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2013’s 25 Highest Paid Hedge Fund Managers – No African Americans

Posted on April 25, 2013 by | 9 comments

By William A. Foster, IV

Wealth will set us fucking free, okay? ‘Cause wealth is empowering, wealth can uplift communities from poverty, okay? – Chris Rock

This past week Institutional Investor’s released its annual ‘Rich List’ of highest paid hedge fund managers of 2013. These 25 gentleman earned a combined $14.14 billion in 2012. Yes, that was billion with a B. Just to make the list a hedge fund manager had to make $200 million in the recorded fiscal year. The median earning according to Institutional Investor was $350 million. The king of the list was David Tepper, the hedge fund manager who once in 2011 accidentally left his ATM receipt (shown below) showing $100 million in his savings account, earned $2.2 billion. Yes, in one year David Tepper earned more money than what is in the combined coffers of all 100 plus HBCU endowments. Yet, the list in its twelve years has never had an African American present on the list.

TepperATM_receipt

What is a hedge fund? According to Investopedia, it is an aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns. Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.

The minimum investment most hedge funds require varies between $500 000 to $1 million. More established hedge funds can have even higher minimums. Hedge fund managers are able to make a tremendous amount of money because of the industry unwritten rule called 2 and 20. This refers to hedge fund managers charging a 2 percent fee on investments in the hedge fund and receiving a 20 percent cut of all profits generated by the fund. To say this is a lucrative rule, one only needs to look at the list of earning by the top hedge fund managers. If a hedge fund gets 10 investors (individuals or institutions) to invest $1 million each to create a $10 million pool before any investments are even made the 2 percent rule has generated $200 000 in fees for the manager. Assuming the fund turns than $10 million into $110 million then the hedge fund manager would receive $20 million for a total of $20.2 million in earnings. As long as the hedge fund produces its promised returns then investors will continue to pour money into it.

African America’s top ten earners from 2012 were in the fields of sports and entertainment combing to earn approximately $700 million or an average of $70 million a piece. Meanwhile, the top ten earners for hedge fund managers over that same period earned a combined $10.1 billion or an average of $1 billion a piece. This means that the income gap that exist between African America exist even in the upper echelons. In this case, African America’s top ten earned $0.07 for every $1.00 European America’s top ten earned.

The reality that all of African America’s top earners are still represented by being labor of the sports and entertainment industry (minus Oprah Winfrey) continues to highlight some very disturbing social trends and economic miseducation of what really constitutes wealth and power. Hedge fund managers not only control their own wealth but often the wealth of families, other wealthy individuals, institutions (like college endowments), and the ability to dictate the actions and operations of entire companies. If they miss a proverbial “shot” it can wipe out entire communities and families. Therefore, they are afforded a great deal of power within the realms of finance and society. On the other hand if LeBron James misses the game winning shot in the 7th game of the NBA championship its impact is minute at best.

It is time we become more strategic and provocative about our placement of our intellectual capital versus physical capital. We promote education and intellectual development as our upliftment and yet at the apex we continue to see those who will entertain in different forms and fashions reaping rewards whose ripple in terms of power for the African American community is miniscule at best. If there is an assumption that we are closing the gap it is because we would rather put on rose colored glasses than look at the reality – one man makes 300 percent of our ten highest earners. Unfortunately, even roses have thorns.

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HBCU Super Conferences And Profitable Move To Soccer Are A Must

Posted on May 16, 2012 by | 2 comments

By William A. Foster, IV

“A state without some means of change is without the means of its conservation.” – Edmund Burke

Something we should be clear on. There is no benefit for European American owned media companies to showcase HBCU sports or events. Nor their companies in general to provide more than token sponsorship which we continuously chase. It is not profitable for them socially or economically. The reality is HBCUs are Division 1-AA and Division II schools. HBCUs or not – only the Division 1-A six power conferences (SEC, Big 12, Big Ten, Pac-12, Big East, ACC) will ever be on European American owned channels. We know that even if all the best African American athletes returned to HBCUs they would still not be on television. The reality is it is less about the players on the field and more about the people in the stands. Even in pre-desegregation when HBCUs had the better talent they were not placed on television. You can say this was because of outright racism or you can look at the economics of it then and now. The demographics start with that at almost all of these HWCUs in the six power conferences are predominantly European American. By predominantly I’m speaking of 80% or more. They also have always been able to bring in 50,000 plus at football stadiums and 10,000 plus at basketball consistently. They have larger student population and alumni bases. Something one could argue we could have had by now but a mixture of desegregation and heavy domestic recruitment has limited that growth. The current median net worth of European America is approximately $98,000 versus African America’s approximately $2,200. Given that reality, who would you feature on television? Let me help you even further. In 2007, the buying power of European Americans in California was $1.1 trillion and the buying power for all of African America was approximately $850 billion according to the University of Georgia’s Terry School of Business. That’s just the economics of it. Unfortunately, we sold off BET to Viacom, we are only a minority stake in TVOne, and OWN, while 50% co-owned by Oprah Winfrey, clearly is a channel not focused on catering to the African American demographic.

As such we need to focus on taking a different approach. First, what is clear is that we need to move first in creating super conferences. We can do this by a realignment which is badly needed regardless. Right now there are five HBCU conferences – we need to add a sixth and maybe a seventh. Currently, in the five HBCU conferences there are a total of 55 teams. That means roughly only 50% of HBCUs are in an HBCU conference. Schools like Central State University and Wilberforce University both located in Ohio, Langston University in Oklahoma, and Texas College in Texas are left to fend for themselves in non-HBCU conferences. Why they have not been extended an invite in football hotbeds is both the short sightedness of our conferences; as well in part due to the geographic nature of them which is why I’m suggesting the realignment that is more geographically and financially friendly. It would also do us well to include schools that are not traditional HBCUs like Roxbury Community College in Massachusetts, Medgar Evers in New York, Chicago State in Illinois, and a school without an undergraduate but would be worth the investment to build one in Charles Drew University in California. This would give us a coast to coast presence in every city with a dominant African American presence and allow for the establishment of seven HBCU conferences with fifteen schools in each conference.

Given that football and basketball are still the dominant revenue sports, at the moment, we could then have a twelve team playoff in football to determine the HBCU national football champion and a sixteen or thirty-two team HBCU basketball tournament. The events would be focused in major African American populated cities so that we’d be able to attract a large general African American population who might want to be a part of the event even if they are not attached to a certain HBCU. The cities would be (in order of largest African American populations) New York City, Chicago, Philadelphia, Detroit, Houston, Memphis, Baltimore, Los Angeles, Washington DC, and Dallas. All of which have African American populations 300,000 and above. There of course would be allowances for cities like New Orleans and Atlanta who have a geographical strategic advantages along with a strong cultural connection to HBCUs and African America as a whole to host events which would be approved by the conferences. Ultimately, HBCUs will make the majority of their money with major events not television money. An event planning company owned by the seven conferences will coordinate the HBCU football playoffs and basketball tournament. HBCUs with public access channels and television studios will produce, air, and stream online the events. So while the television money isn’t there the accumulation of social capital would be there. The student-athletes would be on television unlike their Division 1-AA and Division II counterparts and HBCUs would find themselves in front of more African American children which would lay the foundation for improving the paltry HBCU attendance number as it relates to percentage of African Americans who go to college choosing HBCUs. Currently, only 10-12 percent of African Americans who are college eligible are choosing HBCUs which has long-term implications on number of alumni and potential donors.

All of this said, as it relates to football and basketball, it will be a move towards a real investment in a strong soccer infrastructure now not later that can create a paradigm shift in HBCU sport financials and establish an immense global presence in the African Diaspora especially in Africa, Latin America, and Europe which constitutes a population of approximately a billion rabid soccer fans. The African Diaspora’s 4 wealthiest, all based in Africa, are worth a combined $28.1 billion. With Africa being the fastest growing continent economically there is an immense opportunity for recruitment of students, research, donors, sponsorship, and an African Diaspora who was in love with the Ghana Black Stars in the last World Cup. There were even a surprisingly large number of African Americans watching the team from Ghana. The move to soccer would do us well as African Americans as well given the realities of football both endangering African American men’s health and the enormous infrastructure cost that college football requires. Football is an American sport, quite possibly one who is witnessing its apex in American society, and demographics of globalization as well as youth sports, which show soccer has more children participants than football and basketball combined, indicate a shift has already occurred towards soccer. Pro soccer franchises are second only to NFL franchises in terms of average value and that is without a strong presence in America, yet. Forming dominant college soccer franchises lends us the opportunity to not only tap the African American consumer but the African Diaspora consumer.

It is clear the times of us being passive and taking a wait and see what our counterparts are doing has left us in dire straits far too often. We would do well to be out ahead of the curve for once instead of chasing it.

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The Miscelebration of African-American “First” 2012

Posted on April 2, 2012 by | Leave a comment

By William A. Foster, IV

The mere imparting of information is not education. – Dr. Carter G. Woodson

Are we American or not? Are we African or not? Over 100 years after W.E.B. DuBois first brought the theory of “double consciousness” to our minds, it is an answer that in our celebration of achievements we clearly still struggle with. We continue to celebrate our firsts into historically white institutions and give little credence to our accomplishments within our historically black institutions, subconsciously continuing to view our own institutions as second class. I continue to firmly believe a people are a reflection of its institutions. These institutions include the family, businesses, schools, and etc…

Every year we watch as Major League Baseball celebrates Jackie Robinson’s breaking of the color line of baseball and we as African-Americans cheer right along in joy. Yet, looking through the owners’ box of the three major American sports (football, basketball, and baseball) there is only one African-American owner 60 plus years later. Sorry, the Los Angeles Dodgers recent purchase by the Magic Johnson “Group” for $2 billion appears to have Magic Johnson as no more than the face of the group not the actual money, decision maker, or principal owner. He appears to be no more than a minority owner similar to that of Jay-Z with the New Jersey Nets and LeBron James with Liverpool FC. Magic as it were appears to be a convenient double irony if you will as the face of  the group buying the team that broke a mythical labor color barrier in Major League Baseball. A “color” barrier I will touch on later had nothing to do with race. The real money and principal financier behind the purchase of the Dodgers is the Guggenheim Partners, a financial services company with $125 billion in assets under management. The operations of the team appear to be in the hands of Stan Kasten, a baseball executive although there is uncertainty whether he too has an ownership stake. Ironically, the man we love to hate Michael Jordan is still the only African American principal owner of a North American sports team.

The Negro Leagues who have been long since forgotten provided ownership as well managers and a more talented league of baseball from its inception, and yet over 60 years later we see little celebration of Rube Foster the Father of Negro League Baseball for what he did for the African American community economically, socially, and culturally. Meanwhile, Branch Rickey is praised for his “courage” of breaking the color line. The real color line that Jackie impacted for Branch was the “green” color line as the Dodgers with Jackie would break attendance records for the league at both home and away games making Branch Rickey an even wealthier man as Jackie was “paraded” before all-white crowds amazed by the “super negro”. We will hail the accomplishment of Ernie Davis being the first African-American to win the Heisman at Syracuse, forgetting it only cemented the expedition of talent from our HBCUs both athletically and academically, and crippling them financially. Academically, we’d rather celebrate Ruth Simmons becoming the first to become president of an Ivy League college instead of celebrating Daniel Payne who was our first college president at Wilberforce. Our neighbor state to the east Arkansas, we celebrate the Little Rock Nine who desegregated the all-white school there but in the process, serving to cripple black controlled education. No teachers came with them, nor principals, administrators, nor ability to control or influence curriculum, and in the decades to follow the Arkansas public school system as it pertained to masses of African-Americans would be a microcosm of its former strength in producing quality and quantity of brilliant black minds. This year, I watched as many African American friends and associates cheered on different HWCUs in March Madness, schools who routinely have less than 5% African American populations, typically no more than one African American on the board of trustees if any, and African American donors (where the real power lies) typically are so insignificant the African American and African diaspora population at these HWCUs is at the mercy of whatever leftovers are seen fit for them. Yet, the majority of African American population has no problem throwing their social and economic support behind these schools no matter how marginalized we are within them in terms of institutional power. Meanwhile, Shaw University women’s basketball team won the division II national championship and received very little press (even from our own) or fanfare about this amazing accomplishment. It was HBCU Nation’s 1st national championship in basketball since 2005 when the the Virginia Union men won and the first since 1988 for an HBCU women’s program when Hampton won.

We are in the process of indeed celebrating our demise and forever imbedding in our subconscious that we and more importantly our institutions are, and always will be, second class in this country’s mind. Carter G. Woodson says simply “If a race has no history, if it has no worthwhile tradition, it becomes a negligible factor in the thought of the world, and it stands in danger of being exterminated.” To take Dr. Woodson’s quote a step further, we must do more than celebrate our history, but we must celebrate the history that moved us to a self-sufficient, self-governed, and most important a race that loves itself. Right and wrong can be argued and become a grey topic but I simply ask this continuous of cause and effect, that is to say, do the first we celebrate contribute to a positive impact on the African Diaspora going forward or are we celebrating a perceived subconscious step closer to being accepted as “white” that will destroy our culture and its history?  This editorial is not an attack on those above but seeks to raise a conversation of are we properly examining the history we celebrate. Are we simply trying to celebrate that still ever elusive ghost of “whiteness”? I dare say we would not celebrate the first African-American to have been allowed to serve in the Ku Klux Klan or would we? Malcolm X many times believed that America was just as guilty as Nazi Germany for her atrocities against African-Americans. Yet, we continue to celebrate the entrance of a few into the very institutions that even in 2012 commit social atrocities against us from industrial prisons to under funded schools from elementary to college level as if this is some accomplishment that is helping us solve the ails of restoring our community pride and ability to succeed. Instead of seeing it for what it is and that is a drain of our leadership and excellence from our community into theirs while the masses of us as African-Americans are still struggling to get out of the proverbial and literal gutter. Because we all know that acceptance into their institutions so many times means turning your back on your own if you want to remain “accepted” and the losing of institutional power. It is not enough to celebrate history but to celebrate that history which uplifted and moved along the hopes and dreams for all of us and not that which highlights the divide and conquer of us over time.

To read the 1st Miscelebration of African-American “First” published click here.

Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & President of AK, Inc. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as writing articles for other African American media outlets.

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