Hungarian-born billionaire investor George Soros is pledging $18 billion - the bulk of his $26 billion fortune – to his Open Society Foundation, completing the integration of his family office, Soros Fund Management, and the charitable organization that serves as a front for Soros’s globalist agenda.
WSJ reports that the gift has vaulted Open Society to the top ranks of philanthropic organizations. It now appears to be the second largest such organization in the US by assets after the Bill and Melinda Gates Foundation, based on 2014 figures from the National Philanthropic Trust. Soros, who is 87, shares influence over the investment firm’s strategy with Open Society’s investment committee. Soros serves as the committee’s chairman, but the committee was set up to survive him, he said.
“It’s an ongoing process of migration from a hedge fund toward a pool of capital deployed to support a foundation over the long term,” said Bill Ford, a committee member and the chief executive of General Atlantic LLC, a firm that invests in growth-stage companies.
However, Bloomberg reported that the transfer of funds was authorized to help minimize a tax bill hedge fund managers are facing this year. Money managers have until the end of the year to pay taxes on fees they earned from assets in offshore funds, but had earlier deferred payment on. Many are now turning to charitable donations, including to their own foundations, to help offset the tax burden.
Tax experts have estimated that collectively managers have at least $100 billion offshore, based on tax-advisers’ conversations with clients, brokers and fund-service providers. A New York-based money manager such as Soros could be subject to a top federal income tax rate of 39.6%, not including state and local taxes. When Congress eliminated the tax break in 2008 during the aftermath of the financial crisis, it gave hedge fund managers until Dec. 31, 2017 to bring the cash home and pay the accumulated taxes.
It's believed that most of Soro's wealth is tied up with his family office. At the end of 2013, Soros had amassed $13.3 billion in his Soros Fund Management through the use of deferrals, according to Irish regulatory filings. Since it's unclear how much the fund's assets have grown since then, it's difficult to tell what percentage of the fund's assets the donation represents.
Soros founded Open Society in 1993 and has used it to support pro-Clinton groups and Super PACs, as well as leftist groups like Black Lives Matter, and other leftist groups that purportedly have links to local Antifa organizations.
Soros has also given more than $33 million to the Black Lives Matter groups involved in the social unrest in Ferguson and Baltimore.
Sources close to Soros told WSJ that he doesn’t plan to trade the billions that now belong to Open Society. After stepping back from active management in 2000, Soros came out of retirement in 2007 to bet against the housing market, and has had several notable trading successes in recent years – including a profitable bet on S&P 500 puts ahead of the June 2016 Brexit vote. His most recent trade was a bet that stocks would slump following Trump’s election.
Instead, the Dow Jones Industrial Average climbed above 23,000 for the first time on Tuesday.
Several states have accused Soros of inappropriately meddling in local affairs. Israel accused the philanthropist billionaire of "continuously undermining Israel's democratically elected governments.” Meanwhile, Soros’s support for refugees brought him into conflict with Hungarian President Viktor Orban, formerly a friend of the billionaire. Orban has accused Soros of being a political puppet master, and officials in his government have described Soros’s Open Society charities as “political activism disguised as NGO work.":
Soros, who has lived under both communism and Nazi occupation in Hungary, hoped to foster “open societies” in places where authoritarian governments held power. He named his foundation after a book by the philosopher Karl Popper, one of his teachers at the London School of Economics, who was a notable defender of liberal democracies.
As WSJ explains, Open Society operates through a network of more than 40 foundations and offices in countries from Afghanistan to South Africa and has a broad mandate to act on its founder’s values. OS organizations have funded refugee relief, public-health efforts and programs including a mobile court for gender crimes in the Democratic Republic of the Congo. The philanthropy also advocates for rights of the Roma, one of Europe’s largest ethnic minorities.
Responding to rumors that the firm is becoming more risk averse, one of Soros’s portfolio managers told WSJ that the firm would still look for opportunities for profitable macro trades, but that those opportunities would be smaller and more fleeting.
Though Soros has been a vocal opponent of President Donald Trump’s agenda, he once hired Treasury Secretary Steven Mnuchin to run a credit business at Soros.
It’s long been known that most of Soros’s fortune would eventually go to Open Society, though Soros previously funded it with annual donations. He plans to give it most of the rest of his wealth in his lifetime or upon his death, said people familiar with the matter, pushing its assets above $20 billion.
Soros Fund Management’s annual returns have averaged around 11% in the past 10 years, according to a person familiar with the figures, well below the 30% of its early decades.
Soros has about $6 billion in private-equity and related investments, including African cellphone towers and a stake in a restaurant chain called Dinosaur Bar-B-Que. The overseers of this chunk of money report to Open Society’s investment committee.
Soros is best known for building one of the world’s largest fortunes through a series of super-profitable trades. In September 1992, the Bank of England left the European Exchange Rate Mechanism under pressure from speculators, including Soros, who had been aggressively shorting the pound.
The trade netted Soros a profit of $1 billion and earned him a reputation as the man who broke the Bank of England.