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A specialized set of asset managers, responsible for investing $850 billion in higher-yield credit worldwide, is at risk of losing business unless it fixes its glaring shortage of women, especially in top jobs.

Pressure to increase diversity is largely coming from those who oversee the big pools of institutional capital that fund the private-credit industry, made up of lenders that finance companies too risky to get conventional loans. Some investors are making their position crystal clear: If you’re asking for our money, there better be women sitting across the table from us when we strike a deal.

“We want our money to be managed and invested in entities that share our values and our priorities,” said Kim Thomassin, executive vice president of stewardship investing at pension fund Caisse de Depot et Placement du Quebec, which has C$333 billion ($254 billion) in assets, including C$35 billion invested in private credit. “When the stewards of large sums of capital, the institutional investors like us, all get together, it’s billions and billions of dollars and, frankly, money talks.”

Women now hold about a fifth of the industry’s jobs and just 10% of the senior positions as of last year, according to London-based research firm Preqin. By comparison, women on average hold 52% of the management jobs in U.S. industry and 22% of the leadership roles in financial services, according to the Bureau of Labor Statistics and Deloitte, respectively.

In theory, the sector’s rapid growth should create opportunities for private lenders to bring more women on board. Private credit has surged threefold since the 2008 financial crisis. Analysts expect assets to reach $1 trillion in the next several years.

“Whenever you have growth there are always going to be more seats available at the table,” said Sylvia Owens, global private credit and real assets strategist at New York-based portfolio advisory firm Aksia.

In spite of private credit’s past expansion, female employment has changed little in recent years, suggesting that hiring more women won’t simply happen on its own: It takes someone pushing from the outside.

“If the clients drive it and demand it, and they are very committed to it, then it tends to happen,” said Theresa Shutt, the chief investment officer at Laval, Quebec-based Fiera Private Debt, where women hold more than 15% of the higher positions.

Some big asset managers such as Bain Capital Credit and Barings – both count private credit among their large investment offerings – say they are trying address the lack of gender diversity in the industry by putting measures in place to boost women in the early stages of their careers. They also are offering boot camps on credit and alternative assets for college students or establishing support groups for women already in the industry.

Those in the private-credit business say the outside pressure is intensifying.

“We do see this request more and more," said Cecile Mayer-Levi, head of private debt for European alternative-asset manager Tikehau Capital, based in Paris.

New York-based Caspian Capital, which invests in a type of private credit considered distressed debt, earlier this year started a diversity initiative aimed at increasing the ranks of women and minorities. “The events this summer reiterated the urgency and focus,” said Kathryn Murtagh, general counsel at the firm. Caspian’s staff of two dozen is now more than 40% female, she said.

Meanwhile, alternative investment shop Varde Partners in the past five years has boosted its female investment professional headcount to 22%, from 9%. The Minneapolis-based firm, which invests in corporate debt, including private credit, has overhauled its hiring processes, including how it screens resumes and reviews promotions.

“Investors are increasingly focused on diversity, and rightly holding managers to a higher standard,” Varde co-founder Marcia Page said in an email.

-Bloomberg

Pagaya Investments, an analytics-driven asset manager of unsecured consumer loans culled from major marketplace lending platforms, is sponsoring its first publicly rated securitization in a $423.94 million transaction.

Pagaya AI Debt Selection Trust (PAID) 2020-3 will include three classes of notes, including a $282,220 Class A tranche with a preliminary A- rating from Kroll Bond Rating Agency.

Instead of gathering loans through preselected portfolios of collateral compiled by lenders, Pagayauses its own artificial-intelligence platform to select individual loans from the managed portfolios of those marketplace lenders including LendingClub, Prosper, Avant, and Marlette.

The deal is entirely prefunded.
See story here.

WASHINGTON — Neither President Donald Trump nor Democratic nominee Joe Biden has made banking policy a cornerstone of their presidential campaigns. Yet whoever wins in November will face a task of utmost importance to financial institutions: selecting new heads of the financial regulatory agencies.

The new presidential term could start with a vacancy atop the Office of the Comptroller of the Currency if Trump fails to name a nominee who is then Senate-confirmed by January. The administration would also face a decision early on about whether to reappoint Federal Reserve Chair Jerome Powell, whose term ends in February 2022, or select a new head of the central bank.

“At some level, it’s just like with wars and everything else: the victor gets to write the story,” said Greg Lyons, a partner at Debevoise & Plimpton.

But if Biden wins, he could move more aggressively to change the leadership of the Consumer Financial Protection Bureau following a Supreme Court ruling allowing the president greater discretion to fire the head of the CFPB, currently Kathy Kraninger. An upcoming Supreme Court case involving the Federal Housing Finance Agency could give a Biden administration similar standing to remove Director Mark Calabria.
The CFPB's Kraninger was confirmed for a five-year term in December 2018. But the Supreme Court decision in Seila Law v. CFPB determined that the president is able to fire the director at will, a decision that some speculate could also apply to Calabria's standing at the FHFA.
Lyons said whoever gets appointed to the run the agencies in the new presidential term will help set the future of tech in banking, supervisory policy and other important matters.

“Who is there is really going to matter a lot,” he said. “We know what kind of people Trump appoints. You would think that that would lead to ongoing integration of banks and fintech, more tailoring for certain types of banks, perhaps more flexibility on exams and fewer enforcement actions and so forth.”

But the profile of regulators Biden might appoint is less clear.

While Biden took consistently moderate positions compared to some of his former Democratic rivals for the nomination, it remains to be seen the kind of influence more progressive figures like Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., have on financial regulatory policy.

- Hannah Lang