Next Life

Hedge Fund Analytics for Nonprofits


When bonus season came around, instead of deciding whether to buy a new suit, car, or a Caribbean vacation, hedge fund analysts Holden Karnofsky and Elie Hassenfeld, both then 25, agonized over which charities to donate to. They put so much time and effort into figuring it out that they eventually left their jobs at Bridgewater Associates, a hedge fund with more than $125 billion under management, to start GiveWell, a nonprofit that evaluates charities with hedge-fund–level rigor. “We were both interested in markets, but we were more interested in how to reduce diarrhea in infants in the developing world,” says Karnofsky, who graduated from Harvard in 2003.

He and Hassenfeld, a Columbia graduate, quit in 2007 and, with $300,000 raised from their friends and former co-workers, developed a grant program in which they would award charities up to $140,000. GiveWell now ranks organizations according to five criteria—evidence of effectiveness, cost-effectiveness, need for funding, transparency, and self-monitoring—and posts the results on its website. GiveWell recommends 2 percent of the charities it reviews, most of them in the developing world, where a dollar goes further toward saving lives.

Though the two now make salaries that are less than half what they earned at Bridgewater, donations to charities they recommend, such as Village Reach and Against Malaria Foundation, have more than tripled in the last year, totaling $1,606,274. Next, they are launching a project called GiveWell Labs, targeting high-net-worth donors. Hassenfeld says they hope to ultimately “change the rules of the game.”
 

Holden and Elie’s best advice:


1. Product before marketing

Focusing on making our research better—as opposed to repackaging it—has been the best approach to finding a group of fans who love what we do. A great product has led to opportunities for getting the word out.
 
2. Meet deadlines
We’re constantly rethinking how to evaluate charities. But we also put out recommendations every year. This way we avoid perfectionism and make sure we’re always sharing enough of our thinking to get feedback.


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