Millennials want their investments to create social impact. How have hedge funds responded?

Last week, we wrote of the $30 trillion of capital set to be inherited by millennials, a group of which an overwhelming number (93%, to be exact) want their their investments to create social good. We spoke of the response by the financial industry to address this desire. But what about hedge funds? As we wrote, a recent study has shown that hedge funds that publicly donate to charity experience 20% greater annualized net asset inflows in the following year than similar non-donating peers.

Hedge fund managers historically have engaged with charities in the following four ways, broadly, with the first two types of giving growing the most significantly in recent years:

1. Establish in-house charitable arms: examples include percentage of management or performance fees or certain budget set aside each year for causes nominated by employees (e.g. Man Group, Winton, Aspect)
2. Individually establish co-operative foundations with other firms/managers in the industry: Robin Hood, Hedge Fund Cares, & ARK.
3. Personal Legacy Foundations: Simons Foundation, Robertson Foundation, Open Society Institute
4. One-off targeted donations to personal interests: John Paulson’s $100 million donation to Central Park Conservancy, Ken Griffin’s $150 million donation for financial aid

That said, while in-house programs and co-operative foundations have grown, they still represent a tiny fraction of the more than 10,000 hedge funds globally, and, are almost exclusively prevalent in only the very largest and most prominent hedge funds. Despite a large amount of capital set to fall into the hands of a generation that has made clear the importance of social impact in their investment decisions, the vast majority of hedge funds have no charitable giving efforts. Why?