Hedges Turn From Robber Barons to Robin Hoods

OK, so the operative word for hedge funds, it sometimes seems, is greed. Whether accused of wrecking companies for short-term gain or criticized for their lavish Connecticut manors, the hedge fund elite often cannot escape a reputation as this generation’s Gordon Gekkos, in it solely for the money.

But Fortune’s Andy Serwer says that managers like Paul Tudor Jones, Steve Cohen and Glen Dubin do not completely deserve that reputation. The proof? The Robin Hood Foundation, a charity that began with hedge-fund managers but now encompasses everyone from Goldman Sachs’s Lloyd C. Blankfein to Harvey Weinstein.

Beyond the sheer sums of money that the organization doles out to New York’s poor, which is impressive in its own right, Mr. Serwer says that the foundation draws upon the same belief in efficient markets that propelled its members to the largesse they now give away. Perhaps as impressive is that the group has made it cool for budding financial moguls to open wallets wide for charity.

To be sure, the $525 million the group has spent fighting poverty in New York City cannot compare to the $40 billion that Warren E. Buffett recently donated to the Gates Foundation. But the foundation is notable for how it differs from other charities. Robin Hood spends all the money it raises in one year in the next, and it maintains no endowment, drawing solely on donations and investments it maintains in its enviable roster of hedge funds: ESL, SAC Capital and D.E. Shaw, to name a few.

Most notably, the group helped pioneer the concept of venture charity, or doling out money based on the same sort of criteria a private-equity firm or hedge fund would use. Robin Hood uses both an outside firm and its own internal economists to determine which programs are worth keeping, and each year, the group cuts its bottom 10 percent of charities. Per board member Tom Brokaw, the decision-making process sometimes looks like a General Electric internal meeting.

Yet the process nets results, Mr. Serwer writes: Whether at a charter school in Brooklyn’s Bedford-Stuyvesant neighborhood that puts private prep schools to shame or with a needle-exchange program in Manhattan’s Lower East Side, Robin Hood has made tangible differences in the areas it has invested in.

http://dealbook.blogs.nytimes.com/?p=7149