The City’s new boom market: philanthropy

Simon Nixon

18 November 2006

The buzz in the City is that philanthropy is back, after a gap of about 100 years. The hedge fund industry has led the way. Some specially created funds, like Ark (Absolute Return for Kids) and TCI (The Children’s Investment fund) give a proportion of their returns each year to charity. A charity auction organised by Ark’s glamorous founder, Arpad Busson, estranged partner of Elle Macpherson, raised £18 million in an evening. Private equity groups such as Permira and Alchemy have also set up trusts. Leading City figures such as Sir Ronald Cohen of Apax Partners and Stanley Fink of Man Group have given up their jobs to concentrate on philanthropy.

For all the self-righteousness in the City, however, the kids don’t have to worry too much just yet. British giving is peanuts compared with the US. At 0.7 per cent of our GDP, we only give half as much as Americans. And wealthy Britons are the most miserly of all. The richest fifth in Britain give 1 per cent of their income, while the poorest fifth give 3 per cent. Nor does anybody seem willing to live up to Andrew Carnegie’s dictum, ‘He who dies rich, dies disgraced’. Even Warren Buffett’s huge donation to his friend Bill Gates’s charitable foundation will still leave him with several billions in hand to keep future generations of Buffetts off the streets. And it’s fair to say that sales of yachts, private jets and other fripperies of extreme wealth are rocketing far faster than charitable donations. Generosity has its limits.

Even so, talk of a philanthropy boom is more than simply self-serving propaganda by the financial elite. Over the past two decades globalisation, technological change, financial innovation, tax cuts and the slaying of inflation have allowed some people, particularly on Wall Street and in the City, to amass giant fortunes relatively young, long before they are ready to retire. There are now 793 dollar billionaires in the world, up from just 476 three years ago, according to Forbes. Three quarters of those appearing in the Sunday Times rich list are self-made millionaires, whereas 20 years ago 75 per cent inherited their wealth. And over the past 30 years the richest 10 per cent of Britons have doubled their share of national wealth to 14 per cent. What’s clear is that a growing number of these people want to give some of it back.