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The Jewish Federations in North America have major financial clout. Collectively they have over $16 billion in combined assets, which is roughly the same as Iceland's GDP and higher than that of Monaco or Cambodia, for example. Moreover, the federations' investment income – combined gains from cash investments, securities, gross rental income, and other returns – grew to almost $900 million over the four years from 2012 to 2015.
Their revenue stems chiefly from donations, but donors cannot be sure how their dollars are invested.
In 2015, the federations had more than half a billion dollars in hedge funds and other vehicles famed mainly for secrecy, that operate from shelters like the Cayman Islands and Bermuda. Out of the federations' total assets, totaling some $9 billion, half a billion is not a small amount.
Other nonprofit organizations also invest in offshore tax havens, just like businessmen and the murky sort of politicians exposed by the Panama Papers. Representatives of the funds argue that they have little choice. They have to put their assets somewhere, and the kind of major investment vehicles they need tend to operate offshore, to reduce their own tax bill. While nonprofits don't pay tax, investment vehicles do.
"Often working with professional investment advisors and investment committees, not-for-profits aim to maximize the return on their endowments and other funds," the JFNA commented. "A common method to achieve this result for many not-for-profits, including non-profit colleges and hospitals, is to invest in offshore vehicles."
Investing through funds operating in offshore tax havens is perfectly legal. However, it may beg questions about transparency.
Cleveland versus 'nuclear Iran'
The Jewish Federation of Cleveland, Ohio, is big. In 2015, the last year for which public data is available, it got $76 million in contributions and grants, owned more than $450 million in assets, and reported $15 million in investment income.
This federation invests through offshore vehicles, for 2015 reporting $138 million placed in offshore vehicles, including in Owl Creek Overseas Fund, Black Bear Offshore Fund, and Coatue Offshore Fund (all registered in the Cayman Islands), Lynx (Bermuda) and others.
Where investment vehicles of this sort put the federations' money is anybody's guess.
They say it takes money to make money and indeed, between 2012 to 2015, the Cleveland federation paid out $5.5 million, a substantial sum, on investment management and advice.
In 2015 it also reported $3.1 million in transactions with Cleveland Federation PI, which federation marcom manager Dahlia Fisher calls a “federation entity used for private equity investment purposes.”
Click here to access all the Federations' 990 tax forms (Return of Organization Exempt From Income Tax), broken down by state and city.
In fact, Haaretz discovered that the Cleveland Jewish Federation has 62 "federation entities." Some are proper companies, some are foundations and 60 are listed at the Cleveland Federation's own address. That is decidedly unusual, but Fisher says it's because their financial records are maintained by Federation staff.
Though how their assets are invested by the offshore vehicles cannot be known, spending is more transparent. Take the Jews of Cleveland against the ayatollahs. Among its targets for spending, the Cleveland federation chose the local needy, Israel, and “preventing a nuclear Iran” (“Join us in protecting the people of the United States, Israel, and the world”.)