Are Hedge Fund Managers’ Charitable Donations Strategic?

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

Agarwal, Vikas and Lu, Yan and Ray, Sugata, Are Hedge Fund Managers’ Charitable Donations Strategic? (April 12, 2018). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2703472 or http://dx.doi.org/10.2139/ssrn.2703472