NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, June 20, 2013

MONTE CARLO (Reuters) – Hedge funds, once seen as a quick route to riches for managers and investors alike, are trying to reinvent themselves as more socially conscious and make money all the same.

After an extended run of poor returns, executives at a slimmed-down annual industry conference in Monaco on Tuesday were as likely to be found talking about charitable giving as top trading ideas. Managers have latched onto the idea that social responsibility and making money could go hand in hand.

“I think impact investing is the new buzzword,” said Jeroen Tielman, CEO of hedge fund investor IMQubator. “It’s after things like the Bangladesh factory disaster. Investors are starting to think and are realising they can make a difference.”

This year’s mood marked a dramatic change from the 2008 conference, when the industry was at the height of its powers and superstar of the moment John Paulson – fresh from earning $3.7 billion (2.3 billion pounds) personally from betting on the subprime meltdown – predicted $1.3 trillion of losses in the financial sector.

Just five years on, the $2.4 trillion industry increasingly tries to justify its existence and redefine its purpose amid discontent from investors, pressure from regulators, and suspicion and blame from politicians and the general public towards high-earning financiers.