fundraising with wall street in mind

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Fundraising with Wall Street in Mind

Geoffrey Levin, Cadwalader, Wilkersham & Taft LLP Stephen K. Orr, Orr Associates, Inc. (OAI)

Fundraising with Wall Street in Mind November 13, 2014

Stephen K. Orr, Managing Partner, Orr Associates, Inc. (OAI) Geoffrey W. Levin, Partner, Cadwalader, Wickersham & Taft LLP, Secretary, Youth, I.N.C.

Copyright © 2014 Orr Associates, Inc.

Table of Contents

1. Introductions 2. Finance 3. Private Equity and Hedge Fund Overviews 4. What are These Donors Thinking? 5. Questions

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About Us

Steve Orr • More than two decades of nonprofit fundraising experience with

finance executives • 12 years on Wall Street

– Goldman Sachs, Citibank, and others – While at Goldman, established the National Mentoring Partnership in 1991

and subsequently helped raise a cumulative $30 million • Started OAI to focus on nonprofit strategy and development work, and

have expanded to include assessments, board development, development management, campaign management, and nonprofit management

• Executive Director and Founder of Youth, I.N.C. (1994-Present) • MBA, International Management, Thunderbird School of Global

Management ; BS, Business, Michigan State University

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About Us

Geoff Levin • More than two decades of legal experience in the financial sector • Partner, Cadwalader, Wickersham & Taft LLP

– Mergers and acquisitions – Preferred stock/venture capital investments – Fund formations

• Secretary, Board of Directors, Chair, Audit Committee, Youth, I.N.C. (on board since 2009)

• JD, University of Minnesota; BBA, University of Michigan

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Key Points

1. Finance 2. Private Equity and Hedge Fund Overviews 3. What are These Donors Thinking?

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Copyright © 2014 Orr Associates, Inc. 7

FINANCE

Private equity

Hedge funds

Real estate

Investment bankers

Commercial bankers Lawyers

Accountants

Vendors

Printers


Why Talk Finance?

• Finance wealth is relatively new and uncommitted – Disposable incomes and giving plans are not yet

“locked in” – Donors are entering life cycle stage where they want to –

and can – give back or have time to do something significant with a lasting impact and legacy

• Fundraising from financial professionals is very different from fundraising for other industries or old money

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High Net Worth Individuals (HNWI)

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http://www.thereformedbroker.com/wp-content/uploads/2013/04/pew-0.png


Stock Market (S&P 500)

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Why Focus on Finance?

• HNWI = strong desire to give = major gift prospects

• The 1% – Earn 20% of total U.S. income ($367,000+ per year) – More than 1 million people

• 143,000 are in finance • 122,000 live in New York City

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The Forbes 400: The Richest People in America (2014)

Combined net worth = 2.3 trillion

Average net worth was $5.7 billion

16 attributed wealth to

private equity

29 attributed wealth to

hedge funds

36 attributed wealth to real

estate

69% were self-made

20% in the Tristate Area

Top 1% Finance NYC

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• Very common for a finance professional to earn more than $1 million

• Tax motivation around philanthropy

• Wealth and income from HF / PE / PM / IB is predictable – e.g., $1 million of income and investable assets fairly

common for employees 5-7 years into HF and PE careers

• New money – first generation wealth

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Top 1% Finance NYC


• The Finance Universe – Buy Side

• Owns assets and receives returns on investments • Private equity, hedge funds, insurance companies, investment

managers, and real estate owners

– Sell Side • Earns commissions or fees on transactions • Brokers and investment bankers

– Service Providers • Lawyers, printers, accountants, and consultants

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Top 1% Finance NYC


Private equity

Hedge funds and real estate

Investment bankers and commercial bankers

Service providers: lawyers, accountants, printers, etc.

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Top 1% Finance NYC


Key Points


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Private Equity

• PE firms invest in equity and debt of operating companies that are undervalued

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3,300

PE firms headquartered

in the U.S.

547

Buyout/growth expansion

funds currently fundraising in

the U.S.

11,130

PE-backed companies

headquartered in the U.S.

7,500,000

Employees at U.S. PE-backed

companies


Where are the Private Equity Firms?

Half of the largest private equity

firms in the U.S. are based in the New York area

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Principals

At the top ranks, the better players routinely earn sums in the $3 to $10

million range

At the mid-career stage (2 to 4 years after MBA) compensation runs from

$300,000 to $800,000

2008 median starting salary and signing bonus was $145,000

$90,000 the first year out of school and $200,000 for a typical MBA

Private Equity Compensation

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Steve Schwarzman (Forbes #42)

• Net Worth: $10.2 billion • Chairman and CEO, Blackstone

Group • 2013 Income: $465 million

– Only $350,000 was salary – Collected dividends totaling

$352.5 million

• Institutionalized Blackstone’s corporate culture of philanthropy

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Steve Schwarzman (Forbes #42)

• Donor profile: – $100 million to start a Rhodes Scholar-like

program to send 200 predominantly U.S.-based students to study at Tsinghua University in Beijing every year

– Send hundreds of children to schools in New York each year

– $100 million to the New York Public Library • Past/Present Philanthropic Boards:

– The Asia Society – New York City Partnership – Tsinghua University – Frick Collection – John F. Kennedy Center for the Performing Arts – Harvard Business School Board of Dean’s Advisors

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Leon Black (Forbes #93)

• Net Worth: $5.2 billion • CEO of Apollo Global

Management • 2013 Income: $546 million

– Only $100,000 was salary – Bulk was from distributions based

on the 92.7 million shares he owns in the firm (Apollo paid out $3.98/share)

• Institutionalized Apollo’s corporate culture of philanthropy

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Leon Black (Forbes #93)

• Donor profile: – $25 million to form the new Melanoma Research

Alliance • Another $15 million over the next three years

– $48 million to Dartmouth College to support its new Black Family Visual Arts Center

• Past/Present Philanthropic Boards: – FasterCures – Dartmouth College – The Museum of Modern Art – Mt. Sinai Hospital – Lincoln Center for the Performing Arts – The Metropolitan Museum of Art – Prep for Prep – The Asia Society

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Henry R. Kravis (Forbes #96)

• Net Worth: $4.9 billion • Co-Chair and Co-CEO, KKR • 2013 Income: $161 million

– Only $300,000 was salary – $117.2 million in stock dividends

• Institutionalized KKR’s corporate culture of philanthropy

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Henry R. Kravis (Forbes #96)

• Donor profile: – Founded The Henry R. Kravis Prize in Leadership – $15 million to Mount Sinai Medical Center to establish the

"Center for Cardiovascular Health" – $100 million this year to establish a new molecular oncology unit

at Memorial Sloan Kettering Cancer Center – Founded and is co-chairman of the New York City

Investment Fund – $100 million to Columbia Business School – A wing is named after him at the Metropolitan Museum of Art

• Past/Present Philanthropic Boards: – Mount Sinai Medical Center – Partnership for New York City – Public Television Channel 13/WNET New York – Columbia Graduate School of Business – Rockefeller University – Claremont McKenna College

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Hedge Fund

• A limited-partnership fund that invests private capital speculatively to maximize capital appreciation

• Diverse range of markets, investment instruments, and strategies

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$2.25 trillion

Assets and growing every year

10,000

Active HFs (privately owned and operated)


Where are the Hedge Fund Firms?

Two thirds of largest HFs in the

U.S. are in the New York metro area

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Hedge Fund Compensation

Principals

Fund Heads earn between $200,000 and $400,000 with a bonus of $700,000 to $6M for a total of $1-$9M

Sr. Portfolio Managers earn between $175,000 and $200,000 with a bonus of $700,000 to $1M for a total of $1-$1.5M

Jr. Portfolio Managers earn between $125,000 and $180,000 with a bonus of $350,000 to $600,000 for a total of $400,000-$650,000

Jr. Traders earn between $79,000 and $115,000 with a bonus of $65,000 to $300,000 for a total of $150,000-$450,000

Jr. Analysts earn between $88,000 and $120,000 with a bonus of $125,000 to $200,000 for a total of $212,000-$320,000

Risk Managers earn between $113,000 and $145,000 with a bonus of $118,000 to $400,000 for a total of $230,000-$530,000

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Julian Robertson (Forbes #167)

• Net Worth: $3.3 billion • Founder of Tiger Management • Retired

– Upon the dissolution of Tiger Management, launched 38 “Tiger Cubs” (funds run by younger analysts and mentored by Robertson) – number of Tiger Cubs has now grown to 67

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Julian Robertson (Forbes #167)

• Donor profile: – Founded and gave $9.6-million to the Tiger

Foundation, supports needy families in New York – Founded and gave $50-million to The Robertson

Foundation, supports education, environment, medical research, and religion and spirituality

– Founder and benefactor of the Robertson Scholars Program which awards full-tuition, room and board to 36 Duke University and University of North Carolina at Chapel Hill students each year

– Signed the Giving Pledge – $27 million to New York Stem Cell Foundation

• Past/Present Philanthropic Boards: – Cancer Research Institute – The Aotearoa Foundation – The Robertson Scholars Program

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Paul Tudor Jones (Forbes #114)

• Net Worth: $4.3 billion • Founder, Tudor Investment

Corporation • 2013 Income: $800 million • Instrumental in founding

the Robin Hood Foundation, which has raised nearly $2 billion to battle poverty in New York City

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Paul Tudor Jones (Forbes #114)

• Donor profile: – Founder, Robin Hood Foundation – Founder, Chairman, Excellence Charter School,

the country's first all-boys charter school (Brooklyn)

– Founded and chaired the Bedford Stuyvesant I Have A Dream Foundation, which puts local students in colleges

– $35 million to University of Virginia to construct a new basketball arena ; $12 million to create a new Contemplative Sciences Center

• Past/Present Philanthropic Boards: – Former Chairman, National Fish and Wildlife

Foundation – Chair, Everglades Foundation

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Where to Find Major Donors

1. Use your board and major donors’ networks – Use Spheres of Influence conversations (two-degrees of separation

connections) – Review LinkedIn connections – Tools like WealthEngine will help you uncover the capacity of

these individuals

2. Use your board and major donors to educate them about your mission / bring them in to visit your organization – Provide resources and training to support these efforts

(e.g., case/elevator speech, metrics, etc.)

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Key Points


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Wall Street Fundraising

MGO

Private equity

Hedge funds

Real estate

Investment bankers

Commercial bankers Lawyers

Accountants

Vendors

Printers

Questions to ask: What are they

thinking? To whom are they

accountable? To whom can they

introduce you? With whom do they

work? (horizontal vs. vertical)

With whom do they socialize?

Personality traits?

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What are Finance Donors Thinking?

• Does this charity, Executive Director, or Major Gifts Officer understand me and my business?

• Is she/he finance savvy? • How is this charity or gift related to my network?

– Who’s asking? A peer? A client? – Are they part of my network… or a network I need to be

part of? – What are my peers doing and who else is involved?

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Exciting Finance Donors

• Start with colleague to colleague – CEO to CEO / level to level / peer to peer – Get intro from colleague and make sure colleague is part

of the ask process

• Network, network, network • ED or MGO must have basic knowledge of what

donor does: – Need to know the “big deals” and “big names” – Read Wall Street Journal, Forbes, and The Economist – Must personally relate to the donors

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Finance Donor Concerns • No matter how well they are doing, they have worries:

intensity/risk taking/sleeplessness • Wealth is hard-earned and personal • Donations come from individuals, not their companies • Job performance, company performance, markets, economy,

regulations, and taxes • Next bonus: most of pay is bonus (not all cash) • Wealth and income are variable and linked to job

performance – winners and losers • “New Money” • Lifestyle dependent upon income • Wealth preservation is a big issue now

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Wall Street Fundraising

• Wall Street and finance cred • Deal flow • Markets (What is happening today, this week, and this year?) • Small world • Fast, new, and big money • Metrics • ROI • Network • Best time of day for meetings • Extremely busy people

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Questions?

Steve Orr Geoff Levin (212) 424-1915 (212) 504-5550 [email protected] [email protected]

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fundraising with wall street in mind

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