Are Hedge Fund Managers’ Charitable Donations Strategic?
60 Pages Posted: 14 Dec 2015 Last revised: 11 Dec 2020
Date Written: April 12, 2018
We study whether hedge funds make charitable donations to further their business interests. We find that donations are driven by poor fund flows and performance. Post-donation, donor funds experience lower outflows compared to matched non-donors. One-off donations and donations to charities which hold fundraising events catering to the hedge fund community are more likely to mitigate outflows after poor performance. These findings are consistent with strategic motivations driving at least some donations. While the economics of donations initially appear quite favorable to the hedge funds, the benefits from donations are not scalable. Moreover, investors punish donors through greater redemptions if poor performance persists post-donation.
Keywords: Hedge funds, Philanthropy, Trust, Charitable Donations, Capital Formation, Corporate Social Responsibility (CSR)
JEL Classification: D64, G23, G41
Suggested Citation: Suggested Citation