We have not seen a financial storm like the present one for decades. For many, the sudden intensity of this financial cold snap, and the likely wintry recession ahead, has been a surprise. In days of yore, winter and snow forced a community to come together so that it would pull through and see off the cold, the wolves and other dangers.
The hedge fund industry is a community. It is rightfully proud of the many benefits that it has brought. It is not just making its clients wealthier. It has helped transform the investment industry to the good. It gives employment to many people and gives back through philanthropy and charitable works. It has given liquidity to some markets and kept them running. It is true that it is described as a Darwinian industry, and that it is about "survival of the fittest" as if hedge fund managers were a group of frontiersmen. However, in winter, even frontiersmen helped each other through the hard times and stood up for their community.
Deep winter has come to the industry. Performance is down sharply for many strategies. Clients are redeeming. A few politicians are calling for the abolition of hedge funds. Regulators are scrutinising the sector. Leverage is harder to access. Parts of the mainstream media demonize the sector, crowing in triumph at the difficulties it faces. The natural response is to hunker down and let the storm pass. However, if individual funds do that, when the blizzard is over and they emerge blinking into the sunlight, they will likely see a very changed financial landscape. You only need to see the recent statements out of Brussels to see where things may be heading. As EU Economics and Monetary Affairs Commissioner, Joaquin Almunia, recently told the EU Parliament "On hedge funds, we have used as our basis that they must be regulated."
The industry has a choice. It can stand up and be counted, and be part of the debate on how the financial landscape should change, or leave it to the politicians and regulators to sort things out. Clearly industry bodies work behind the scenes on hedge funds' behalf, but there is plenty to do in the public eye to change perceptions. This is where I must declare self interest. After twelve years of selling and structuring hedge funds, I have moved into media relations. I am doing it partly because it is a challenge, but mainly because I am passionate about the hedge fund industry, and am frustrated that it does not stand up for itself. It is a media punch bag.
There is plenty that a good media strategy can do to contribute to asset raising, client retention and attracting talented employees. However, the media strategy needed now is one engaging directly with the press and the broadcast media, and through them with the public and politicians. If the case is not made, and parts of the media paint hedge funds as causing market upheaval, public opinion may turn even more negative. Public opinion moulds political thought. Politicians drive policy responses and financial regulation worldwide.
There are other consequences if hedge funds do not engage. Institutional investors may shy away from investment. Pension fund trustees reading " hedge funds are high risk " stories may not invest. Local politicians may lean on local authority pension plans and force sale of hedge fund positions or forbid any exposure to hedge funds. Unions may question why their members' assets are invested in such "risky" investments. Some institutions may stop lending stocks. All this is not just possible in the context of one country, but applies across regions such as Europe, the Middle East and Asia.
The picture is not as bleak as it seems. There is plenty to be positive about if the industry starts to engage with the media. Both the hedge fund industry and the PR industry need to rethink things. For example:-
· Individual hedge funds need to work much harder on communications with the media. They also need to work more closely with industry bodies such as AIMA. AIMA works hard behind the scenes lobbying on the industry's behalf. It also works hard on the industry's behalf as shown by Chairman, Christopher Fawcett's recent defence of the industry in print media, and on BBC's Newsnight.
· PR firms representing hedge fund clients need to be more strategic in how they serve their clients. Being non-reactive, even if that is the main brief, is exacerbating media hostility. If PR agencies are to represent hedge fund clients better, they need to be much more proactive and to push back at a client's knee-jerk " no comment " reaction.
· The PR industry should also take the hedge fund opportunity more seriously and learn more about the industry and how it works. This means having accounts staffed by people who really understand how their clients' investment strategies work, and who are able to communicate this. This requires investment at a time when hedge fund assets are likely to halve from their $1.9 trillion peak. However, as 1998 and the early 1970s showed, the hedge fund industry has gone through periodic retrenchment. These were exciting times as they were when fresh stars of the hedge fund firmament were born. After each retrenchment the industry has come back stronger.
Many hedge funds are launched because their owners want to control their own destiny. Surrendering the media landscape, with the likely consequences, runs against that philosophy. There are grave dangers in ignoring the media. Equally, there are huge benefits to be gained from engaging with the media in an open and coordinated manner. If the hedge fund industry truly is a community, in this financial winter, it needs to come out of the cold and stand together in front of the media.
Sunday, May 20, 2018
Sunday, April 15, 2018
Happiness Comes From Helping Others
The Founder of the renowned civic organization, Grand Street Boys, the late Judge Jonah Goldstein was fond of saying, "Happiness is the one thing in life that multiplies by division. The more you give to others, the more you have for yourself." Goldstein used this expression repeatedly at meetings in the 1940's. If everyone followed this, wouldn't the world be a better place? Dictionary.com offers two definitions for happiness: "1. the quality or state of being happy 2. good fortune; pleasure; contentment; joy." At the same time, Dictionary.com offers three definitions of happy: "1.pleased or delighted 2. pleasing 3. bringing good luck; fortunate." Obviously, Judge Goldstein felt strongly that for one to be truly happy, he must repeatedly bring joy to others as well as himself, thus providing one with a sense of joy, pleasure, delight and contentment.
So many people today seem to follow the "What's in it for me?" philosophy. It seems that too many people today often only "do the right thing" if they believe it will somehow materially benefit them. However, when one realizes that many of the wealthiest individuals in the world are also amongst the most miserable, it takes far more than merely the accumulation of material things, or self- satisfaction, to bring about true happiness. How many truly happy people can you honestly say that you know?
Besides being a well known judge in New York, Jonah Goldstein was famous for founding a civic and philanthropic group known as Grand Street Boys. Almost all the members of Grand Street Boys were professionals- - most of which were attorneys. The legal profession has often been much maligned, yet it is one of the first professions or occupations with an organized methodology of "giving back" to the most needy, via the "pro bono" process. Attorneys are regularly expected to, and do, perform a certain amount of "pro bono," or free legal work, for those unable to afford the cost of legal representation. Judge Goldstein encouraged widespread discussion and fabulous debating during the Grand Street Boys meetings, and in an interactive manner, encouraged members to "give back" to society, in any number of manners.
Why are so many "troubled" individuals so very unhappy? Some people have attributed this unhappiness to a variety of items, including financial reversals, financial pressures, "personal problems," or the often-stated, "He's just not a very happy person." Yet, all evidence points to the fact that those individuals that appear to be "happiest" are often those that "give back" more to society and to mankind. "Giving back" does not have to be financial, but it can be. However, merely donating money generally does not create the level of happiness that non- financial volunteerism does. Think about the people you have met who are the happiest - - - aren't they invariably the ones who volunteer more, are more charitable, and/ or more philanthropic? Should this not be a valuable lesson to all of us, and to society, especially in these difficult economic times, when many worthwhile charities so much need assistance?
Judge Goldstein was certainly a sage. He was an incredibly successful man professionally, yet he got more pleasure, fulfillment and happiness from "giving back" than from anything else. Wouldn't our world, especially in these troubling and trying times, be far better off if more of us emulated him?
So many people today seem to follow the "What's in it for me?" philosophy. It seems that too many people today often only "do the right thing" if they believe it will somehow materially benefit them. However, when one realizes that many of the wealthiest individuals in the world are also amongst the most miserable, it takes far more than merely the accumulation of material things, or self- satisfaction, to bring about true happiness. How many truly happy people can you honestly say that you know?
Besides being a well known judge in New York, Jonah Goldstein was famous for founding a civic and philanthropic group known as Grand Street Boys. Almost all the members of Grand Street Boys were professionals- - most of which were attorneys. The legal profession has often been much maligned, yet it is one of the first professions or occupations with an organized methodology of "giving back" to the most needy, via the "pro bono" process. Attorneys are regularly expected to, and do, perform a certain amount of "pro bono," or free legal work, for those unable to afford the cost of legal representation. Judge Goldstein encouraged widespread discussion and fabulous debating during the Grand Street Boys meetings, and in an interactive manner, encouraged members to "give back" to society, in any number of manners.
Why are so many "troubled" individuals so very unhappy? Some people have attributed this unhappiness to a variety of items, including financial reversals, financial pressures, "personal problems," or the often-stated, "He's just not a very happy person." Yet, all evidence points to the fact that those individuals that appear to be "happiest" are often those that "give back" more to society and to mankind. "Giving back" does not have to be financial, but it can be. However, merely donating money generally does not create the level of happiness that non- financial volunteerism does. Think about the people you have met who are the happiest - - - aren't they invariably the ones who volunteer more, are more charitable, and/ or more philanthropic? Should this not be a valuable lesson to all of us, and to society, especially in these difficult economic times, when many worthwhile charities so much need assistance?
Judge Goldstein was certainly a sage. He was an incredibly successful man professionally, yet he got more pleasure, fulfillment and happiness from "giving back" than from anything else. Wouldn't our world, especially in these troubling and trying times, be far better off if more of us emulated him?
Thursday, March 15, 2018
Return on Investment - Nonprofit Fundraising
You are an Executive or Key Volunteer leader of a not for profit who has been in your position less than a year. You know the honeymoon is over. One of the many issues you want to address is the concern that so much of your fundraising time, energy and resources are spent planning fundraising events. It seems like the mission of your agency has shifted, and staff as well as volunteers spend more time planning parties than delivering service.
Fundraising events can and do play an important role in many not for profits. However, too many organizations do not fully understand how to maximize their fundraising efforts.
This may seem like blasphemy to some, but events should primarily be utilized to attract new donors, cultivate existing donors and volunteers, say thank you to your donors, volunteers and staff, or to provide community education. For most organizations, events (with a few notable exceptions) should not be undertaken if they are expected to provide a good financial return on the organization's investment of time and resources to produce the event.
According to the AAFRC Trust for Philanthropy, 78.3% of all charitable contributions come from individuals. It is also well known that 80%-90% of all funds raised from those individuals are from the top 10% of donors. In other words, major giving is where it's at. This is not to preclude the importance of broad based memberships and giving at all levels, but rather to focus your fundraising energies on the best return on investment (ROI) of time, staff, volunteers, and other resources, facilities, etc.
When calculating ROI, keep in mind the indirect costs associated with fundraising. For example staff costs are not just for those who are directly involved with fundraising. Other staff and administration typically are involved as well, albeit to a lesser extent. The costs associated with staff and volunteer time, facility usage, overhead expenses, as well as out of pocket direct costs should all be factored into determining ROI.
From an ROI perspective, it costs less and produces more income to raise major gifts than to use other methods of fundraising. While a variety of methods should be used in each organization, all too often, nonprofits tend to utilize, to a disproportionate degree, those methods which produce the lower returns, (events and direct mail) rather than those that are more effective (major gifts)..
Special events can build excitement, engage people, provide enjoyable opportunities for volunteers but they typically cost too much to produce to justify the amount of money they raise. As a result, most organizations are reducing the number of events they hold and are putting more emphasis on major gifts and planned giving.
Using the return on investment approach to analyze fundraising performance is an excellent way to engage leadership and staff on how best to plan your future fundraising activities. You will find that Board members who have for-profit business experience will likely better understand such an approach to planning and resource allocation.
Fundraising events can and do play an important role in many not for profits. However, too many organizations do not fully understand how to maximize their fundraising efforts.
This may seem like blasphemy to some, but events should primarily be utilized to attract new donors, cultivate existing donors and volunteers, say thank you to your donors, volunteers and staff, or to provide community education. For most organizations, events (with a few notable exceptions) should not be undertaken if they are expected to provide a good financial return on the organization's investment of time and resources to produce the event.
According to the AAFRC Trust for Philanthropy, 78.3% of all charitable contributions come from individuals. It is also well known that 80%-90% of all funds raised from those individuals are from the top 10% of donors. In other words, major giving is where it's at. This is not to preclude the importance of broad based memberships and giving at all levels, but rather to focus your fundraising energies on the best return on investment (ROI) of time, staff, volunteers, and other resources, facilities, etc.
When calculating ROI, keep in mind the indirect costs associated with fundraising. For example staff costs are not just for those who are directly involved with fundraising. Other staff and administration typically are involved as well, albeit to a lesser extent. The costs associated with staff and volunteer time, facility usage, overhead expenses, as well as out of pocket direct costs should all be factored into determining ROI.
From an ROI perspective, it costs less and produces more income to raise major gifts than to use other methods of fundraising. While a variety of methods should be used in each organization, all too often, nonprofits tend to utilize, to a disproportionate degree, those methods which produce the lower returns, (events and direct mail) rather than those that are more effective (major gifts)..
Special events can build excitement, engage people, provide enjoyable opportunities for volunteers but they typically cost too much to produce to justify the amount of money they raise. As a result, most organizations are reducing the number of events they hold and are putting more emphasis on major gifts and planned giving.
Using the return on investment approach to analyze fundraising performance is an excellent way to engage leadership and staff on how best to plan your future fundraising activities. You will find that Board members who have for-profit business experience will likely better understand such an approach to planning and resource allocation.
Tuesday, February 6, 2018
Before You Donate to Community Service Or a Charity, Investigate the Organization
"Charity could lead to a multitude of sins," said Oscar Wilde. What did he mean? In a financial sense, he may have meant that you have to be careful about how someone will spend your donation. But perhaps he also meant that you have to be wary about what charity you donate, lest the people that they profess to help never receive your donation. Throughout history, the most preferred method of stealing money has been to steal it under the guise of charitable interest. By preying on people's sympathy, unscrupulous charities can receive a constant flow of money without having to do much convincing.
In most cases, ulterior charitable organizations don't pocket your donation outright. Instead, they trickle a small amount of money to their supposed beneficiaries and use the rest for other purposes. However, if you're considering donating to charity, the goal is not to be so careful that you decide not to donate, but to follow some time tested advice that will keep you from donating to the wrong organizations. Whether you plan to donate to community service projects, a religious charity or a secular charity, following the two tips below will keep you from giving to organizations that will misappropriate your donation.
Research the Organization
Whether the aim or your donation is toward a community service project or a general charity fund, don't give to an organization before you request its written literature and a copy of its latest annual report, which should include a list of its board of directors, its mission statement and its most recent available audited financial statements that include accompanying notes. While it would still be possible to falsify this information, most unscrupulous organizations are looking for easy targets and won't spend time going back and forth with someone who questions their legitimacy. But the rule is to not give to organizations that can't provide you with the above materials, regardless of their explanations.
Make Sure the Organization is Legitimate
Here's how easy it is to start a false charity or community service organization: you put up a website, rent cheap office space under an assumed name and have enough few phone lines so that each of your associates can represent a different department. Therefore, even if you receive convincing documents from an organization, it's best check with the American Institute of Philanthropy (AIP) in the case of charities and the Better Business Bureau Wise Giving Alliance in the case of community service organizations to see if they're familiar with the organization that you're considering. If they don't have a record of the organization, it could either be because the organization is extremely new or because it's operating as a temporary money-maker in the form of a charitable organization. In general, its best to only donate to organizations that watchdog groups know about.
In most cases, ulterior charitable organizations don't pocket your donation outright. Instead, they trickle a small amount of money to their supposed beneficiaries and use the rest for other purposes. However, if you're considering donating to charity, the goal is not to be so careful that you decide not to donate, but to follow some time tested advice that will keep you from donating to the wrong organizations. Whether you plan to donate to community service projects, a religious charity or a secular charity, following the two tips below will keep you from giving to organizations that will misappropriate your donation.
Research the Organization
Whether the aim or your donation is toward a community service project or a general charity fund, don't give to an organization before you request its written literature and a copy of its latest annual report, which should include a list of its board of directors, its mission statement and its most recent available audited financial statements that include accompanying notes. While it would still be possible to falsify this information, most unscrupulous organizations are looking for easy targets and won't spend time going back and forth with someone who questions their legitimacy. But the rule is to not give to organizations that can't provide you with the above materials, regardless of their explanations.
Make Sure the Organization is Legitimate
Here's how easy it is to start a false charity or community service organization: you put up a website, rent cheap office space under an assumed name and have enough few phone lines so that each of your associates can represent a different department. Therefore, even if you receive convincing documents from an organization, it's best check with the American Institute of Philanthropy (AIP) in the case of charities and the Better Business Bureau Wise Giving Alliance in the case of community service organizations to see if they're familiar with the organization that you're considering. If they don't have a record of the organization, it could either be because the organization is extremely new or because it's operating as a temporary money-maker in the form of a charitable organization. In general, its best to only donate to organizations that watchdog groups know about.
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