No good work goes unpunished

I said, write him a check. Did you listen? Noooo...

Senator Chuck Grassley, already a past winner of NakedShorts’ eagerly sought Moron du Jour Award, grabbed tunnzapixels yesterday with his savagely cynical assault on The Robin Hood Foundation, the hedge fund industry’s leading charity:

“I don't remember Robin Hood keeping two and 20 as his cut,” says Senator Charles Grassley of Iowa, the top Republican on the tax-writing finance committee...

The comment showed up in a Bloomberg story reporting that about half the foundation’s $144.5 million rainy-day fund is invested with hedge funds run by Robin Hood donors or board members, who collect “industry standard” 2/20 fees. Grassley, currently a fully-paid member of the jihad against the tax-advantaged—always excepting his ruddy-faced corn-growing ethanol-scam-beneficiary constituents—is concerned that managers are taking charitable donations as a chance “to do well for themselves and forget it is about doing good for others.”

So at the risk of spoiling Grassley’s story by allowing a fact or two to creep into debate, let’s look at fact or two that mostly didn’t make the Bloomberg cut:

• The so-called rainy-day fund has built up over several years from donations made by Robin Hood Foundation board members. On top of contributions that in 2005, the latest year for which figures are available, hit almost $28 million. Add in the gains from from “board-donated investments” the total topped $50 million, or almost 40 percent of the foundation’s $130 million income.
• The rainy-day fund amounts to roughly 1.5 times the foundation’s annual budget, well within Better Business Bureau guidelines: a “charity's unrestricted net assets available for use should not be more than three times the size of the past year's expenses or three times the size of the current year's budget, whichever is higher.”
• (Because the Robin Hood’s directors underwrite administration and fundraising costs—mentioned in the Bloomberg story—the foundation easily meets the BBB requirement that a charity “spend at least 65% of its total expenses on program activities” and spend “more than 35% of related contributions on fund raising.” (Buy a ticket to the gala? None of that lined into Aerosmith’s pockets.))
• While the mere existence of a rainy-day fund in an organization dominated by allegedly “fast buck” traders may seem an anomaly, it allows Robin Hood to make long-term commitments to the organizations—many of them small and financially stretched—it supports, confident that it can meet those commitments.
• Also worth noting, again given the reputation of the investment managers among the board members for being somewhat less than transparent in their investment dealings, the foundation publishes financial information and provides a link to a site where its tax return can be accessed (free registration required).
• The rainy day fund has been tapped on several occasions, notably in the wake of 9/11 and the 2000-2002 bear market, when many New York charities were hard hit by falling contributions. It has committed almost $60 million to a $180 million New York City Department of Education program to build two model public charter high schools in two of the city’s most troubled neighborhoods: one is already under contract in Crown Heights, Brooklyn, and the other is slated for the South Bronx

So here’s some other things that Grassley turned his back on:

• In 2005, the foundation paid $14 million in investment fees. A number that presumably includes those paid to the 12, of 19 total, hedge funds that are not managed “either by a member of the board of directors or the leadership council, a group of major donors.”
• Of the funds specifically itemized in the article:

Two—Tudor BVI Global Fund Ltd, and Tudor Futures Fund—managed by Robin Hood founder Paul Tudor Jones II, are long closed to new investors. The assets in question total $15 million, or less than one one-thousandth of the $17-odd billion Tudor complex, making them, and their fees, something less than a microscopic rounding error.

According to Bloomberg, the charity’s stake in “SAC Capital International Ltd, managed by board member Steven Cohen, grew to $23.9 million at the end of 2005 from an initial investment of $15 million in 2004.” More importantly, given the fee fanaticism, “The tax form said...the charity paid management and incentive fees that are standard for the industry,” at least implicitly suggesting that Steven Cohen is cutting the Robin Hood money a substantial break from his far-above-industry-standard 3/35 or 3/50 or whatever the SAC house rake is these days. Not to mention the materiality clause which would land in the same general ballpark as the Tudor math.

And that’s before we get into such minor details as the fact that the charity’s investments have, according to David Saltzman, Robin Hood's executive director quoted by Bloomberg, returned an annual average of 17 percent after fees between 1990 and 2006, compared with 11 percent for the S&P 500.

Oh, the hell with it. The Robin Hood Foundation board members are big enough to fight their own battles, in sharp contrast to Grassley, who is a very, very little man. To be known, when, or if, he troubles these pixels in future, as Senator Grasshole.

Robin Hood Nest Egg Draws Scrutiny From Congress
By Ryan J. Donmoyer and Alison Fitzgerald
Bloomberg Jul. 16 2007

The Robin Hood Foundation
Update: Q2 2007

Disclosure: NakedShorts, under an assumed name, has over the years had mostly fleeting contact with less than a handful of Robin Hood Foundation board members. He has also contributed, and intends doing so in future, to Robin Hood’s extraordinarily important, and by virtually any standard, extraordinarily successful, work.

Comments

[Alex Ambroz]

Well done followup.