Noncyclical giving

Say it isn't so, Mr. Scrooge. Worries are escalating that the financial markets' annus horribilis will make it tougher to summon the spirit of giving this year and next. With plunging markets, a severe cash crunch, battered investment portfolios, dropping housing values -- everything but the sky falling -- Wall Street appears to be receiving more than bestowing.

How bad can things get? History has shown that donations don't fall off a cliff when times are bad. In the past 40 years, total giving has risen 4.3% per year in nonrecessionary years, adjusted for inflation. But even in recessionary years, contributions declined by only 1% per year, according to Patrick Rooney, director of research at Indiana University's Center on Philanthropy. Assuming that holds true, the drop in giving shouldn't be as catastrophic as the markets have been.

-- See the slideshow: Special Report: Philanthropy in hard times --

Yet there's every indication charities may be staring at the face of disaster. For one thing, those numbers account only for individual giving, while the bulk of funding for charities comes from government, fees and foundations. The government alone provides $100 billion per year historically. "Even if we're to assume that individual giving remains flat, everything else is falling across the board," says Ken Berger, president and CEO of Charity Navigator, an online service that tracks, analyzes and compares nonprofits.

Anecdotally, New York's food banks and other nonprofits are already feeling the pinch as demand mounts. When the economy is severely weakened, the need becomes more acute. There's talk of scores of charities consolidating. Nonprofits' fundraising could be every bit as challenging as cash-strapped endowments and foundations' budgets will be for the coming year. Financial kingpins, perhaps not always the most generous donors even in the best of times, are in retrenchment. Institutions such as Lehman Brothers Holdings Inc. and Merrill Lynch & Co. have disappeared, and though their foundations may live on, the largess will most certainly diminish. Those lucky enough to survive the ongoing shakeout -- and it is far from over -- will themselves be hard-pressed to make up the shortfall.

But let's try not to dwell on the bad news and point to a bit of tidings and good cheer: Some amount of wealth transfer will be expected in spite of everything. Some generous souls who did better than others can make a difference. And it isn't as if there aren't people who are already making a difference one way or another.

This year, we feature seven professionals who somehow manage to spearhead philanthropic programs of various shapes and sizes while excelling in their particular areas of expertise. David Webb, a partner at Cleary Gottlieb Steen & Hamilton LLP, not only is involved in affordable housing pro bono work but also devotes time running the firm's lawyer-training and knowledge-management programs. Maya Steinitz, an associate at Latham & Watkins LLP, has crafted and led ambitious international pro bono efforts, including work assisting the Southern Sudanese in drafting federal and regional interim constitutions.

In Boston, Tim Dibble, managing general partner at Alta Communications Inc., has chaired a local philanthropy for disadvantaged urban young adults, while Robert Morris, founder of private equity firm Olympus Partners in Stamford, Conn., helps out at the Polio Foundation and volunteers at a local school for underprivileged children.

These are just a handful of people who prove there's more in fact to giving than monetary contributions. Theirs is the type of generosity that's been tested through cycles, recession or no recession.

. . .

In the many years that Rob Davis has worked with hedge funds, perhaps nothing compares with the revelation he had at his first charity event in 1999: that hedge funds have a softer side. "I was shocked and delighted," says Davis, a partner at Merlin Securities LLC. Davis had organized a formal dinner at Manhattan's Pierre Hotel Ballroom to raise money for the prevention and treatment of child abuse. The gathering of 400-plus hedge fund managers, lawyers and related industry professionals raised some $542,000, exceeding his expectations. Among the first beneficiaries were Supportive Children's Advocacy Network in the Bronx and Boys and Girls Harbor Inc. in Harlem.

The native New Yorker was convinced he was barely scratching the surface. "Hedge fund managers give millions to charities of all kinds, but they tend to be private," says Davis, 63, from his modest office in midtown Manhattan. Davis has since turned the event into an annual affair for the nonprofit Hedge Funds Care that he founded in 1998. "People don't know that hedge funds are some of the biggest philanthropists," he says. Michael Vranos of Ellington Management Group LLC and Kevin Shannon of Moore Capital Management LLC both sit on HFC's board.

Davis is not a hedge fund investor himself, but his New York prime brokerage provides extensive reporting, trading and operational services to all manner of funds. The firm serves about 300 clients globally, mostly funds with less than $1 billion of assets. Some clients may drop off next year, he allows, though the firm could also pick up market share.

Merlin, formed in 2004 by a group of prime brokerage alumni from Montgomery Securities, (acquired by NationsBanc, now Bank of America), caught the eye of Menlo Park, Calif., VC Sequoia Capital, which invested $20 million earlier this year. Its network of clients and advisers has also lent itself to Davis' fundraising at HFC.

HFC's focus came out of Davis' early experience as an elementary school teacher. He grew up in Freeport, Long Island, and went to the State University of New York at New Paltz. After college, he taught 10-year-olds and discovered cases of physical and sexual abuse in his class. "I helped them overcome the difficulties and got the police involved," he says. It was something that stayed with him as he raised his own children -- he has five, all supportive of his work.

The idea for HFC, however, was not purely altruistic. In 1998, Long-Term Capital Management had just collapsed, threatening to bring down the entire financial system. Davis thought something needed to be done to counteract the "terrible publicity" that hedge funds were getting. "LTCM was a poor symbol -- it was unbelievably highly leveraged, which was atypical of hedge funds at that time, but not dissimilar to what financial institutions have become today," he says. "Someone needed to do something and in so doing, do something good."   Continued...