This content is from: Portfolio

Hedge Funds Give Back to Charities Bigtime

Wealthy hedge fund managers would rather choose their own charity than have their millions taxed to a build a bridge to nowhere.

Let’s face it. Hedge fund managers have become the poster people for those who want to demonize the greedy Wall Street set. Probably has something to do with the fact that many earn hundreds of millions of dollars in a single year and a handful make over $1 billion. So, the demonizers want to single them out for additional taxes, which is not a totally bad thing. The problem is the hedge haters believe our politicians will efficiently get this additional stash to the people and institutions that need it the most. Yeah, right. And Bernie Madoff never had a down year.

Part of the problem might be that few are aware how much money some hedge fund managers give away to charity. Sure, we know that Paul Tudor Jones II created Robin Hood foundation and Appaloosa Management founder David Tepper gave $55 million to Carnegie Mellon, and maybe they know Jim Simons, founder of Renaissance Technologies Corp. is desperately trying to improve math skills among students as well as teachers. However, countless others regularly give to inner city school programs, charter schools, universities and cultural institutions such as museums, Lincoln Center, Carnegie Hall or even the New York Public Library, to name just a few worthy causes.

In fact, last year Duquesne Capital’s Stanley Druckenmiller and his wife Fiona shifted $700 million of their money—or about one-quarter of their reported net worth--to their family foundation. In addition, in 2009 they gave $100 million to New York University’s Langone Medical Center to create a neuroscience institute. In 2006, he gave $25 million to the Harlem Children’s Zone, a nonprofit that assists at-risk children and adults. Not one of them donated to a bridge to nowhere or to the U.S. Post Office.

So, it was interesting to see that last week alone, at least two hedge fund managers and one private equity luminary pledged to give away chunks of their money, in some cases substantial sums. Of course, in each case the recipient made the announcement. The most significant: Last Tuesday Columbia Business School announced KKR co-founder Henry R. Kravis, a 1969 graduate, pledged $100 million. The gift is the largest in the school’s history. It will be used to support the construction of the business school’s new facilities. One of the business school’s two new buildings will be named The Henry R. Kravis Building.

Believe it or not, on the very same day, Leon Cooperman of Omega Advisors and a classmate of Kravis at Columbia, told CNBC he will donate most of his fortune to charity in order to help poor people get out of poverty. And I thought front-running was illegal. He would not say how much he will give away, but he told CNBC: “Every dollar I make, I’ll give it away because what I’ve planned to leave to my children, that’s already been set.” In case you did not know, one of his children—Wayne Cooperman--is the founder of Cobalt Capital, a successful hedge fund manager in his own right. So, he certainly doesn’t need the money. By the way, Baupost’s Seth Klarman pledged to do the same thing last year. “My story is kind of the American dream,” said Cooperman, who grew up in the Bronx and initially enrolled in dental school, but dropped out after less than two weeks. “I want to be able to help those that are disadvantaged to experience the American dream.” In fact, when he made the announcement, Cooperman stressed that he would rather be taxed less and decide for himself where to donate his tax money. “Left to my own devices I would like to have more control over recycling my money rather than the government taking control,” he said. Guess he does not feel like funding a bridge to nowhere either.

In any case, the following day, Stony Brook University announced that Glenn Dubin, co-founder of Highbridge Capital Management and a 1978 alum, is making a $4.3 million donation to the university’s Athletic Department to help complete a new strength and conditioning facility. His gift is the largest private donation ever to an athletics department within the SUNY system. The new 8,000-square-foot facility will be named the Dubin Family Athletic Performance Center. Dubin, who grew up in the Washington Heights section of Manhattan, was a member of Stony Brook’s football and men’s lacrosse programs. He previously donated $1 million to Stony Brook in 2005 to create the Glenn Dubin Endowed Scholarship Fund, offering scholarships to students from Washington Heights, particularly to students from P.S. 132, where he attended elementary school. Incidentally, fellow hedgie Jim Simons is already a major contributor to Stony Brook.

Earlier this year, Dubin donated $5 million to The Harvard Kennedy School of Government to launch a graduate fellowship fund to support and develop new programs for emerging leaders from the United States and around the world. And several years ago, he and his wife Dr. Eva Andersson-Dubin, pledged $15 million to The Campaign for Mount Sinai to create The Eva and Glenn Dubin Breast Care Center at Mount Sinai. The Center will incorporate holistic therapies such as massage, nutrition, and patient counseling and maintain an interdisciplinary staff of physicians, nurses, and social workers to provide state-of-the-art care.

The week before this trio of donations, Bill Ackman’s Pershing Square Foundation donated $25 million to help match Facebook founder Mark Zuckerberg’s $100 million gift to the Newark public schools. Earlier this year, George Weiss, a very secretive hedge fund manager, pledged $20 million to the University of Pennsylvania, while Joe DiMenna of Zweig-DiMenna gave $5 million to the New-York Historical Society. In 2009, George Soros gave $100 million to Fund for Policy Reform, former Tiger Management founder Julian H. Robertson Jr. and his wife Josie gave $66.1 million to the Auckland Art Gallery in New Zealand, Farallon Capital’s Thomas F. Steyer gave $40 million to Stanford University and Mark W. Yusko and Stacey Miller gave $35 million to their alma mater, Notre Dame University. Yusko, CEO and CIO of Morgan Creek Capital Management was previously president, CIO and founder of UNC Management, the endowment investment office of the University of North Carolina at Chapel Hill.

Should billionaires pay more in taxes when the country is in deep debt? Well, they probably wouldn’t miss the money. But perhaps the recipients of their generosity would. At the least, give credit where credit is due.

Related Content