Dozens Of Venture Firms Have Police Union Funds As Investing Partners
For years, venture capital and private equity firms have used police retirement funds for investing capital. That practice is attracting new attention in the wake of protests against police brutality and the murder of George Floyd while in police custody.
Dozens of venture firms, including NEA, Spark Capital and IVP, have police pension funds as limited partners, according to The Information, which analyzed financial reports published by these funds.
Hundreds of private equity funds, including large firms like Apollo and KKR, have taken money from police unions, The Information reported. “These investments illustrate the financial ties that link Silicon Valley and police workers at a time when civil rights advocates and some state lawmakers are pushing for police reform,” Kate Clark reported. “The connections raise the possibility that venture firms could come under pressure to distance themselves from these limited partners.”
Unlike most unions, police unions are “profoundly conservative institutions that uphold a particular white ethnic, law-and-order-focused variant of right-wing politics,” Dylan Matthews wrote for Vox. “The presence of a segment of a union movement that’s unapologetically right-wing and hostile to Black communities has tested the limits of solidarity from more left-wing unionists.”
Over the past 50 years, police unions have become one of the most powerful lobbyists in local government and the loudest voices against criminal justice reform — especially when it comes to police use of force and discipline.
Few people have tried to defend Minneapolis officer Chauvin — who kneeled on Floyd’s neck for more than eight minutes on May 25, suffocating him as Floyd repeated “I can’t breathe” and begged for his life — or three other arresting officers who stood by and did nothing to help.
One exception is Bob Kroll, the president of the Minneapolis Police Department’s police union. In a letter to union members, Kroll referred to people protesting against police brutality as a “terrorist movement.” He defended the officers who killed Floyd and were fired, saying they were “terminated without due process.”
The video of Floyd’s suffocation and death by Minneapolis police was seen and protested around the world.
About half of the capital supplied to PE and VC funds comes from pension funds, according to Ayako Yasuda, a professor of finance at the University of California, Davis. Pension fund managers are investing more of their assets in PE and VC funds, which are known for high-risk investments and impressive returns.
Police retirement funds are no exception. Investors include the Oklahoma Police Pension & Retirement System—a backer of FirstMark Capital—and funds protecting the retirement assets of big-city police departments.
The Los Angeles Fire and Police Pension Fund has the most venture investments of police retirement funds, according to an analysis of annual reports. It manages more than $23 billion and has invested in hundreds of funds focused on private companies in the last 10 years, inlcuding NEA, IVP, Canaan Partners, TCV, Oak HC/FT, Polaris Partners and Threshold Ventures.
The average pension fund invests mostly in private equity because returns are more consistent than in venture, The Information reported. Capital from these funds has ended up in many technology startups.
For example, venture firms backed by the LA Fire and Police Pension Fund have invested in Robinhood, Opendoor, Peloton, Rent the Runway, ByteDance, Airbnb, MasterClass, Coinbase and Discord, among many others, according to PitchBook.
The New York City Police Pension Fund, whose $45.2 billion under management makes it one of the largest police retirement funds, has invested recently mainly in hundreds of PE funds, including BlackRock, KKR, Vista Equity Partners and Warburg Pincus.
“Both tech (companies) and VCs are being called on to do more to improve social justice, racial justice and gender equality,” Yasuda told The Information. “Maybe new distributions of matching (between limited partners and general partners) will emerge from this.”
Civil rights activists and some labor leaders have called for limiting the power of police unions, saying they have concealed abuses and shielded police officers from accountability.
Police unions have fought many proposed reforms, such asallowing citizens to sue officers.
Rep. Bobby Rush (D-Ill) likened Chicago’s largest police union, the Chicago Fraternal Order of Police Lodge 7, to the Ku Klux Klan, saying the two organizations “are like kissing, hugging, and law-breaking cousins.”
“We’ve gone through a moment of awakening, and I think that’s impacted people at all levels, including people who make these huge decisions about where money is moving,” said Scott Roberts, senior director of criminal justice campaigns for Color Of Change. A nonprofit civil rights advocate, Color Of Change helped organize the Facebook ad boycott. “No one should be aligning themselves with these unions that are the primary opposition to reform,” Roberts said.
Listen to GHOGH with Jamarlin Martin | Episode 73: Jamarlin Martin Jamarlin makes the case for why this is a multi-factor rebellion vs. just protests about George Floyd. He discusses the Democratic Party’s sneaky relationship with the police in cities and states under Dem control, and why Joe Biden is a cop and the Steve Jobs of mass incarceration.
It’s not likely that funds will end their relationships with police pensions, Yasuda said.
While some VC and PE funds have started reviewing their practices, few have included limited partners in their promises to make changes. One exception is Sequoia Capital, one of the largest Silicon Valley venture firms, which recently said it would start reaching out to historically Black colleges and universities about becoming investors in future funds.
Others including Spark Capital and Canvas Ventures said they support the Black community and have donated to organizations including the NAACP Legal Defense and Educational Fund, Equal Justice Initiative and Innocence Project.