fund Manager Directive, which governs everything from marketing to risk management for funds raising EU capital, sets precedents for wider regulatory oversight. And the UK’s Financial Conduct Authority has started demanding diversity reporting from listed companies—while this doesn’t directly impact PE firms yet, it shows where the regulatory winds are blowing.  

Add in voluntary initiatives like the Institutional Limited Partners Association’s Diversity in Action program, and it’s clear: PE firms that don’t take DEI seriously now will face tougher scrutiny later. 

The Uncomfortable Truth About the Current State of DEI in Private Equity

Despite the clear benefits, PE remains stubbornly homogeneous. Only 20% of senior investment roles globally are held by women, even though women occupy 48% of entry-level positions. At the managing director level, women hold just 15% of investing roles. At this rate, we’re looking at 60 years before we reach gender parity. 

The racial diversity numbers are even more discouraging. White professionals dominate 70% of all investing roles and 80% of managing director positions.  

How to Drive Real Change in Private Equity

PE firms are multi-layered like onions, and driving meaningful change requires peeling back each layer systematically. In off-record conversations with our team, senior PE leaders revealed exactly how they’re currently tackling these layers. At the portfolio level, they’ve launched development programs targeting diverse management candidates. At the operational level, they’re implementing formal processes and tracking metrics against performance data. And at the strategic level, they’re incorporating diversity monitoring into their ESG frameworks—though they’re candid that in challenging business conditions, qualification remains the primary criterion. This systematic approach across layers shows how DEI has evolved from a social initiative to a core business metric. 

So, how do you start to improve your PE firm’s DEI? You start at the core: the firm itself. Those vague diversity commitments? They mean nothing until you tie them to executive compensation. When bonuses depend on DEI results, people get serious. 

Start conducting regular pay equity audits—they’ll help you catch costly problems before they spiral. Next up are your deal teams, where diversity hits your profits directly. Take a hard look at your investment committees—if they all share the same background and perspective, you’re missing opportunities. Your next billion-dollar deal might come from networks you haven’t tapped yet, so start building relationships in new places. 

Now for the real challenge: your portfolio companies. Make DEI central to your post-acquisition 100-day strategy—this starts with board composition but must extend throughout the organization. While you’re reshaping the board, implement diversity requirements in your supplier network to build a more inclusive ecosystem. Inside your PortCos, create mentorship programs that connect diverse junior talent with senior leaders across your portfolio—this not only develops future leaders but creates a support system that improves retention. 

Finding Diverse Talent for Private Equity Firms

The biggest pushback to driving diversity in PE? “We can’t find qualified diverse candidates.” Let’s call that what it is—an excuse. The talent is out there, but PE firms need to abandon their narrow view of what makes a great leader. Instead of fishing in the same depleted banking and consulting pools, look to sectors where diverse leadership is already succeeding. Tech companies, for example, have been promoting diverse executive talent for years. Corporate development roles are filled with sharp minds who understand deal-making too. And don’t overlook military leaders who’ve managed complex operations under pressure. These candidates might not fit your traditional PE mold, but that’s exactly the point. 

The secret to success in DEI is the same as anything else in business: resilience and commitment. This isn’t about checking boxes or making your website look more diverse. It’s about building stronger, more profitable companies through genuine diversity and inclusion. In an industry obsessed with returns, can you really afford to keep dragging your feet on this? 

About the Authors

Mikael Stelander, a leading Nordic executive search consultant, founded Stanton Chase Helsinki in 2005 and serves as its Managing Partner. He also currently serves as the Global Functional Leader for Private Equity. Mikael’s tenure includes roles as Stanton Chase’s Vice President EMEA (2012-2017) and Global Practice Leader for Technology (2007-2011).  He specializes in global C-level searches for the technology and private equity industries. His expertise also encompasses management assessments, culture assessments, and board services. 

Finley Konrade is a Managing Director at Stanton Chase Dallas, Regional Vice President for North America, and Regional Functional Leader for Private Equity in North America. With over 18 years of experience in executive talent identification and placement across multiple continents, she has developed deep expertise in connecting PE firms and their portfolio companies with transformational leaders. A member of the US steering committee for Board Services and the Association for Corporate Growth, Finley brings unique insights from her extensive work with Fortune 500 corporations, private enterprises, and PE portfolio companies across industrial, financial services, and consumer products sectors. 

Marek Huml is a Managing Partner at Stanton Chase Prague and the Regional Functional Leader for CFO & Financial Executives in EMEA, as well as Global Subsector Leader for Telecommunications. With over 15 years of experience in executive search and a background as a Financial Director and Apple Computers controller, he brings unique insights to leadership placement across industrial, private equity, financial services, technology, and consumer sectors. A founding partner of Stanton Chase’s Prague office and active member of the Czech Private Equity and Venture Capital Association, Marek has successfully completed hundreds of senior leadership searches throughout Europe, with particular expertise in the Czech Republic and Slovakia.