Africa: U.S. Hedge Funds Tackle Malaria 'Emergency' in Africa

18 September 2005
interview

New York — After a global eradication programme eliminated or greatly reduced malaria in most of the world by 1969, the disease was largely overlooked in international development planning. Today, more than 90 per cent of the world's malaria burden is in Africa, with children and pregnant women the major sufferers. In 1998, the Roll Back Malaria initiative was launched by a coalition of international organizations, and the involvement of celebrities like the Senegalese musician Youssou N'Dour has recently raised the profile of the effort. Attention has been further heightened by the campaign for the United Nations Millennium Development Goals to reduce poverty worldwide.

When Lance Laifer, a 41-year old businessman with roots in the hedge-fund industry tuned his television to the Charlie Rose show one night in early May, he wasn't anticipating a reorientation of his personal priorities. But after hearing UN advisor Dr. Jeffrey Sachs from Columbia University say that some 5,000 African children die every day from malaria - and that the death rate could be decisively reduced by concerted efforts - Laifer talked to friends who work together on an annual fundraiser to fight children's cancer. They decided they had to act, and Laifer deferred his planned October launch of a hedge fund in favor of organizing a conference on malaria.

On Tuesday in New York, "Hedge Funds vs. Malaria" is expected to draw several hundred participants from the financial community to discuss how to mobilize resources and fight the disease. According to the Hedge Fund Association, there are currently some 8350 active funds in the United States, with $875 billion in assets and an annual growth rate of 20 percent per year. The funds, which use high-risk techniques to boost earnings as well as various strategies to mitigate or 'hedge' against losses, are popular with wealthy investors and large institutions. Laifer talked about the malaria initiative this week in an interview with AllAfrica's Reed Kramer, who will address the conference. Here are excerpts from their conversation.

What made you decide to drop what you were doing, including launching your hedge fund, to focus on malaria?

Most of us involved in this effort were shocked to learn that malaria is still killing people today. Personally, I thought malaria was eliminated years ago. Few of us knew that this disease is killing so many people every year, most of them in Africa, and those among us with some awareness of the disease had no idea we could do something about it.

But even so, why malaria, out of all the possible good causes?

We can't live in a world that just sits by and watches millions of children die every year from a preventable disease. The numbers of deaths are staggering. This is a plague of Biblical proportions, but unlike Biblical plagues, it doesn't have a defined end. It goes on and on. Yet we not only don't see front-page stories about it; we don't see news stories about it. Since I became aware of the scope of malaria a few months ago, I've been trying to do everything I can. And the people in the hedge-fund community are trying to do everything they can, because this is an emergency situation.

Why are hedge fund managers at the center of this?

The people in the hedge-fund community are very good at investing money, and they're also good at getting publicity. Everybody seems to want to write stories about hedge funds. If some of the attention focused on hedge funds could get focused on malaria, that would be a huge plus for the children of Africa, in a real life-and-death way. There is more media attention focused on hedge funds than there is on malaria in Africa. That's a sad commentary on the world.

This disease over the past 25 years has killed between 25 and 75 million children. The statistics on this are all over the map. The estimates of annual deaths range from one million to three million. In the world that hedge-fund managers are used to living in, numbers are really important, so improving statistical accuracy is an important part of the campaign against malaria, and maybe we can contribute to that. But the basic fact is that there are millions upon millions of children dying from a preventable cause. It's just unacceptable.

So what's your strategy for engagement? I take it you're not just talking about a one-day conference.

Our first thought was that we were going to be one of the fundraisers for malaria. We began by assuming that there would be a lot of charities we would want to get behind. But we found hardly anybody in the United States focusing on malaria. So what we had originally thought would merely be an opportunity to get organized amongst ourselves has created a tremendous interest. As far as we know, this is the first major attempt to raise funds for malaria in the United States. Nobody else has come to us and said, 'We've just raised $100,000 in San Francisco for malaria.' If anybody else is out there raising money - saying 'thank you' to them is the right approach.

But there should be efforts everywhere. You should be able to go to a website and see a fund-raiser in your neighborhood, a fundraiser every weekend. I don't care if it's a bake sale for bednets, if it's a 5K run for sprays, if it's a walkathon. There is already a world swim for malaria in December, where the goal is to get a million people to swim and raise awareness. It's a great thing for everybody to be aware of and to get involved with.

Our starting point is to bring attention to malaria, to the point where there isn't a person who doesn't know about it. Now, when I start a conversation with someone, I say, "What do you know about malaria?"

Even though malaria is the largest killer of people in world history, there is no malaria 'lobby'. Malaria has not been marketed well, it's not been packaged well, it's not been positioned well. We live in a world where packaging, and advertising and positioning is everything. But there's nobody we've found who is working on malaria as a marketing project. We're beginning with the hedge-fund community, which has a lot of industry connections. We need to bring in the advertising industry and the media, as well. We want every church, synagogue and mosque, every sports league, every community, every state involved. Four months ago, I didn't know anything about malaria. This country has creativity, energy, big hearts. If we get focused on this problem, we will knock malaria out of Africa.

What exactly will you be raising money for?

Our initial approach was that we just wanted to do bednets. But it turns out that there's a capacity restraint; there aren't enough bednets. And other interventions are needed, as well. So we decided on an integrated approach.

Imagine a village with 150 households and assume six persons per household. Bednet technology has developed - the chemically treated, long-lasting bednets are effective, and they last five or six years. Start off there, with bednets, window curtains, something to hang on the door. Also assume you need two bednets per household. That cost comes to $16 per household. Assuming that 50% of the 900 people living in that village get malaria anyway, the cost of effective treatment with ACTs [Artemisinin-containing combination therapies that are the recommended replacement for chloroquine, which is cheaper but less effective] runs about $6 per person, for a total cost of $2,700. Then we would supplement that with environmental spraying, which would bring the cost to $8000.

The direct cost to eradicate malaria in Africa, using those calculations - considering that there are 600 million people at risk in Africa - the direct cost should be around $6 billion, although it could be more or less, even by 100%, I don't know which. As more products, more bednets, more ACTs, all those things come online, the cost should go down. Of course there are logistics, implementation, monitoring - the administrative costs, those sort of soft costs, intangible costs.

But the point is that this is a problem that is addressable, and it is possible to get people involved by presenting them with a way to make a direct difference. So the idea is to use the concept of a malaria-free zone. For many individuals and groups in the United States, $8000 is doable. They can raise $8000. What group in this country with money would not want to adopt a malaria-free zone and know that they are saving lives? Kids can get involved. A Little League [children's baseball] team can raise that amount of money. If you break it down to the individual level of people in the village, the cost is less than $10 per person. That represents an incredible opportunity.

We're going to be meeting with basketball players. There's a plan to have Malaria Awareness Day during the national tournament next March, with people signing up to shoot a basket, with sponsors paying for shots that are made and the money going to support malaria-free zones. I'm from New Jersey, where our professional team is the New Jersey Nets. What if we could get the team to call themselves the "New Jersey Bednets" for just one day? Just think how much awareness that would raise!

The director of the Dikembe Mutombo Foundation [founded by the Houston Rockets player from the Democratic Republic of the Congo] said we should get soccer involved, because soccer is so popular in Africa and elsewhere in the world. We could get all the soccer federations to have a campaign to 'kick malaria out of Africa'.

But the point is, this is a problem that is addressable. We live in a world where tens of billions of dollars are spent the wrong way. One of the things we're very sensitive to is donor fatigue. We don't want to create problems for people. If we can actually implement the malaria-free-zone idea, that's great. If not, we're not sold on our own charity. Our approach is more like the Linux-based approach on the Internet - basically to be an open source for everybody to use. We don't care who solves malaria. We don't care if it's drug company 'A'; we don't care if its charity 'B'. What I have seen in the time I have spent on this is that I as an individual and we as a hedge fund community, we can make a difference.

What makes you think hedge funds, and beyond them, other industries and civic organizations, will decide to become involved on a large scale?

The hedge-fund community is one of the most philanthropic groups around. A group of us had experience organizing the Ira W. Sohn Investment Research Conference to benefit the Tomorrow's Children Fund, which is dedicated to helping kids who have cancer and serious blood disorders. In May, the 10th annual conference at the Waldorf Astoria here in New York attracted about 800 participants and raised $2.5 million, including a $1 million contribution from David Einhorn, president of Greenlight Capital.

Two co-founders with me of that conference, Doug Hirsch of Seneca Capital and Dan Nir of Gracie Capital, are introducing speakers at Tuesday's malaria event. Others who have agreed to help out and will be introducing speakers include David Einhorn, Dan Loeb of Third Point Partners, Joel Greenblatt from Gotham Capital, Marc Lasry from Avenue Capital Group, Eugene Major from Dunbar Capital, Jeff Tannenbaum from Fir Tree Partners, Charles Garner of Island Capital and Whitney Tilson of the Tilson Funds.

What it comes down to is that there are children dying from preventable diseases. Malaria has been eradicated all over the world, save for Africa and just a few pockets in other places. And it can and must be wiped out there as well.

All we have to do is harness the creative energies of people in this country and elsewhere. Then Africa may become the next China. If Africa becomes more productive - and that's one of the huge benefits of defeating malaria - then there will be lots of money to be made in Africa - by hedge funds and many others.

Already, we're seeing high returns on certain African stock exchanges. There are developing markets for consumer goods. There's money to be made on Internet companies in Africa, as is happening in China. We're going to have people at our conference talking not just about malaria but also about business opportunities.

We view malaria as the tipping point for Africa. We think Africa needs to cure something and to show the world that they have done it. And it can be a unifying experience for all of Africa. From where we sit, the fight against malaria can be a real success story to demonstrate what Africa can accomplish.

To contact the organizers of "Hedge Funds Against Malaria," email vs.malaria@gmail.com.

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