Wal-Mart launches private equity fund

Wal-Mart is dedicating $25m for a private equity fund that will invest in women- or minority-owned businesses. The launch of the new investment vehicle follows years of criticism aimed at the company’s diversity efforts.

Wal-Mart Stores has stepped into private equity, committing $25 million (€21 million) of capital to a fund that will invest directly into women- and minority-owned businesses. The company is partnering with Dallas-based boutique Aldus Equity, which will spearhead the investment strategy for the company.

Wal-Mart launches fund focused on diversity

Speaking on Wal-Mart’s objective, Esther Silver-Parker, a vice president of diversity relations at the retail giant, said in a statement that the fund “complements and extends [the] company’s long-standing supplier diversity programs.”

Wal-Mart has been dogged by criticism in recent years related to its diversity efforts. The company agreed this past March to an $11 million settlement that was the direct result of an investigation into the hiring of illegal workers at its stores. Also, in the previous year, the company was hit with a large sex-discrimination lawsuit.

It was also in 2003 that Wal-Mart launched its office of diversity, and last year, the company stepped up the initiative by linking the company’s executive bonuses to certain diversity guidelines.

When Wal-Mart launched its diversity office, company CEO Lee Scott said at the time, “Diversity doesn’t just happen… Just saying we are committed to diversity is not enough — we must put in place the right systems, processes and leadership to make it happen.”

According to a statement, Wal-Mart is calling its private equity commitment a “co-investment management fund”, which will invest in women- and minority-owned businesses seeking capital for acquisitions, joint ventures and other expansion initiatives. Prospective investment candidates must be retail focused, and operate companies that distribute either products or services to retailers.

A spokeswoman for Wal-Mart told PEO that the company does expect to achieve a return on the investment over the life of the fund, but she didn’t want to speculate on any particular objectives. The company anticipates it will make its first investment in the next three to six months. The capital for the fund is coming off of the company’s balance sheet.

The move by Wal-Mart follows a similar path taken by an increasing number of groups today. Firms such as Palladium Equity, ICV Capital Partners and Yucaipa Cos. have actively looked to invest in businesses owned by either women or minorities. Also, The Council of Urban Investors Institute released a report entitled “In Your Own Backyard: Investment Opportunities in Emerging Domestic Markets,” which detailed the opportunities that exist for investing in these areas.