A Social Wealth Fund for Reparations

This was originally published in the Black Women's Roundtable 2021 Report.

With the Covid-19 pandemic taking an unprecedented social and economic toll, Black women have been hit the hardest. Black Americans have Covid-19 mortality rates that are double those of Whites. Black women are harder hit by unemployment, and while Black women were the fastest-growing demographic of business owners before the pandemic, 41% of Black-owned businesses were shuttered by Covid-19. The deaths of Breonna Taylor, Ahmaud Arbery, and most explicitly, George Floyd, have put a blazing spotlight on the collective, multifaceted, systemic, and persistent preponderance of anti-Black racism. 

Now is the time to prioritize investment in Black women in a way that pays a dividend for comprehensive reparations. Reparations include restitution, compensation, rehabilitation, satisfaction, and guarantees of non-repetition. This should be carried out using Presidential reorganization authority to establish a Racial Atoning Compensation Endowment (RACE) and corresponding RACE Funds. 

While RACE should be centered on atonement for anti-Black racism, it should also inform policy to address broader historical and persistent harm caused by White nationalist ideology. This may, at some point, include the harm suffered by all Americans (e.g. universal basic income). However, it should begin with funding for education, skilled trades, upskilling, homeownership, debt relief, mental and physical health care, childcare, social safety nets, and equitable access to entrepreneurial training and funding for American citizens and permanent residents of Black African descent. 

How would RACE be funded? 

The fund should be established through a private partnership - not unlike the National Endowment for the Humanities. The newly formed RACE should be a management arm that oversees subsidiary funds. These funds can be regional, theme, and domain-specific. Capitalization of the funds can be deployed by the Treasury Department, Congressionally-approved appropriations, tax-deductible donations, commitments/pledges from major tech companies and financial institutions, and co-investment by limited partners. It should thereafter be sustained through returns on investments and equity pledges from early-stage beneficiaries. 

What would the economics look like? 

Imagine RACE Fund I contributes $100 billion to a $1 trillion fund, which, deploys $100 billion per year. The management arm collects 1.2% ($12 billion) per year for assets under management which goes to operations and reparations programs. After ten years, assuming a 3X return at the wind-down of the fund, the US Government’s return would be 10% of $3 trillion, or $300 billion, plus carry (performance fees rolled up to the management arm). Assuming a 20% carry on the $2 trillion in profits ($400 billion) and $120 billion in cumulative management fees, the return would be $820 billion. While far from the trillions of dollars economists estimate Black Americans are owed for reparations tied to slavery, these economics are sufficient to initiate reparations for modern-day harm Black people in America continue to suffer due to systemic anti-Black racism.

How should investments be allocated?

Emerging managers across the nation are ready and willing to invest in the entrepreneurs who will lead our economic recovery. However, emerging managers need the funding to do so. With family offices and high net worth individuals uncertain about the investment climate, it is imperative that the U.S. government steps up to de-risk and jump-start the next generation of fund managers. 

Priority should be given to Black female fund managers with demonstratable access to deal flow. Currently, Black women are less than 1% of fund managers, and Black female founders receive a fraction of 1% of venture capital. To ensure efficient deployment, funding could also go to fund managers who commit to diversity, equity, and inclusion through initiatives like the Tech Funding Equity Opportunity Pledge.  

In Summary

The top ten tech companies in the United States have market values of hundreds of billions to trillions of dollars. By making strategic investments in funds and venture studios employing Black executives to commercialize government-funded intellectual property, the US has the ability to become a major shareholder in the next generation of trillion-dollar companies while, at the same time, addressing and course-correcting its dark racialized past. 

While the U.S. has responded to Covid-19 with trillions of dollars in aid (with no path to recoupment in sight), Black women have been largely left behind. Some private companies have pledged to address issues faced by Black people, including a $10 billion commitment by Goldman Sachs earmarked for Black women in entrepreneurship and beyond. While these commitments are promising, Black women deserve what Sojourner Truth, Harriet Tubman, Ida B. Wells, Pauli Murray, Rosa Parks, Coretta Scott King, Betty Shabazz, Maya Angelou, and so many others deserved, but never saw manifest: comprehensive reparations for anti-black racism. 

* See The 10 Largest Investment Management Companies Worldwide

Read more in BLACK WOMEN IN THE U.S. 2021: PRIORITIES, POLICY AND POWER BLACK WOMEN’S ROUNDTABLE REPORT 8TH EDITION, 2021 REBUILDING HOPE, JUSTICE, EQUITY & EQUALITY IN THE MIDST OF A PANDEMIC AND A NEW POLITICAL, RACIAL & SOCIAL JUSTICE ERA