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Private equity plays critical role in minority communities, study finds

Private equity investment can play a critical role in promoting job growth, higher wages, better benefits and overall economic development in the US’s growing minority communities, acco

Private equity investment can play a critical role in promoting job growth, higher wages, better benefits and overall economic development in the US’s growing minority communities, according to a study released by the National Association of Investment Companies.

Conducted for the NAIC by a Boston Consulting Group team, the study also concludes that because of massive shifts in US demographics, the economic development of the nation’s emerging minority markets will play a crucial role in driving the overall growth of the US economy in the years ahead.

The BCG team found that average annual job growth after private equity investment was 14 per cent, compared to one per cent for all US non-farm jobs between 2003 and 2008.

Two-thirds of the new jobs went to minorities, compared to the overall US minority employment rate of 30 per cent.

Revenue at the emerging market companies receiving private equity investments grew at an average annual rate of 35 per cent compared to a five per cent rate for all US businesses.

On average, the companies paid wages that were 15 per cent higher than the average annual income for full-time civilian workers and nearly 70 per cent of the companies’ employees had access to health benefits.

‘In the decades ahead, the growth of the nation’s emerging minority communities – our country’s emerging domestic markets – will play a critical role in driving the growth of the overall US economy,’ says NAIC president and chief executive Samuel J. Boyd, Jr (pictured). ‘This new study demonstrates that private capital investments by firms such as those that belong to the NAIC can have an overwhelmingly positive impact on the businesses, minority-owned and otherwise, that operate in that space.’

Specifically, the study called on the Obama Administration to create programmes that encourage more private sector investment in emerging domestic markets; ensure that businesses that serve minorities are adequately addressed in future government stimulus programmes; and consider the effect that its plan to raise taxes on private equity investment may have on minority businesses, investors and communities.

‘The private equity firms that invest in emerging domestic markets would be the ones hardest hit by proposals to significantly raise taxes on private equity investment,’ Boyd says.

According to the study, businesses that are part of the emerging domestic market sector are those that are owned by ethnic minorities; those whose customer base primarily comprises ethnic minorities, and those located in inner city or low-to-moderate income neighbourhoods.

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