The Forbes 400 list of the wealthiest Americans reveals that only 7 of the top 100 are hedge fund managers and the first hedge fund manager on the list is George Soros, ironically the most left-leaning multi-billionaire on the planet. So why are hedge fund managers under attack?
Hedge funds are largely misunderstood by the public and people naturally fear what they do not understand. More to the point, the media tends to focus on the “black hats” in the industry; those who have come into conflict with the law (Bernie Madoff) and those targeted by regulators (Steve Cohen). They also focus on the few who have achieved incredible wealth (Ray Dalio). Politicians are merely seeding the furrow already plowed by the media.
The truth is hedge fund managers do not dominate the list of wealthiest Americans. There are around 15,000 hedge funds yet only 26 hedge fund founders made the Forbes 400 list. Despite small numbers, hedge fund managers are painted as villains for having the audacity to avail themselves of the very regulations their accusers (politicians) have passed into law, specifically carried interest.
The widening gap between rich and poor will continue to be a significant theme in the 2016 campaign and many in the hedge fund industry will concede that wealth inequality needs to be addressed. However, this problem is not a construct of the hedge fund industry. On the contrary, hedge fund activities contribute significantly to job and wealth creation.
In sharp contrast to public perception, many wealthy hedge fund managers are deeply involved in philanthropic pursuits. A look at the philanthropic activities of the seven wealthiest hedge fund managers reveals that:
George Soros has been donating to worthy causes since 1979 when he provided scholarships to black students for the purpose of attending South Africa’s Capetown University. In 1984, he established his Open Society Foundations in more than 60 countries and is believed to have given away more than $7 billion.
Ray Dalio, a signatory to The Giving Pledge, donates to several hundred nonprofits each year via the Dalio Foundation. In 2013, Dalio funded the foundation to the tune of $400 million. His charitable interests include the environment, education and mental health. Dalio also is a major supporter of the Robin Hood Foundation to which he gave a $10 million challenge grant in 2014.
James Simons is another hedge fund founder that has signed The Giving Pledge. Simons founded the Simons Foundation through which millions of dollars have been donated to a variety of causes.
Steve Cohen has donated $80 million to the Robin Hood Foundation, $145 million to various hospitals, $36 million to Brown University, and has made various significant donations to museums.
John Paulson also has a charitable foundation, the Paulson Family Foundation, but perhaps his best known work of charity is the $100 million given to New York’s Central Park.
David Tepper has the David Tepper Charitable Foundation whose focus is primarily on education. One of his significant donations was $135 million to Carnegie Mellon’s school of business and he also donates to after school programs and early education endeavors such as Jump Start Young Children.
Ken Griffin donated $10 million to the Museum of Contemporary Art Chicago, $150 million to Harvard and an estimated $500 million overall. Mr. Griffin also operates a foundation, the Kenneth G. Griffin Charitable Fund.
It is unfortunate that such good works are being answered by a political class that seeks to marginalize these men in an effort to advance their political fortunes.
Hedge Fund Jobs
These insights suggest yet another means of networking one’s way into the hedge fund industry. Working with charitable organizations can provide exposure to hedge fund movers and shakers while at the same time providing the opportunity to contribute to those in need.