44 — Contributing to Communities Alternative Investment Management Association — 1 AIMA Alternative Investment CONTRIBUTING TO COMMUNITIES Management Association A global review of charitable and philanthropic activities www.aima.org by the hedge fund industry Alternative Investment Management Association — 3 Table of contents Foreword EXECUTIVE SUMMARY ........................................................... 06 I am delighted to introduce Contributing to Communities, industries. We should not forget that the hedge fund industry the first review of its kind of the charitable and philanthropic is itself a fairly small community. We have estimated that activities of the hedge fund industry worldwide. around 100,000 people are employed directly by managers in SECTION 1 ...................................................... 08 the industry worldwide, which, if it were a single company, The report has been produced by the Alternative Investment would still fail to make Fortune’s list of the 50 biggest Overview of hedge fund Management Association (AIMA), the global hedge fund corporations in terms of employees. Suffice to say, and given charitable activities by region industry association. One of our objectives traditionally has its size, the hedge fund industry does — and quite rightly — been to draw attention to the value the hedge fund industry make a real contribution to communities. brings to society as a whole, from the role that hedge funds play in stabilising financial markets to the benefits of capital We also recognise the limitations of charity and philanthropy preservation and diversification that they offer to their itself. Altruistic gestures are features of compassionate investors, the majority of whom today comprise socially- societies. But they should not be a substitute for addressing SECTION 2 ...................................................... 18 important institutions such as pension funds, endowments the deeper causes of poverty and inequality. The charitable and, indeed, charitable foundations. and philanthropic activities of the hedge fund industry matter, Benefits to communities but they can only ever achieve so much. and the third sector The industry has always engaged in charitable giving and philanthropy. In this report, we have focused just on those activities that are in the public domain (much charitable activity being private). We have chosen to eschew images of gala dinners, celebrity endorsements and presentation cheques so often associated with the industry’s charitable activities. SECTION 3 ...................................................... 26 Instead, our primary focus has been on where the money Types of charitable activity raised ultimately goes — whether a school in a deprived part by hedge fund firms and managers of London, a much-loved public park in America, a facility in Britain for developing the next generation of scientists or a hospital for sick children in Asia, to name but a few. Andrew Baker We have not sought to judge whether the volume and scope CEO, AIMA of the industry’s charitable and philanthropic activities are sufficient, or whether or not they compare well with other SECTION 4 ...................................................... 32 Operational issues and challenges CONCLUSION ........................................................................... 39 BIBLIOGRAPHY ....................................................................... 40 Cover image. New York’s Central Park received $100 million from John Paulson in 2012 – the largest monetary gift ever given to a US public park. 4 — Contributing to Communities Alternative Investment Management Association — 5 01. A group of students from the Opportunity Network’s OppNet Prep program, which introduces ninth graders from New York state schools to the importance of career networking. Donations from the hedge fund industry have helped the organisation expand from 10 students to 300. 6 — Contributing to Communities Alternative Investment Management Association — 7 Executive summary But in terms of the charitable and Charitable and philanthropic activity in the global hedge philanthropic activities of the industry, even these examples may be only the tip fund industry is widespread. Hedge fund managers of the iceberg. The report focuses only and staff are engaged with charities in a multitude of on activities in the public domain. It is worth noting that very often the different ways. industry’s charitable and philanthropic activities are done in private, and These activities range from workplace giving programmes without publicity. The report also sets out the benefits to personal foundations set up by a manager or group of accrued by the third sector and society more generally as managers to donate a portion of their wealth, to board a result of these activities. membership or trusteeship of established charities. Also outlined are some of the operational issues and Some of the largest individual contributions include George challenges faced by hedge fund managers and staff in setting Soros’ Open Society Foundation, which directed $742 up charitable initiatives. Deciding on a funding model, million towards charitable causes in 2010, the most recent selecting and monitoring beneficiaries, and marrying work and available data1; Paul Tudor Jones’ Robin Hood Foundation, charitable commitments are some of the common issues which receives donations from across the industry as well raised by interviewees in reflecting on their experiences. as public fundraising drives and which gave $146 million Above all, the report seeks to highlight the social benefits of in grants to dozens of poverty-fighting programmes in the global hedge fund industry’s charitable and philanthropic New York City in 20122; Louis Bacon, the founder of Moore activities: from tangible gains such as the funding of new Capital Management, who has spent close to $400 million schools, medical equipment and housing to more intangible on 202,000 acres of land in the US that are either already benefits including improvements to charities’ strategic in conservation easements or soon will be3; and the Simons planning and financial operations. Foundation, which gave $122 million in 2011, also the most recently available data4. The report’s findings are based on interviews with individuals from the hedge fund industry who are active in the charity Hedge fund industry figures who have dedicated the majority sector and representatives of charities, which were carried of their wealth to philanthropy by signing the Giving Pledge, out during 2012 and 2013. Those responses are used in tandem an initiative launched in 2010 by Warren Buffett and Bill with publicly available data on the financial and social and Melinda Gates, include Bill Ackman, John Arnold, Ray activities of hedge fund charities to gain a detailed picture Dalio, Christopher Hohn, Julian Robertson, Jim Simons and of global hedge fund charitable activity. Tom Steyer5. 02. ARK Globe Academy in Southwark, London is an ‘all-through’ academy for 1,200 students aged 4–18. 03. A Man Group employee helps a primary school NOTE student with her 1 Open Society Foundations, 2012. ‘Expenditures’. Available at www.opensocietyfoundations.org/about/expenditures reading in London’s 2 The Robin Hood Foundation, 2011. ‘Financials’. Available at www.robinhood.org/about/financials East End, part 3 Forbes magazine, January 2013. Available at of the workplace www.forbes.com/sites/erincarlyle/2013/03/28/audubon-society-gala-honors-louis-bacon-bette-midler-sings-birdie-tunes volunteering scheme 4 The Simons Foundation, 2011. ‘Annual report’. Available at http://simonsfoundation.s3.amazonaws.com/share/2011_Annual_Report.pdf funded by the firm’s 5 The Giving Pledge, 2013. Available at http://givingpledge.org/index.html Charitable Trust. 8 — Contributing to Communities Alternative Investment Management Association — 9 Section 1 Overview of hedge fund charitable activities by region Hedge fund charitable activity is widespread in the US, which is the largest jurisdiction globally where managers are based. Philanthropy within the hedge fund industry is also rapidly spreading across national borders as the industry becomes more global, with new initiatives in Europe and Asia. Many philanthropic initiatives from the hedge fund industry concentrate their funding on the developing world, particularly Africa. This part of the report will examine the spread of hedge fund charitable contributions by region, looking at the important philanthropic players and causes being strongly supported by the industry in each financial centre. Across the global hedge fund industry, the concentration of managers are domiciled in either the US or UK, which means their charitable foundations are also, somewhat unsurprisingly, largely headquartered in these two countries, particularly within London and New York. But the development of the industry in Europe and in Asian markets has resulted in a similar spread in philanthropic activity across these areas, with firms in Europe and Asia forming co- operative foundations and partnerships with local charities. 04. A pupil in the library of the Burlington Danes Academy, the first of 18 academies opened by ARK Schools. 10 — Contributing to Communities Alternative Investment Management Association — 11 Americas career and college preparation workshops and 05. The High The prevalence of giving on this large scale within financial services internships. Portfolios with Line Park in Purpose, a new charity fundraiser