Hedge Fund Managers Score Tax Break While Keeping Investment Control

Word is out among hedge fund managers on how to get tax breaks for giving to charity — without actually handing over their money just yet. They can even keep it in their funds.

Step 1: Donate to your own charitable foundation.

Step 2: Have the foundation invest in your hedge fund.

Step 3: When the foundation must give some money away, send it to a donor-advised fund, or DAF. That counts as a charity, but lets you hold the earmarked cash there as long as you wish and give — or not give — in secrecy.

Take Stephen Mandel’s $999,999,999 Zoom Foundation — that’s how the Tiger Cub has valued his organization’s assets in annual regulatory filings since 2017. It invests the money back into his Lone Pine Capital hedge fund and makes one gift a year to a DAF. Traces of where his donations ultimately land are scattered across charities’ websites, including tens of millions of dollars to Teach for America and Blue Meridian Partners, which works to solve youth poverty. But it’s far from a complete picture of what happened to the $336 million that Mandel funneled to his DAF over a six-year period.

Lone Pine’s chief operating officer, Kerry Tyler, has a similar setup with her Azcat Foundation. Some Renaissance Technologies executives have employed the strategy, for years pouring their foundations’ cash into the astonishingly lucrative Medallion Fund. And an anonymously funded foundation in New York that invests in Israel Englander’s Millennium Management also only makes one gift a year to a DAF. Spokespeople for all three hedge funds declined to comment.