Steve Ballmer has put a lot of money on Black private-fund managers in an effort to support exceptional investing talent and bridge the funding gap for minority-led businesses.
In an interview, the ex-CEO of Microsoft Corp. stated that he and his wife Connie Ballmer have put $400 million into four different investment entities this year that are specifically targeting Black venture capital and private equity managers.
For two new vehicles, one managed by Goldman Sachs Group Inc. and the other by alternative-asset-management firm GCM Grosvenor Inc., the Ballmers put up a combined $150 million as anchor commitments with JPMorgan Chase & Co. managing the fundraising. These investments will support companies run by people of color, using fund-of-fund tactics; those companies will then utilize those funds to primarily fund other businesses run by people of color.
More than $250 million was also invested by the Ballmer’s in vehicles run by Ariel Investments and Fairview Capital, two of the oldest Black-founded asset managers in the United States.
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Mr. Ballmer expressed his expectation that the $400 million pledge would help equalize the shortage of funding opportunities for black and white fund managers.
“The money is not flowing to Black fund managers,” said Mr. Ballmer. “And for Black VCs, I have talked to, it’s just a little harder than for their white counterparts to raise that money.”
Former Microsoft CEO and current Los Angeles Clippers owner Steve Ballmer made the donation out of his personal wealth rather than through his nonprofit, the Ballmer Group, which works to increase social and economic mobility. According to Bloomberg’s Billionaires Index, Mr. Ballmer is the ninth-wealthiest person in the world with an estimated net worth of almost $84 billion.
The Ballmer’s aren’t usually the kind to put money into private equity, so this investment is out of character for them. Mr. Ballmer has stated that “the S&P index and Microsoft stock” make up the bulk of the company’s investment portfolio.
Mr. Ballmer stated that the violence that ensued after the death of George Floyd in Minneapolis in 2020 prompted him to take action over the funding discrepancies between Black and white investment firms.
The Ballmer’s wanted to invest in Black-led funds of funds but were met with a paucity of options. Mr. Ballmer was persuaded by this void to invest in Black private-market managers and business founders after realizing there was a significant unmet need for finance.
He remarked, “I began to feel bullish that this is a genuine possibility.”
Mr. Ballmer doesn’t think he has to choose between making a profit and doing good in the world. The four investments will aim for returns above those of publicly listed stocks and bonds, which is consistent with the private investment market rate.
The alternative-investments sector—which includes private equity, venture capital, hedge funds, and other managers of private funds—has struggled for years with a lack of ethnic diversity among its ranks.
However, according to Laurence Morse co-founder and managing partner of Fairview Capital, the number of Black-owned private-fund managers is on the rise, with many new and relatively young firms entering the fray. Mr. Ballmer put his trust in Fairview, a private-markets investor based in West Hartford, Conn. to oversee a $50 million single-investor fund of funds that provides capital to Black private-fund managers.
Mr. Morse reported that the number of Black-owned venture capital and private equity funds raising funding in 2018 was 84, a 25% increase over the previous year. He predicted that this year’s total will top 90, which would be plenty for assembling a balanced fund-of-funds portfolio.
We understand the landscape of potential outcomes and we believe we can construct a portfolio with sufficient shooting lanes he explained.
The Ballmers have put the most money ($200 million) into the recently established private-equity fund Project Black which is managed by the alternatives department of asset management Ariel Investments.
According to an Ariel investor memo, the fund will be the company’s first foray into private equity, and its primary goal is to build a portfolio of minority-owned, middle-market businesses that may serve as strategic partners to Fortune 500 corporations. Sorenson Communications, a provider of technologies for people with hearing loss, was Ariel’s first Project Black investment this year, and the company was acquired by Ariel for $1.3 billion.
According to a regulatory filing, the Project Black fund had raised nearly $1.1 billion as of last month, out of a target of $2.5 billion.
Mr. Ballmer claims that one of his main goals is to establish mechanisms that may draw in further funding and develop over time. The Ballmer’s have put $100 million into Black Equity Opportunities LLC, a new fund of funds run by Goldman Sachs that is trying to raise around $200 million. Furthermore, they put $50 million into a Grosvenor-managed fund-of-funds strategy that is looking to bring in $100 million.
Mr. Ballmer expects his initial investments to stimulate additional funding for these ventures. He described the $400 million as “a major commitment” and expressed hope that others would follow suit.
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