Why aren’t more hedge funds giving back?

We have written on this blog of the clear reasons why hedge fund managers should give back. 93% of millennials want their investment managers to create social good, and there are a lot of millennial dollars coming: $30 trillion to be exact, set to be inherited over the next three decades. The hedge funds that have responded to these trends have reaped the benefits: hedge funds that publicly donate to charity experience 20% greater annualized net asset inflows in the following year than similar non-donating peers. That said, the fact remains that the vast majority of hedge funds have no charitable giving efforts. Why?

The reasoning for not doing so can be distilled into the following three overarching points:

1. Perception that charitable arms are a costly, time-consuming luxury only for the largest managers: In order to start a foundation, managers often have to use large-scale, expensive service providers and legal counsel. In addition, there is a layer of complexity associated with how to best structure a charitable entity.
2. View that charity is a distraction to their core business: Setting up a charity is time consuming; managers are particularly hesitant to set anything up if they are going through down performance period.
3. Cynicism on the charity sector generally: Managers believe they lack the expertise to confidently identify the best charities, particularly in an age where there is a real problem with misuse of funds in the industry.

Is there a solution? More on how SharedImpact can help next week.