Hedge Funds and Foundations

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As foundations and other institutional investors face mounting challenges to meet their obligations and goals, hedge funds have helped place them on firmer ground over the long-term. Hedge funds …

As foundations and other institutional investors face mounting challenges to meet their obligations and goals, hedge funds have helped place them on firmer ground over the long-term. Hedge funds originated as an investment vehicle to help diversify portfolios, manage risk, and produce reliable returns. Recently, hedge funds’ investor base has evolved from individuals to institutions (which now represent 66% of the capital invested in the industry), including foundations.

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  • 1. Hedge Funds and Foundations Managed Funds Association | January 2014
  • 2. Overview Hedge funds originated as an investment vehicle to help diversify portfolios, manage risk, and produce reliable returns over time. While hedge funds’ investor base has evolved from individuals to institutions such as pension plans, universities, and foundations their core goals have not. Foundations face mounting challenges in meeting their financial obligations and goals. As a result, institutional investors, foundations included, have shifted investment strategies in recent years to alternative investments -- including hedge funds -- which have helped place them on firmer ground over the long-term. This presentation details the growing partnerships between hedge funds and foundations. 2
  • 3. Hedge Funds and Foundations Hedge funds’ investor base has evolved significantly over the years, with 66% of assets under management currently coming from institutional investors such as pensions, endowments, and foundations.* FACT: 66% of hedge fund assets are held by institutional investors. *Source: 2014 Preqin Global Hedge Fund Report, January 2014. 3
  • 4. Why do Foundations Invest in Hedge Funds? Many institutions are currently working to cope with major demographic and fiscal challenges, including funding shortfalls. As a result, institutions are increasingly seeking ways to diversify their investment portfolios to produce reliable returns. Here are some of the most important characteristics institutions seek when evaluating hedge funds: *Source: Advent Hedge Fund Investor Survey, 09/2013 4
  • 5. Foundations and Non-Profits Invest in Hedge Funds Non-profit foundations and charitable organizations around the world partner with hedge funds to help establish the financial resources needed to fund critical projects in local communities. For example, The Nobel Foundation recently announced its plan to invest more money in hedge funds to boost its returns and restore the award to its previous size after decreasing the amount of its cash prize by 20% in 2013. Here are additional, examples of Foundations that benefit from their investment in the hedge fund community: Source: Nobel Prize to Get Hedge Fund Boost After Awards Sink 20%, Bloomberg News, December 2012. 5
  • 6. Improving the Quality of Life through Foundations Foundations, with investments in hedge funds, support communities in the U.S. and around the world through improvements in education, health and economic issues as well as an emphasis on arts and cultural development. For example, the Robert Wood Johnson Foundation held nearly $1.58 billion in hedge fund investments at the end of 2012, approximately 17% of total assets. The Robert Wood Johnson Foundation is the largest philanthropic foundation in the country and focuses on addressing the major health care issues facing the U.S. today through education and advocacy efforts.* Examples of Robert Wood Johnson Foundation Goals: Childhood Obesity: To reverse the childhood obesity epidemic by 2015 by improving access to affordable health foods and increasing opportunities for physical activity in schools and communities across the nation. Coverage: Making comprehensive, affordable, high-quality and cost-effective health insurance available to all Americans by 2016. *Source: Robert Wood Johnson Foundation 6
  • 7. Hedge Funds Investor Map To learn more about how hedge funds help foundations and non-profits in your state, visit this Hedge Fund Investor Map, where you will be able to track the hedge fund investments made by the foundations, pension funds, corporations, and other institutions in your state. 7