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Locating senior women in private equity funds, hedge funds or investment banks is as rare as finding zebras in Antarctica, says William D. Cohan.

Despite their bright smiles and elegant demeanours, the sorry state of professional women in the highbrow world of private equity was on full display in a two-page photographic spread tucked into the middle of the May 2007 issue of Portfolio, Condé Nast's new business monthly. The magazine managed to find a total of six women fortunate enough to have busted through "some of the thickest glass ceilings in all of finance" to become partners at the leading private equity firms and posed them all together – with plenty of room to spare – in the Tony Campbell Apartment in New York's Grand Central Station. Indeed, at the top 10 private equity firms, there are only four women partners: two at the Carlyle Group, one at TPG and one at Goldman Sachs. That's it. There are no women deal partners, for instance, at any of KKR, the Blackstone Group, Thomas H. Lee, Cerberus (the new owner of the Chrysler Corporation), Quadrangle Group and Hellman & Friedman among many, many others. Hedge funds, of course, are even more of a men's club.

Carbon copies

"People in small collegial partnerships tend to hire in their own image," explains Sandra Horbach, one of the two women partners at Carlyle, "and that just feeds on itself," she adds. Horbach should know, having worked for 12 years as the only woman partner at Forstmann Little & Co. before moving to Carlyle in September 2005. Bo Arlander, who worked in the unfriendly – for women, that is – confines of Lazard in New York for a few years in the early 1990s before moving to the merchant banking arm of Bear Stearns, where she is now a senior managing director, claims to have some insight into why it is so difficult for women to succeed in private equity. "I have to work twice as hard and be twice as good to be half as successful," she explains. That is the same refrain heard for years by the very few women at Lazard, too.

Like private equity, like banking

As difficult a trek as it is for women to become partners in private equity firms and at hedge funds, it is only slightly better for women in the still male-dominated world of investment banking. Even the paragon of Wall Street virtue and public relations, Goldman Sachs, confirms that only 14% of its 'partners' are women, which is double the percentage of six years ago. But this past January, Goldman's most senior woman partner, Suzanne Nora Johnson, left her position as vice-chairman of the firm. You can count Wall Street's top women bankers on one hand: Christina Mohr at Citigroup, Laurie Coben at Merrill Lynch and Nancy Peretsman at Allen & Co. As for senior management on Wall Street, that would be Zoe Cruz, co-president of Morgan Stanley, and Sallie Krawcheck, ousted as Citigroup's CFO and now running the company's wealth management unit.

From one frat house to another

Why does Wall Street remain so inhospitable to women? Part of the reason, sadly, as Portfolio points out, is that Wall Street "has always been the ultimate frat house, notorious for its foul-mouthed trading floors, locker-room deals, and periodic mini-scandals involving after-work bacchanals." The facts back up this observation. During the last three years alone, Morgan Stanley has set aside US$100m to settle two sex discrimination lawsuits. The most recent class-action settlement of US$46m came in April 2007 with eight current and former women brokers who claimed the firm discriminated against them in promotions, training and pay; the other settlement, for US$54m, came in 2004 over a claim by women bankers at the firm, also about unequal pay and lack of promotions.

Morgan Stanley is not alone, of course. In April 2005, a federal jury in New York ordered UBS, Europe's largest bank, to pay US$29m in damages to Laura Zubulake, a former saleswoman who sold Asian equities to institutional investors. Zubulake claimed that she was passed over for the job as manager of the department in favour of a man, who then proceeded to undermine, belittle and ridicule her in front of her co-workers. "This sends a message not just to UBS but to everybody," she said at the time of the verdict. "The message for all women on Wall Street is not to be afraid to stand up and speak out when they feel they are being treated differently." The list goes on, and on.

It's the hours, stupid

Compounding the problem of too much testosterone on Wall Street are the longstanding ones of long hours, extensive travel and demanding, insensitive bosses and clients. These latter problems affect both men and women equally, of course, but everyone knows the toll falls disproportionately on women, or those women who also hope for something resembling a normal family life.

Some Wall Street firms are trying to rectify the situation by creating programmes designed to lure women back to the investment banking workforce by allowing for a more flexible and family-friendly work schedule. Lehman Brothers started Encore; Goldman has New Directions. Lehman has hired back to the Street 20 bankers in the programme's first year.

But it comes as no surprise that, as part of the bargain, these women (and a few men, believe it or not) are paid far less than are their full-time, nose-to-the-grindstone peers. The opportunities for resentment around the water cooler are rife. And nobody is thinking the women who return to the workforce under these programmes will be senior managers one day.

Perhaps Wall Street bankers should look to Wall Street law firms for a role model. Last November, Weil Gotshal & Manages announced that, for the first time ever, more women than men were made partners of the firm. Of the 20 new partners, 11 were women, including two women who were named "Flex-Time Partners" to accommodate their desire for more family time.

• William D. Cohan is the author of The Last Tycoons: The Secret History of Lazard Frères & Co., published by Doubleday Books, and is a former managing director at JPMorgan Chase & Co. and a former VP at Lazard Frères.