City, county pension money could be used to aid startups
A Memphis nonprofit agency aims to tap pension funds of Memphis and Shelby County employees and invest the money in local entrepreneurs.
Epicenter has asked for a portion of the city and county pension money to enter a new investment fund already seeded with $10 million from FedEx Corp., city and county officials said.
The standalone nonprofit agency was spun out of the Greater Memphis Chamber’s Chairman’s Circle, which listed a new set of goals in 2014 called moon missions. Epicenter’s mission is aid for 1,000 entrepreneurs by 2025, including 500 newly started firms.
The agency has raised about $40 million and intends to eventually pool $100 million for investments, Epicenter President Leslie Lynn Smith said.
Shelby County Mayor Lee Harris said Epicenter sought $10 million from the county pension fund. He said the request was referred to pension adviser Wilshire Associates for a recommendation. Memphis Mayor Jim Strickland’s spokeswoman by email said an investment adviser was asked to consider Epicenter’s request.
The advisers would assess Epicenter’s management, investment strategy and ability to oversee a venture capital fund. It isn’t clear when the advisers will complete their tasks.
Memphis’ municipal pension fund has amassed more than $2 billion. The money has been spread among private investment managers responsible for using their share of the money to buy stocks, bonds and other sound assets. The county fund is similarly allocated among investment managers, and Harris recently sought to include Memphisbased Preservation Partners among these managers.
Harris said he was not sure what Wilshire might report on Epicenter’s request. In general, he said, investing a portion of local pension money in new Memphis businesses able to ramp up jobs and tax base seems fine.
“It’s a great thing to invest in Memphis,” Harris said.
No investment funds currently invest exclusively in Memphis entrepreneurs. This lack of startup money, called venture capital, results in many young firms staying small and unable to ramp up sales volume to a level that can attract operating loans from regular banks.
Dozens of wealthy Memphians have committed money to the investment fund, bringing it to the $40 million level. Money allocated by the city and county pension funds could raise the level to $60 million.
“Our pension funds could certainly help. They’ve invested in other entrepreneurial vehicles. Why not invest in our entrepreneurs?” said FedEx executive Richard Smith, who also serves as voluntary chairman of the Greater Memphis Chamber and is unrelated to Leslie Lynn Smith.
A donor has tentatively agreed to replenish the city and county pension funds for any money lost in Epicenter’s investment fund, Richard Smith said.