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Asset Management Culture

More Diverse Managers Are Raising Venture and PE Funds at Fastest Pace, Research Finds

The number of women-andminority-owned private equity and venture capital firms in the US grewnearly 20% from 2022 to 2023.
By Matt Toledo



There were 907 women- and minority-owned private equity and venture capital firms in the U.S. by the end of 2023, according to Fairview Capital’s 2023 market review. The $10 billion asset manager has conducted the annual survey of diverse managers since 2014, when there were only 100 such firms in the market.

Fairview counts women- and minority-owned firms as those that are at least 50% owned by people from these groups.

The report’s findings include:

  • Diverse managers in VC and PE grew to 907 at the end of 2023 from 760 at the end of 2022;
  • Those raising capital increased to 417 from 346;
  • The median fund size target of these managers was $100 million; and
  • 50% of funds were continuing funding rounds that began in 2022.

“We find that the increase in diverse talent is continuing to drive consistent growth in the community of woman- and minority-owned firms, despite significant underrepresentation in the market overall,” said Aakar Vachhani, Fairview Capital’s managing partner, in a statement. “While the data makes it clear that the opportunity set of woman- and minority-owned firms remains dynamic, we are observing some limited partners gravitate to the perceived safety of larger, more tenured firms.”

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VC Firms Growing Fastest

“The investment opportunity with [minority]-owned firms continues to be dominated by venture capital,” the report stated. Fairview wrote that barriers to entry are lower in VC for diverse managers, leading to higher growth for these managers.

According to the report, growth in women- and minority-owned venture capital firms has outpaced growth in buyout and growth equity firms. From 2014 to 2023, the number of growth funds grew 3.7 times, which lagged behind the growth of diverse managers (9.4 times) and venture capital firms (16.7 times).

Of diverse managers listed in the report, 72% were managers of venture capital firms, with the rest working on buyout, growth and credit-related strategies.

Underrepresentation of diverse managers in buyouts and growth equity correlated to the size of the funds needed in the different strategies. Many diverse managers are raising smaller funds, while growth equity and buyout funds often write larger checks and raise larger funds and require significant up-front investment, the report stated.

According to Fairview, track records are harder to generate for diverse managers in buyouts and growth equity; the firm noted that these managers have more success building track records in VC through smaller “proof of concept” funds and through angel investing, which have lower barriers to entry, according to Fairview.

Troubles Amid a Volatile Market

While Fairview has published the annual report for a decade, it has been an active investor in diverse-managed firms for 30 years. The firm noted that diverse managers tend to be more impacted by market sentiment shifts.

“In uncertain times, [LPs] tend to take a flight to perceived safety in larger and more tenured firms; it appears this time is no different,” the report stated.

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NYC Pensions Increase Allocation to Emerging Managers Following Outperformance

California Law Aims for More Equitable Distribution of VC Funding

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Home > News > Pensions > With Corporate DB Pension Funding at All-Time High, Will Pension Reversion Transactions Increase?
Pensions

With Corporate DB Pension Funding at All-Time High, Will Pension Reversion Transactions Increase?

Likely not, but there are opportunities for plan sponsors to take advantage of excess pension assets.  
By Matt Toledo



Last week, the Eastman Kodak Co. announced it would examine all possible opportunities to take advantage of its excess pension assets and outsourced the management of those assets.  

According to data provided to CIO, Kodak’s funded ratio stood at 145% as of June 30, 2023, up from roughly 93% a decade earlier. Kodak’s defined benefit plan is overfunded by approximately $1.2 billion.  

While Kodak did not publicly confirm it plans on a pension reversion, in which a plan sponsor takes ownership of excess pension assets, Bloomberg reported last week that a reversion transaction was under consideration.  

U.S. corporate pension funds are at all-time high pension funding levels, driven by strong equity returns and elevated interest rates, according to several corporate pension trackers. With many of these pension trackers showing average funded status of the largest corporate DB plans as greater than 100%, discussions on how to manage that surplus are likely happening at many companies.  

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“U.S. corporate pension plans have maintained their overfunded status for 14 consecutive months since early 2023.” said Ned McGuire, managing director at Wilshire in the firm’s February U.S Corporate pension plan funding status update.  

Tax Considerations for Reversions 

Companies that undergo a reversion process could be subject to a 50% federal tax bill, which could climb as high as 80% to 90% of the pension surplus when adding local and state taxes, says Zorast Wadia, a principal in and consulting actuary at Milliman Inc.  

Still, there are processes that would relieve a company of this tax burden during a reversion process, including using some of the surplus assets to increase benefits for plan participants and beneficiaries, Wadia says. Doing this could reduce the federal tax rate to 25%. 

A company could also choose to share the entire surplus with its pension participants and beneficiaries, which would not subject the surplus to any tax.  

Without these tax strategies, a reversion could simply be too costly. With a pension surplus of $1.2 billion, Kodak could forgo up to $960 million to taxes, assuming a tax rate of 80%.  

Other Options? 

Will more companies opt for pension reversions? Not likely, Wadia says, due to the significant tax hurdles.  

Companies are more likely to reopen their DB plans, rather than undergo reversion, Wadia says.  

“That’s not to say that sponsors adopting DB plans is going to happen en masse either, but I would think that it’s more likely for … the sponsor to restart the defined benefit plan, rather than focus on capturing the after-tax portion of whatever’s left of the regression.” 

IBM announced in 2023 that it will end corporate contributions to the company’s defined contribution plan and instead reopen its cash balance defined benefit pension fund.  

Related Stories: 

Eastman Kodak to Shift Pension Assets to NEPC 

JPM: Reopen Corporate DB Plans or Stop Closing and Freezing Them  

Largest Corporate Plans Hit Highest Funded Status Since 2007, Despite 2022 Investment Losses 

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