Alternative social investments

This has been the worst year or so in history for the hedge-fund industry, with many funds suffering deep losses and record numbers of them going out of business. Yet some leading hedge-funders remain firmly committed to giving away a chunk of their fortunes.

Frugal Busson and bill-killerAs The Economist went to press the Children’s Investment Fund Foundation, a charity based in London, was due to announce that it had received a whopping £495m ($812m) in the 2008 fiscal year from TCI, a hedge fund, under covenants built into the fund when it was founded by Christopher Cooper-Hohn in 2003. The gift took the value of the endowment to just over £1.5 billion, all of which Cooper-Hohn and his wife, Jamie, who oversees the day-to-day running of the foundation, will use to help children in the developing world.

Yet the crisis has taken its toll on London’s hedge-fund philanthropists. In two instances, the Cooper-Hohns have filled (at least temporarily) a funding gap caused by partners suffering such deep losses that they could no longer fulfil their pledges to fund projects. On June 5th an annual gala and auction organised by Arpad Busson, a starry hedge-fund boss, for Absolute Return for Kids (ARK), another charity, raised £15.6m, well down from £25.5m in 2008.

That made the annual transatlantic hedge-fund give-off between ARK and the organisation that inspired it even less of a contest than usual. At its gala auction in New York in May the Robin Hood Foundation, which tackles poverty in the city, raised a record $72.6m, up from $56.5m in 2008 and topping by just over $1m the previous high in boom-era 2007. The achievement owed much to George Soros, the original hedge-fund philanthropist, who pledged to give up to $50 million over two years if it was matched by a similar sum from Robin Hood’s board members. That created a pool of up to $100m to be used to match other pledges.

In keeping with the times, both galas were lower-key affairs than usual. ARK cut the cost of the evening by two-thirds, and for entertainment attendees had to make do with a speech from Boris Johnson, the mayor of London. And Robin Hood’s traditional auction of items such as dinner with Mikhail Gorbachev or a day on the set of the next James Bond movie, which has been criticised as a platform for rich show-offs, was replaced with a fund-raising session using wireless technology that allowed donors to give anonymously.

Source