H. Talmage Dobbs, Jr. Chair
Professor of Finance
Robinson College of Business
Georgia State University
There is a large body of research on individuals’ charitable giving, but the extent to which business professionals such as hedge fund managers strategically donate personal wealth to further their business interests has not received much attention. Hedge fund managers have become one of the wealthiest groups in America, so their personal charitable donations are of interest to those who study philanthropy. Charitable giving is an avenue for managers of poorly performing hedge funds to generate goodwill and trust among investors. Attending fundraising events allows them to network with other high net worth individuals who might invest capital or provide valuable business information. Finance professor Vikas Agarwal of Georgia State University’s Robinson College of Business and colleagues conducted a study to examine the motives behind hedge fund managers’ charitable donations and the effects of their donations on the net flows and performance of the funds they manage.
The team studied 6,642 charitable donations by 667 hedge fund managers over 22 years and found some interesting patterns. First, they observed that poorly performing managers with dwindling flows are more likely to donate. Second, they identified several hedge fund characteristics that are predictive of charitable donations. For example, funds that are closed to new investment are less likely to donate. They also observed a significant increase in net flows for donating funds, and particularly for poorly performing donating funds. The types of donations they found more likely to be strategic were one-off non-recurring donations and donations to certain charities that are popular among the hedge fund community. Their findings show that even personal charitable contributions may not be purely altruistic.
For more information
Agarwal, Vikas and Lu, Yan and Ray, Sugata, “Are Hedge Fund Managers’ Charitable Donations Strategic?” (October 30, 2017). Available at SSRN