News last week of financial difficulties for Newport Beach’s David Gelbaum—one of the country’s largest philanthropists—had many here asking, “David who?”
National media put the spotlight on Gelbaum, a longtime Newport Beach resident who’s believed to have given more than $500 million in anonymous donations to a variety of mostly progressive causes this decade.
That anonymity was shattered when reports came out last week that the American Civil Liberties Union faces a $20 million shortage in funding next year—about 25% of its annual budget—after Gelbaum said he wouldn’t be able to contribute his normal amount to several groups next year due to financial issues.
Gelbaum made his fortune as a hedge fund manager on Wall Street and now heads up the Quercus Trust, a Newport Beach-based fund that invests in clean technology and alternative energy companies.
According to trade reports, Quercus has invested in close to 50 companies as of early this year, including large holdings in Ohio’s Energy Focus Inc., Pennsylvania’s Axion Power International Inc. and Entech Solar Inc. of Texas.
Gelbaum said in a statement last week that those investments have “placed me in a highly illiquid position” due to the down market.
The statement was an abrupt change for Gelbaum, who has been described as “an intensely private” philanthropist who insisted on anonymity in exchange for his gifts.
There’s only been one major profile of Gelbaum, done by the Los Angeles Times in 2004.
“I don’t think that if you have a lot (of) money and you give away a lot of money, you should get a lot of recognition. You shouldn’t be able to buy that,” Gelbaum told the Times.
Part of the reason for Gelbaum’s reluctance to talk to the media likely has to do with him wanting to keep his investing strategies secret, said Edward Thorp, a one-time partner of Gelbaum who now runs Newport Beach-based Edward O. Thorp & Associates LP.
“He’s a very private person,” Thorp said.
History
Gelbaum is the son of the former chairman of the University of California, Irvine’s math department. He also attended UC Irvine, where he excelled in math, graduating in 1972.
Gelbaum was making $3.75 an hour at an auto repair shop while in college when he was hired by Thorp, who at the time taught at the school.
Thorp hired Gelbaum to work for his Princeton/Newport Partners hedge fund in 1972.
Thorp is perhaps better known as the author of blackjack book “Beat the Dealer.” He found that similar mathematical strategies used at the card table could be used to help investors win on Wall Street.
Princeton/Newport Partners was the first fund of its kind to use a market neutral strategy, which sought to profit from both the up and down swings of the market by investing in options, warrants and bonds.
Gelbaum is credited with making his fortune from using mathematical strategies to pick stocks and bonds.
“He was a smart kid and wanted to work hard,” Thorp said.
Gelbaum, who stayed with the fund until 1988, was always generous with his philanthropy, giving half of what he made to charities, Thorp said.
Thorp guesses Gelbaum’s fortune to be $100 million to $300 million, but noted that the two haven’t been in close contact for several years.
Other reports had put Gelbaum’s fortune much higher before the credit crunch and his extensive giving.
In addition to the ACLU, recipients of Gelbaum’s giving include the Sierra Club and the Iraq-Afghanistan Deployment Impact Fund of the California Community Foundation, which provides assistance to families of troops deployed in Iraq and Afghanistan.
Gelbaum in 2006 was named the ninth Most Influential Person in Southern California by the Los Angeles Times Magazine. In 2004 he was said to have given more money to conservation causes in California than anyone else.
Earlier this decade, most of his conservancy efforts were made through Oak Brook-based Wildlands Conservancy and related programs, which helped protect close to 1,200 square miles of land in the state.
The Times’ 2004 profile listed a number of local gifts from Gelbaum, including more than $20 million to the Orange County school system, as well as $3.5 million to a children’s charity overseen by former sheriff Michael Carona.
