Nine of Europe’s top 20 private equity firms have set up organisations to fund charities, and three are in the process of establishing their own.

The drive behind this trend is to improve their public standing which has suffered in the current financial climate and a desire to “do something positive” with their profits, according to a report published by Private Equity News this month.

The report focussed on a list of the 20 largest private equity firms in Europe, in terms of funds raised in the last 10 years, supplied by data provider Preqin. The number of grant-making bodies run by these companies has increased from four to nine in the past five years, the report said. Bridgepoint, Apax Partners, Cinven, Permira and IK Investment Partners have all set up organisations to fund charities during that time, it continued.

Other firms with longer-established charitable organisations are 3i Group, Charterhouse, Doughty Hanson and Terra Firma, the report says.

The report’s author, Toby Lewis, a reporter for Private Equity News, told Philanthropy UK that, “Many within private equity firms have become increasingly conscious of their company’s public image as they face hostility prompted by the current financial climate, and they feel strongly that they should do something positive with the money they have made in recent years. They also want to have close control over their giving.”

The London-based Private Equity Foundation (PEF), founded in 2006, is supported by a wide range of firms and employs a venture philanthropy model that draws on characteristics of the private equity industry such as investing in leadership, making a small number of large grants, and providing expertise as well as money. It funds initiatives to help young people not in education, employment or training (NEETs)

Shaks Ghosh, chief executive of the Private Equity Foundation, and guest editor of Private Equity News for this month’s issue, told Philanthropy UK that, “Individuals within private equity firms have been deeply philanthropic for many years, and there is also a culture of corporate giving, but the trend of setting up foundations is only beginning to take shape now.

“It fits well with many of the companies that private equity firms invest in and could motivate staff,” Ghosh added.

Prominent funders that embrace a private equity approach include Impetus Trust, whose co- founder Stephen Dawson was a managing director of venture capital company ECI. They also include social investment organisation Social Finance, which recently proposed Social Impact Bonds in the UK, and community development venture capital company Bridges Ventures, chaired by Sir Ronald Cohen, founding partner and former chairman of Apax Partners.

Ghosh said, “The creation of new foundations is exciting. If [the foundations] follow their own private equity practices they can become serious agents for change but it is too early to tell if they will.”

The average donation of the seven who disclosed this information for the last financial year was £437,000. The largest amount donated was £1.2m, by Apax Partners. According to its 2008 Annual Report, released in June 2009, funds under the advice of Apax Partners total over $35 bn (£21bn) around the world.

With development of private equity firms’ philanthropy comes an increase in donations and, just as importantly for those whose reputations have been affected by the recession, it will “push news of the private equity industry’s commitment to charity into the public domain,” Ghosh said.