Police reform has become a hot-topic political issue.
But I’m not going to focus on police politics in this article…
Instead, I’m going to focus on police profits.
You see, for years, cops have been using a powerful investment strategy — a strategy that helps them build a big nest egg so they can retire early.
And today, I’ll show you how to start using this strategy yourself.
Add Another Asset Class
If you’re like most folks, you probably have a balanced investment portfolio...
For example, maybe you have 60% in stocks, and 40% in bonds or real estate.
But professional investors (like the big pension funds that manage the retirement accounts of police officers) add another asset class: private equity.
Unlike stocks or mutual funds, private equity investments aren’t listed on a public exchange. Instead, such investments are in unlisted private companies and startup companies.
There are two main reasons pension funds invest in private equity:
1. The Returns. According to Cambridge Associates — an investment firm with clients like Bill Gates and the Rockefeller Foundation — over the last 25 years, early-stage private equity has generated average annual returns of 55% per year.
That’s nearly 10x higher than the stock market average. At 55%, in 10 years, an investment of $10,000 would turn into more than $800,000.
2. Diversification. Private equity can zig when the stock market zags. So even if there’s a meltdown in the stock market, your allocation to private equity can outperform.
Police Go Private
These benefits help explain why, according to Ayako Yasuda, a finance professor at the University of California, about half the capital managed by the private equity industry comes from pension systems like police retirement funds.
- The $25 billion Los Angeles Fire and Police Pension Fund has invested in hundreds of private equity funds, including NEA and Canaan Partners.
- The $2.6 billion Oklahoma Police Pension and Retirement System has a target allocation to private equity of 15%.
- The $3.6 billion San Jose, California Police and Fire Department Retirement Plan has a target allocation to private equity of 19%.
And capital from these funds has ended up in some of today’s most successful startups…
Blossoming into Billion-Dollar Giants
For example, as reported by research company PitchBook last week, venture firms backed by the LA Fire and Police Pension Fund have invested in startups including:
Robinhood, Peloton, ByteDance, Airbnb, MasterClass, Coinbase, and many others.
These once-tiny startups have blossomed into billion-dollar giants.
And this is how startup investors earn an average 55% a year — or earn one-time windfalls of millions of dollars.
So, how can you get involved?
Historically, private equity was only accessible to pension funds or wealthy investors.
After all, the minimum to get into a fund like NEA or Canaan Partners is several million dollars.
But as I explained last week, thanks to a new set of laws called The JOBS Act, now anyone can invest in private equity…
And anyone can put themselves in position to earn market-beating returns.
It doesn’t take much money to get started. Even a few hundred dollars will do the trick.
This is why, about six years ago, Wayne and I launched Crowdability: our mission is to help individual investors like you make sense of (and profit from) this newly available market.
Here are two easy (and free) ways to get started:
First, take a look at our weekly “Deals” email. We send this out every Monday at 11am EST, and it contains a handful of new startup deals for you to explore.
Second, check out our free white papers like “Tips from the Pros.” These easy-to-read reports will teach you how to separate the good deals from the bad.