RCP Advisors (RCP), an independent sponsor of private equity funds-of-funds, secondary funds, and co-investment funds, has released a new report – Diversity and Financial Outperformance in Middle Market PE – which features multiple analyses of minority, women, veteran, and disabled majority-owned North American lower middle market private equity firms and illustrates how and why this cohort of managers have outperformed the broader market.
The moral imperative for investors to pursue DEI investing aside, the DEI Research Report found that diverse private equity managers in the lower middle market generate alpha, often with less risk than non-diverse managers. The first half of the report is a compilation of key takeaways from a multitude of DEI-focused research, highlighting private equity financial outperformance and deciphering potential reasonings why diverse managers have historically achieved superior returns.
The second half of the report uses RCP’s proprietary database, GPScout, to confirm that diverse managers in the lower middle market have a higher propensity to generate returns that meet or exceed the broader market, often doing so with less downside dispersion. The report also examines the various characteristics of diverse managers and performance of underlying deals invested-in by diverse-owned funds.
The research utilised in this report was conducted by RPM, RCP’s Research, Performance, and Monitoring Team and led by Mary Hunt. As previously mentioned, the data used in the analysis was compiled using GPScout, which consists of over 2,900 private equity firms, 5,000 private equity funds, 35,000 portfolio companies with ROIC metrics, and 190,000 unique entries relating to different private equity metrics.
