Last November, the New York Times reported that the 92nd Street Y had entered into an unusual relationship with certain hedge funds managed by the nonprofit’s board members. The Y could invest with money managers such as John Paulson, who sent his children to the Y’s nursery school, at no fee, and with a promise from the billionaire hedge fund manager to guarantee any loss.
That guarantee turned out to be a good thing, as Mr. Paulson’s funds have had a notoriously hard time of things lately. But despite being backed by the word of a man worth nearly $12 billion, a man who earlier this week announced a $100 million donation to Central Park, some people decided that Mr. Paulson’s guarantee to make good any loss wasn’t good enough, the Y, whose $40 million endowment represents a tiny fraction of Mr. Paulson’s total wealth, decided to take its money back, according to Kate Kelley at CNBC.
Although the Y was remunerated for any losses from Paulson or other hedge-fund investments, concerns had developed about the lack of a more diverse portfolio, said these people, and about the possibility that a manager would not be able to reimburse the Y for losses in the unlikely case of a career-ending loss.
Because really, what does that mean, risk-free? Does such a thing exist, can’t any many fail, any castle crumble, any fortune dwindle?