Hedge Funds Care: Philanthropy in the alternative asset management space

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Buy-Side Features
04 Feb, 2011

It would be something of an understatement to say hedge funds do not always receive the greatest press. Some articles in the mainstream media during the post-2008 autopsy reports were so poisonous and vitriolic in their scathing analyses of the alternatives space, it caused one to wonder whether the hedgies actually caused the mess in the first place.

Politicians certainly have not helped hedge funds’ standing in the court of public opinion – populist rhetoric is frequently directed against them - often with little good reason. And finally the industry itself is not totally blameless – there is a continued apathy among some hedge funds about speaking to the media – this perceived secrecy often reinforces the negative public stereotypes people have about them. But would the public hold these views if they knew about some of the excellent charity work and generosity that goes on in the hedge fund world? COO Connect speaks to Robert Mirsky, chairman of Hedge Funds Care UK (HFC) about the work it does and the causes it believes in.

The concept of HFC goes back to 1998. Much like today, hedge funds were being vilified back then following the spectacular collapse of Long Term Capital Management – a one-time darling of the alternative asset management industry that blew up spectacularly and subsequently required a $3.6 billion bail-out from the big banks - to avoid a wider destabilisation of the financial markets. HFC was the brainchild of Rob Davis, a man with a distinguished career in prime brokerage and equity sales whose CV boasts names such as Morgan Stanley, Bank of America Prime Services and Montgomery Securities.

To counteract both the negative press surrounding the hedge fund industry and to showcase the philanthropy of numerous managers, Davis founded HFC with the objective of helping to prevent and treat child abuse. In February 1999, the first ‘Open your Heart to the Children Benefit’ gala took place in New York and raised $542,000 for various children’s charities. However, this was only the first step. HFC has since enjoyed a phenomenal expansion with annual benefits taking place in Los Angeles, San Francisco, Chicago, Atlanta, Boston, Denver, St Paul, Minneapolis, Toronto, London and the Cayman Islands. The charity also organises a series of networking events, poker nights and golf competitions throughout the year. Since inception, it has raised more than $23 million which has been donated to various good causes.

Mirsky, established the UK affiliate of HFC in 2006. Although affiliated with the US branch of HFC, the UK outfit is an independent entity registered with the UK Charities Commission. Like its US counterpart, HFC in the UK focuses solely on underprivileged kids who have suffered neglect or abuse throughout the country.

However, setting up the charity in London was no easy feat. “Many people told me not to do it,” says Mirsky. “They said it was hard work and there would not be enough support. However, at our first event in the Cafe de Paris in Leicester Square, we had a queue out the door of people waiting to get in. I checked out the queue and one of the guys who said it wouldn’t get the support it needed was out there. He went up to me, gave me a hug and said he was wrong,” he recalls.

Child abuse and neglect is something Mirsky believes does not generate enough attention in the public domain. “People give more to animal charities than to children’s charities,” he says.

HFC’s events are fast becoming a regular fixture in the city – attended by numerous fund managers and those connected to the alternative investment management industry. Future plans for this calendar year potentially include a sponsored triathlon, pub quiz nights, networking socials and a summer party. The most recent event included an auction at Grange St Paul’s hotel, which was conducted by Lord Jeffrey Archer - a man Mirsky describes as one of the “best auctioneers he has ever seen.”

The do raised more than £400,000 – items up for grabs included a signed Status Quo guitar, a luxury holiday to Barbados and an original Salvador Dali print. With a lot like that, it is unsurprising they reached the sum total they did. Another event that is rapidly gaining traction (probably among the younger investment professionals) is the “club night” fixture. This was held at Boujis Club in South Kensington last year. The club, which counts the likes of Prince Harry as one of its frequent customers, may host an event again later in 2011. “Last year’s event was a good turnout. We had people at Boujis aged from 22 to 72. It was great to get such a cross-section of people there from the industry,” says Mirsky.

HFC prides itself on such diversity. In fact, they actively encourage junior financial professionals to get involved. “We are not trying to be exclusive. We want everyone involved,” he says. Much like the fund administrators and mini primes who target smaller hedge funds, HFC wants to grow with its younger membership as well. “Those junior guys are going to get bigger and we want to grow with them,” acknowledges Mirsky.

Through HFC’s generosity, numerous charities have been able to enhance their services and provide better care for children in need. But which specific causes does Mirsky feel most passionately about? Barnardo’s runs a programme known as the Young Women’s Project in North London. This facilities one-to-one work with young women up to the age of 18 who are at risk of and/or are being sexually exploited. These young girls are often referred through social services from four London boroughs – Camden, Hackney, Haringey and Islington. This charity, says Mirsky, enables these vulnerable women to get the care and assistance they desperately need.

“It is a safe place for these girls. They receive counselling. It’s shocking in this day and age that girls as young as 12 are being sexually exploited. It doesn’t seem fathomable. I went on a tour of the house they work in and the people there care so much about what they do. Sometimes they even get beauticians to come and see the girls – they might do their nails, apply some make up or give them some hair treatment. It makes these girls feel better about themselves and it helps break them away from the cycle of exploitation,” says Mirsky. The donations from HFC have enabled this charity to continue doing its excellent work and Mirsky hopes to channel in more funds to help the group expand throughout London.

The experience of donating to such charities, acknowledges Mirsky, is truly humbling. The money goes a long way – an HFC grant of say £20,000 per year is often the lifeline that keeps some of these organisations’ doors open. “Every pound makes a difference. I help people make a lot of money and I am happy to do it. But I think that the help is put into context when we see how lucky we are in this industry and personally how lucky I am to be in the position to help. The hedge fund industry deals with billions of dollars each day. That sum of £20,000 in the hedge fund world is miniscule. However, to these charities, that money goes a long way - £20,000 to them can fund an entire project,” he adds.

But should this sort of charity be mandatory for those in high-earning positions? Credit Suisse, for example, recently announced it was forcing its US managing directors to donate 2.5% of their 2010 bonuses to charity. However, Mirsky does not believe this should be made compulsory. “I think it is something that should be encouraged more. In my experience those in the hedge fund world are willing and happy to donate to good causes. We have tremendous sponsorship from corporates and individuals who give a significant chunk of their income to charity and they will gladly donate to us. Many in the industry, however, don’t want recognition for their good deeds,” he says.

Skills learned in business are also often employed by HFC in determining which charities to invest in. “We use our business skills to do cost benefit analysis and strive to leverage the money we give. We also have semi-annual monitoring though we try not to make our monitoring so onerous that it takes away from the work of the charities. We are however extremely results-orientated and expect significant progress from our grantees ” highlights Mirsky.

While some charities and public sector bodies come in for criticism regarding their wasteful overhead costs – HFC continuously reviews these expenditures and strives to cut them year-on-year. The charity despite reducing overheads still continues to be incredibly efficient, adds Mirsky.

The original premise of HFC was ambitious. It has certainly grown far beyond what many of its original founders would have expected or hoped for...and it is still growing. Mirsky stresses this is only just the beginning. He believes more needs to be done in Europe and across the world generally for disadvantaged children. Hopefully in time, HFC might be assisting vulnerable kids in Africa and Asia, he adds.

While this may be ambitious, it is not impossible. Other hedge fund domiciles and administrative centres including Dublin, Hong Kong, Jersey, Guernsey, Switzerland, South Africa and Gibraltar are all expressing interest in setting up their own HFC chapters.

With governments across the world drastically cutting their budgets, the public sectors in these countries are going to be hit badly. Charities, some of whom rely on government grants, certainly won’t be spared either as belts tighten. The philanthropy, generosity and grants that the hedge fund community (not just HFC) provides to these organisations will therefore have an elevated importance. Perhaps then politicians, the media and the public will recognise and realise that hedge funds do provide invaluable services to some of the most vulnerable segments of society.

Robert Mirsky is a partner and head of hedge funds for Europe, Middle East and Africa at KPMG in London. Prior to this, he was a partner at investment management consultancy firm Laven Partners. Mirsky has been chairman of HFC UK since 2005.

For more information about Hedge Funds Care, please visit www.hedgefundscare.org

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