My sibling deserves full credit for thinking of and writing this post but he doesn’t frequent the EA Forum so asked me to post it.
How well-managed are pools of capital used for EA grantmaking? Are they compounding at rates comparable to those of top university endowments?
The power of compound interest means that relatively small differences in performance can add up. For instance, from the Yale Investments Office:
“Yale’s endowment returned 10.9% per annum over the 10 years ending June 30, 2020… Relative to the estimated 7.4% average ten-year return of college and university endowments, Yale’s investment performance added $9.6 billion of value in the form of increased spending and enhanced endowment value [over the 10 years]. During the 10-year period, the endowment grew from $16.7 billion to $31.2 billion.”
It’s worth noting that even smaller foundations can access top-tier asset managers and portfolio construction through outsourced CIO firms (Cambridge Associates, Commonfund).
Epistemic status: Speculative at best. I think the general distribution of assets is probably right, but I’m far from a financial expert, so I might not have the best understanding of the portfolios themselves.
tl;dr: The biggest pool is Dustin & Cari’s portfolio, which probably has comparable performance. Beyond that, most of the money in EA gets spent rapidly, with few long-term assets that can be invested.
Based on my very rough and messy reconstruction of committed resources, organization assets and money flows based on public information, the answer is probably yes.
Why? If we include committed assets, then the biggest pool of capital used for EA grantmaking is Dustin Moskovitz and Cari Tuna’s portfolio, which amounts to over $13bn in what I believe are largely risky, long-run, diversified investments.[1] My best guess is that these investments probably compound (on the long term) to a rate similar to university endowments, which also tend to have a risky profile optimized for long-run stocks.
Now, a substantial part of Dustin and Cari’s money has already been transferred to EA organizations, so the next step in the chain would be to check Good Venture’s assets (which are controlled by Open Philanthropy). These probably amount to something like $4bn based on public filings from 2020.[2] Given Good Venture’s money flows, it would seem reasonable to expect a good part of this to be invested, but probably not for the long run.
The next stop in this train involve the assets being held by (arguably) the biggest foundation in EA, Effective Ventures (the foundation behind CEA, 80k, EA Funds, GWWC and much, much more). EV seems to hold around $55m in what are declared to be mostly short-term savings[3], which I assume mostly originated from Good Ventures.
Conspicuously absent here are direct donations. I believe the rest of the money flow in EA is composed by donations mediated by organizations like GWWC, Founder’s Pledge or EA Funds which turn into either grants or get transferred directly into object-level organizations pretty quickly. I would assume most of these organizations are expense-heavy and don’t have long term investment themselves.
Overall, it still seems like EA as a community holds very little of the assets committed to it, and most of those seem to be invested in a single long-run portfolio.
My main source for this is largely Dustin’s tweets, as well as what I understand is his donation strategy. The idea is to liquidate all of the money before Dustin and Cari die, which is, in expectation a long timespan. Given current money flows, it seems like it would make sense to have a risky, long-term oriented portfolio. Having said that, I’m not a financial expert, so Dustin, if you’re reading this, please pitch in ;)
This does not account for either changes in their assets since then nor does it account for the assets held by Good Ventures LLC, the company that holds certain for-profit investments for the foundation. I couldn’t find any public records of assets for the latter.
This was estimated based on tax filings by Effective Ventures (from 2021) and tax filings by Centre for Effective Altruism USA (from 2020).
My family hedge fund, which is the basis for our effective altruistic donations to Givedirectly, the Helen Keller International, and the Clean Air Task Force looks like this:
16.67% EDV (long term US treasuries) 16.67% SCHD (high yield blue chips) 8.4% DBMF (managed futures) 8.4% KMLM (managed futures) 5.2% VIG (dividend aristocrats and future aristocrats) 5.2% SCHG (50% fastest growing S&P 500 companies) 5.2% SPGP (deep value growth blue chips) 4.2% Amazon 4.2% MasterCard 4.2% Lowe’s 4.2% ASML Holdings (world leader in advanced chip manufacturing tech) 3.33% British American Tobacco 3.33% Altria 3.33% Enbridge 3.33% NextEra Energy Partners 3.33% Brookfield Asset Management
4.1% yield 8.9% growth 13.0% long term return potential and historical returns. 11% to 15% annual income growth.
And as a nice bonus the average peak decline during every bear market in the last 16 years is 10% and the median peak decline is also 10%.
Peak decline in the 2022 bear market −14% vs 35% nasdaq −28% S&P, and −21% 60⁄40.
This portfolio is called the ZEUS ( Zen Extraordinary Ultra Sleep well at night) Income Growth portfolio.
It consists of stocks, bonds, cash, ETFs and individual blue chips.
605 of the world’s best companies or the top 0.1% of all companies in the world according to Vanguard and MSCI.
I’ve spent 8 years in the financial industry as a financial analyst perfecting this family hedge fund which is where I’m investing all my life savings. Or at least that which isn’t invested in the most effective charities.
Right now I’m funding the donations out of pocket.
Eventually 5% if this portfolio will be donated to the most effective charities focused on saving young children, lifting people out of poverty and promoting economic development and figuring climate change.
My two greatest passions and skills are making lots of money and giving it away to the most effective charities who together bring us ever closer to Star Trek utopia.
I should note the goal is to donate 5% of the portfolio each year.
That will let me donate far more than my entire annual income which is currently over $500,000 per year.
I love Will McCaskill’s “earn to give” strategy but I tweak it to “earn to invest and give.”
In an upcoming article on Seeking Alpha I’ll show how donating 50% of your income is great.
But donating 25% of your income to the most effective charities and investing 25% into a low risk ETF based portfolio can result in up to 100x more donations than just donations alone.
Donate today, donate even more tomorrow, and donate staggering amounts over your life time.
And then turn your portfolio into a perpetual charitable trust in your will.
That ensures the effective altruism never stops.
For an example of how powerful this can be consider the example of Ben Franklin.
Franklin left $1,000 in his will to Philadelphia and Boston with one important proviso.
The money had to be invested and half donated to charity after 100 years.
Then the other half after 200 years.
The second donation to each city, was $13 million each.
From $2000 over $26 million donated to charity.
That is the power of patient philanthropy.
Help those most in need today.
Help tens of thousands over your life time.
And help millions or billions over centuries.
Give thousands and you can help lots of people.
Give millions and you can help millions.
Give billions and you can change the world.
But give trillions over centuries and millennia and you can change everything.