2008 was a bad year for hedge funds, according to Hedge Fund Review,
The hedge fund industry concluded 2008 with investors withdrawing a record $152 billion in capital in the fourth quarter of 2008, according to data released by Hedge Fund Research. The HFRI Fund Weighted Composite Index fell by 18.3% percent for all of 2008, only the second calendar year decline since 1990.According to Market Folly,
This capital outflow followed a record year of capital inflows in 2007, during which $194 billion of new capital came into the industry. When combined with the negative performance-based asset flow, total capital invested in the hedge fund industry declined to $1.4 trillion at the end of 2008, a decline of $525 billion from the peak of $1.93 trillion, recorded at mid-year 2008.
Well, here's some overtly optimistic news about the hedge fund industry. That is, if you're a believer that consolidation is natural and healthy. "Only the strongest will survive."Among those who suffered from the downturn was David Gelbaum according to a recent story in the New york Times,
693+ hedge funds were liquidated in the 3rd quarter of 2008 alone. That figure represents around 7% of the industry. When we first started to see signs of massive redemptions coming back in October, we knew it had the potential to get pretty ugly. It did.
A longtime anonymous donor to the American Civil Liberties Union has withdrawn his annual gift of more than $20 million, punching a 25 percent hole in its annual operating budget and forcing cutbacks in operations.The Times story continued,
Anthony D. Romero, executive director of the ACLU, acknowledged in a written statement that a "family" had told the organization in September that it could not make its annual gifts, at least for next year.
"This family, that has sought to protect its privacy by arranging its gifts anonymously, notified us last month that due to market conditions it will be unable to make its expected sizable donations of over $20 million," Mr. Romero said.
ACLU board members, who insisted on anonymity because the loss of the gift was reported in an executive session of their meeting, identified the donor as David Gelbaum, who made a fortune as a hedge fund manager and is now better known as a major investor in clean technology.
Mr. Romero told the organization’s national board about the loss of Mr. Gelbaum's money at its last board meeting in October, breaking the news in executive session. Mr. Romero did not reveal Mr. Gelbaum's name, describing him only as "a donor," board members saidReaders of the times story might be shocked to learn that the fabled ACLU, a civil rights organization, regarded the 740,000 member semi-elitist Sierra Club was a sister organization.
Still, it is hard to keep secrets with a board of more than 80 members, most of whom report to state affiliates. "As soon as he started telling us, anyone who had a laptop with them was busy Googling" and figured out who the donor was, a national board member said.
Mr. Romero told the board that the donor had also stopped giving to three "sister organizations," a phrase board members said he had used in the past to describe other groups with which the ACLU has collaborated, like the Sierra Club.
Mr. Gelbaum took a rare turn in the spotlight earlier this decade when environmental activists said he was behind the Sierra Club’s decision to adopt a neutral stance on immigration. Some people believe immigration has aggravated environmental problems.
He had given the organization a total of $101.5 million, according to The Los Angeles Times, which wrote what is perhaps the only major profile of him, in 2004. In the article, he is quoted as saying that he told Carl Pope, the Sierra Club’s executive director, in 1994 or 1995 "that if they ever came out anti-immigration, they would never get a dollar from me."
According to a statement by Gelbaum, between 2005 and 2009 he had donated $94 million to the ACLU, and $48 million to the Sierra Club. It would appear that the sisterhood of the ACLU and the Sierra Club was in no small measure due to Gelbaum's financial influence.
ACLU Executive Director Anthony D. Romero said of Gelbaum,
David Gelbaum is one of America's greatest heroes – an unassuming man with a spectacularly generous spirit. Every American should be grateful for the selfless commitment to improving the lives of others demonstrated by this remarkable man.An extensive account of Gelbaum appeared in the LA Times, in 2004. There is little doubt that Mr. Gelbaum is an extraordinary man, who has contributed somewhere between $250 million dollars to charitable efforts to aid military families impacted by Bush II era military deployments. The LA Times story quoted Gelbaum as saying,
I did tell (Sierra Club Executive Director) Carl Pope in 1994 or 1995 that if they ever came out anti-immigration, they would never get a dollar from me.There seems little reason to doubt that Gelbaum was passionately committed to the protection of the rights of undocumented aliens. But when Gelbaum pledged to donate $200 million to the Sierra Club, there was an overt string to the donation, the threat to withdraw unfulfilled parts of the pledge, if the group deviated from his stipulation about immigration rights. The LA Times explained,
Gelbaum, who reads the Spanish-language newspaper La Opinion and is married to a Mexican American, said his views on immigration were shaped long ago by his grandfather, Abraham, a watchmaker who had come to America to escape persecution of Jews in Ukraine before World War I.Here we have a sticky issue of language, money offered in an attempt to influence behavior or opinion can be legitimately be called a bribe. It is not illegal to make an offer to give money to a non governmental organization, with stipulations about that organization's conduct, but not all bribes are illegal. And thus there was nothing illegal about David Gelbaum's threat to not give money to the Sierra Club unless certain conditions about the Club's official position on immigration were meet, and Gelbaum's subsequent offer to give the Club $200 million.
"I asked, 'Abe, what do you think about all of these Mexicans coming here?' " Gelbaum said. "Abe didn't speak English that well. He said, 'I came here. How can I tell them not to come?'
"I cannot support an organization that is anti-immigration. It would dishonor the memory of my grandparents."
Pope and other Sierra club leaders were aware of Gelbaum's other interests. Through his Venture capital firm, Quercus Trust. Quercus Trust is the second or third largest "green" venture capital firm, and it is heavily invested in solar technology. A business that was heavily invested in Green Technology:
I doubt that Gelbaum would have stipulated to Pope that the $200 million also depended on he Sierra Club's protection of his green investments, but Pope could infer that if Gelbaum would have stopped donating his $200 million to the Sierra Club over immigration, adopting policies that undermined Gelbaum's solar investments was a no-go. A tacit bribe is one that need not be acknowledged, or even understood by either party, under the circumstances of the Gelbaum pledge to the Sierra Club neither not only was the condition not discussed, but neither Pope nor Gelbaum was probably aware of the string, but if the thought of altering the club's stance toward nuclear power ever came to Pope's mind, the possible effect on Gelbaum's gift, and its consequences for the Cub would have also been a consideration. No one could ever say that David Gelbaum had bought the Sierra Club's conscience on energy issues, but in a way, subtly and probably without thinking, he had. Without thinking about it, Gelbaum had rendered a change in the Sierra Club's position on energy, and in particular nuclear energy unthinkable.