WEST HARTFORD, Conn.--(BUSINESS WIRE)--Fairview Capital, one of the largest minority-owned private equity and venture capital investment management firms in the United States, with over $10 billion under management since inception, today released the Firm’s 2022 Market Review of Woman and Minority-Owned Private Equity and Venture Capital Firms.
The data shows that the opportunity for backing woman and minority-owned private equity and venture capital firms is at record levels. In 2022, Fairview found that the universe of woman and minority-owned firms, those at least 50% owned by women and minorities, grew to 760 firms, up from 627 firms in 2021. Fairview similarly observed a record 346 women and minority-owned firms in the market raising capital during the year, up from 280 firms in 2021. Nonetheless, barriers remain, including smaller median target fund sizes and a tendency for diverse managers to fly under the radar of larger institutional investors and intermediaries.
“Our findings illustrate that the rate of growth and success within the diverse manager community is strong and persistent, despite 2022 being a challenging year for the economy and markets,” said JoAnn Price, Co-Founder and Managing Partner of Fairview Capital. “Despite macroeconomic headwinds, we are seeing persistent new firm formation, as women and minorities continue to have strong conviction in starting new firms."
Woman and minority-owned firms still target only 6% of the capital targeted by the private equity industry in 2022, a figure unchanged from 2021. Underrepresentation continues despite a maturation of the opportunity set. While most diverse managers are raising a first-time fund, Fairview found that 43% of women and minority-owned firms were raising a subsequent fund, representing the highest proportion since 2019, and the highest in terms of absolute number of funds ever. These figures indicate there is a greater opportunity for larger institutional investors and intermediaries who may not be comfortable backing first-time funds.
Other findings from Fairview Capital’s 2022 Market Review include:
- Strong firm formation: 198 first-time woman and minority-owned firms were in the market, in 2022, the highest total ever, representing 57% of woman and minority-owned firms in the market
- Fund sizes remain small: The median target fund size for woman and minority-owned firms was $100 million, unchanged from the prior year and approximately 31% below the industry-wide median fund size, representing a distinguishable gap between diverse and non-diverse firms.
- Spotlight on venture capital: In 2022, 75% of woman and minority-owned firms were raising venture capital funds.
- It was a record year for women-led firms, with 150 in the market, a 29% increase over the prior year.
- Most African American owned firms are raising first time funds.
- Latinx firms remain underrepresented, although 49% are raising a subsequent fund.
- Most Asian American owned firms were in the market with a successor venture capital fund.
“We continue to be encouraged by the rate of new firm formation as well as the staying power and quality of diverse managers. Although there is much more to accomplish, there's unquestionably more well positioned diverse talent in the industry than ever before," said Aakar Vachhani, Partner of Fairview Capital. "While the data shows that the profile of most diverse firms continues to position them below the radar of most institutional investors, we believe those that approach the market with a prepared mind and deliberate approach are poised to benefit."
Fairview Capital started publishing its Market Review data publicly starting in 2014. For nearly 30 years, Fairview has actively invested with diverse managers in partnership with many of the nation’s leading institutional investors. As a result, the firm has built the most comprehensive database of diverse managers in the country. “We are uniquely positioned as a first stop for many new firms just getting started and we have an open-door policy. In a market that can often be opaque, reliable and actionable data on the diverse manager market is hard to come by for most investors. We believe that sharing our data publicly can serve as a valuable tool to investors seeking to invest with diverse managers,” said Kwesi Quaye, Principal of Fairview Capital.
Additional key findings and trends from Fairview:
The Investment Opportunity with Woman and Minority-Owned Funds Continues to be Concentrated in Venture Capital
In 2022, 75% of women and minority-owned firms were raising a venture capital fund. With venture capital representing the majority of the diverse manager opportunity set for the better part of a decade, it is clear that institutional investors seeking to access diverse managers must also build the skill sets, networks, and programs to effectively invest in the venture capital market, particularly at the seed and pre-seed stages.
The Majority of African American-owned Firms Are Raising First-Time Funds
Fairview's data shows that 122 African American-owned firms were in the market during the year, a 45% increase over 2021. In 2022, many African American investment professionals embraced entrepreneurship by launching new firms during the year, the highest ever.
Woman-Owned Funds Have Been a Strong Area of Growth
The number of woman-owned firms increased 29% over 2021, with 150 firms in the market in 2022. In 2022, non-minority woman-owned firms comprised 43% of woman-owned firms in the market. African American woman-owned firms comprised 24% of woman-owned firms in the market, with 86% raising a first-time fund with a median target $50 million fund size. Additionally, Asian American-woman owned firms comprised 25%, and Latina-owned firms comprised 8% of woman-owned firms in the market with the majority raising a first-time fund.
About Fairview Capital:
Fairview Capital is a leading private equity and venture capital investment management firm founded nearly 30 years ago by Laurence C. Morse, Ph.D., and JoAnn Price. Fairview Capital is one of the largest minority-owned investment management firms in the United States with over $10 billion under management since inception. The firm invests on behalf of institutional investors including the world’s leading foundations, endowments, and public and private pension plans. Fairview Capital is renowned for its entrepreneurial spirit, diverse leadership team, inclusive investment approach, and deep expertise that continues to shape the industry. Headquartered in West Hartford, CT, Fairview Capital also has an office in San Francisco, CA. For more information visit www.fairviewcapital.com.