In a recent piece in the Chronicle of Philanthropy, sector leaders, including NCRP President and CEO Aaron Dorfman, asked if foundations are doing enough to respond to the challenges posed by the Trump administration. They mentioned foundations that, in addition to their grantmaking dollars, have used their influence to uphold their values. The Wallace Global Fund, for example, fired its law firm, which also represents the new president.
In refusing to do business with firms that undermine what your foundation stands for, we can also look beyond law firms to the money managers who’ve fueled Trump’s rise to power. A next step we’re hoping to see is for foundations to stop investing with hedge funds and private equity firms that use their earnings to work against everything many funders hold dear.
Aligning investment strategies with foundation values isn’t a new concept. Some 140 foundations have pulled investments out of fossil fuel companies, and The California Endowment joined an increasing number of universities and municipalities in divesting from private prison corporations. Foundation endowments are among the largest institutional investors employing major hedge fund and private equity firms who’ve been central to President Trump’s rise to power.
Stephen Lerner, a fellow at Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor, put it this way:
“Increasing numbers of bankers, hedge fund and private equity managers are supporting and collaborating with Trump, hoping to cash in on his presidency. Beyond searching for tax breaks, and gutting laws designed to protect workers and consumers, they hope to profit off of private prisons, detention centers and other policies that endanger immigrants, people of color and threaten the climate. This is a critical moment for endowments and philanthropy to stop enabling Trump and his racist policies. It is a form of assisted suicide to invest in funds whose managers, policies, investments and actions are in direct conflict with the missions of their organizations. By refusing to invest in, and divesting from, funds managed by collaborators with Trump, philanthropy can send a powerful moral and financial message by cutting off capital to those who profit off of hate.”
Some of the top hedge funds and private equity investors who support Trump and also manage major foundation investments include Blackstone Group’s Steve Schwarzman and Steve Feinberg of Cerberus Capital Management.
Probably most notorious for having compared the Obama administration’s proposal to increase taxes on private equity managers like himself to Hitler’s invasion of Poland, Schwartzman was tapped to head Trump’s Strategic and Policy Forum and stands to benefit personally for policies on which he’s advising the president. He donated $250,000 to Trump’s inaugural committee. Schwarzman is CEO of the Blackstone Group, which manages funds from some of the largest foundation endowments in the country.
Feinberg’s Cerberus Capital Management and invests endowment funds for the largest foundations. A major Trump campaign contributor and economic advisor, his firm has profited handily from sales of semi-automatic rifles of the type used in the Sandy Hook massacre.
If the foundation’s moral values aren’t enough to motivate you to stop enriching these money managers, consider this: they’re also ripping you off. As Warren Buffett noted in a recent letter to investors: “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”
Is your philanthropy doing business with these firms? Which foundation will be the first to publicly pull its investments?
Dan Petegorsky is NCRP’s senior fellow and director of public policy. Follow @NCRP on Twitter.