some of the material discussed yesterday in class. Could this be an
innovative channel for HNWIs/UHNWIs to make in impact in development?
http://www.ssireview.org/articles/entry/hedge_funds_for_good/
Hedge Funds for Good
By Suzie Boss
Looking for the silver lining in the current financial mess takes a special
breed of optimist. Combine that with a quest to redefine the hedge fund as a
force for good and you can start to sound downright quixotic. Ghanaians can
easily find out if the drug they bought is legitimate by texting a
scratch-off code and receiving instant authentication.
Yet that¹s what the founders of New York-based Uhuru Capital Management have
set out to do. The firm will manage a conventional fund of hedge funds, but
with an attention to social values. What¹s more, general partners will
direct 25 percent of their profits to help social entrepreneurs scale up
efforts in developing markets.
The founders bring solid credentials for both making money and doing good.
Peter Kellner, a successful private equity investor, is a protégé of Ashoka
founder Bill Drayton and cofounder of Endeavor, a nonprofit that supports
high-impact entrepreneurs in emerging markets. And Neal Goldman launched
Capital IQ, a financial research firm that was later sold to Standard &
Poor¹s.
The opportunity to put sustainable investing ideas into practice is what
attracted Jed Emerson, Uhuru¹s managing director of integrated performance.
After years of talking up blended value theory on the conference circuit, he
says, ³what we really need are more and deeper examples of practice.²
Will wealthy individuals and families warm to Uhuru¹s approach? Justin
Rockefeller (the youngest son of U.S. Sen. John D. ³Jay² Rockefeller IV) is
one who showed early support, providing start-up capital and family name
recognition.
Uhuru isn¹t sharing financial projections, but no one expects the firm to
grow to the size of the multibillion-dollar hedge funds. ³That level would
not be success for us,² Emerson admits. ³We¹re trying to maximize value. We
don¹t believe we would be able to manage funds as effectively,² he says, if
they mushroomed into the billions.
Uhuru¹s timing and smaller is better approach may work in its favor. The
firm starts at ³the current reset point,² Emerson points out, with no need
to recover losses, a problem plaguing many other hedge funds.
³It¹s pretty clear we¹re at an inflection point in the financial system,²
says Tim Freundlich, a partner at Good Capital and senior vice president at
the Calvert Foundation. ³Everyone¹s wondering, how do we come out of this on
stronger footing? The commitment up front to sustainability and social
responsibility< that¹s what they¹re leading with [at Uhuru]. In the hedge
fund world? There¹s been very little of that.²
But it¹s on the back end where Uhuru<Swahili for freedom< may really make an
impact. That¹s where a quarter of general partners¹ incentive-based
management fees will be channeled to the new Uhuru Sustainability
Foundation, dedicated to helping social entrepreneurs achieve scale in
developing markets. The foundation will keep overhead low by relying on
intermediaries such as Ashoka and Endeavor to manage the selection process.
³We become an investor in their fund management approach,² Emerson explains,
³in the same way we would if we were investing in for-profit activity.²
Once all the parts are operating, Uhuru will have in place a global network
of wealthy investors, hedge fund managers, and social entrepreneurs<groups
whose circles seldom overlap. Their shared knowledge will inform how Uhuru
makes money and does good. Predicts Freundlich, ³That could be a much bigger
conversation.²
With a service that was designed to work with older SMS technology, Twitter's microblogging network is an ideal match for developing markets like India.