Regarding implementation details, if a small donor is going to fund things that are different than what other EAs would typically fund—an approach that various EAs have advocated for and one that I personally support—then I think there’s a strong argument to not “invest all your altruistic funds into a managed futures fund.”
I don’t really understand what you’re saying here.
Separately, I think there’s a high likelihood that this approach (i.e. 100% in QMHIX or EQCHX) will underperform a balanced portfolio, GAA
That’s true, I said that in the post. QMHIX/EQCHX might also have a worse ex-ante Sharpe ratio than GAA. The argument for investing in managed futures is that it has positive expected return (not guaranteed) and has basically zero correlation with stocks and bonds.
I’m more enthusiastic about speculating in asset classes that have historically experienced good returns (venture capital or even gold)
VC is highly correlated with equities, and as an asset class, historically it has performed worse than the S&P 500. Only the top ~quarter of VC firms have outperformed the S&P 500. Investing in, say, Sequoia seems like a good idea, in the same way that investing in the Renaissance Medallion Fund seems like a good idea, but I don’t believe any funds like that are open to new investors. If I could invest in the Medallion Fund, I totally would.
Gold has only performed well relatively recently. In the long run, there is no reason to expect gold to have a real return above 0% because it doesn’t generate any cash flows like stocks and bonds do, and it doesn’t gain value over time except via inflation. A quick search found this page, which shows gold averaged only a 1.2% real return from 1915 to 2020. Research Affiliates projects a −3.6% annual real return for gold over the next 10 years (I don’t know their methodology for predicting gold prices, but I assume it’s good because their stuff is usually good).
I believe that Good Ventures’ investment data may be available on their Form 990.
Yep, I looked into Good Ventures’ Form 990 recently. From what I saw, they don’t appear to invest meaningful amounts of money, they just receive money from Cari and Dustin more or less as they donate it. According to Forbes, Cari and Dustin have almost all their money in Facebook stock (which strikes me as an extremely bad idea in principle, although presumably it’s not easy for them to liquidate their stock and diversify).
I don’t really understand what you’re saying here.
I meant that if a donor isn’t going to make generic grants, like funding a GiveWell top charity, and will instead do things like fund small EA projects that might not otherwise be funded, then pursuing a more reliable investing approach would be a better bet.
If a non-generic donor pursues a risk neutral approach or invests in a single asset class, that could jeopardize their grantmaking, and from the donor’s perspective the downside of not being able to fund a considerable number of projects if there are bad investment outcomes likely outweighs the expected benefit of fractionally shifting the EA community as a whole towards choosing more unusual asset classes.
That’s true, I said that in the post. QMHIX/EQCHX might also have a worse ex-ante Sharpe ratio than GAA. The argument for investing in managed futures is that it has positive expected return (not guaranteed) and has basically zero correlation with stocks and bonds.
Right, and I stated that to emphasize other approaches I mentioned later in my comment that might have had and may continue to have decent returns with zero correlation.
VC is highly correlated with equities, and as an asset class, historically it has performed worse than the S&P 500.
Gold has only performed well relatively recently. In the long run, there is no reason to expect gold to have a real return above 0% because it doesn’t generate any cash flows like stocks and bonds do, and it doesn’t gain value over time except via inflation.
There are a wide variety of views on whether it is wise to invest in every single asset class, from Bitcoin, to gold and venture capital which I mentioned, to managed futures which you mentioned.
I don’t have strong asset class views because Antigravity Investments follows the approach of using quantitative/evidence-based investing to allocate different amounts to different asset classes at various points in time rather than sticking with a particular one for the long haul. I think that writing off entire asset classes may not be a good approach due to the inherently challenging-to-predict nature of future investment returns.
Regarding venture capital, this document from Invesco (which is not trying to sell a VC investment) notes there was a −0.06 correlation between venture capital and large-cap equities from 1990-2014. That document also notes that “top quartile absolute returns for venture capital have historically exceeded those for other asset classes.” Top-quartile outperformance in VC is especially interesting because unlike equity funds in recent decades, it seems like VC funds may experience consistent outperformance across time. Whether that’s due to skill, simply having access to better networks and deal flow, or some combination of both is the question.
Gold definitely struggles with some of the issues commodities and currencies as a whole have (debatable long-term value), but it’s also recommended by the founder of the largest hedge fund in the world, so I don’t think there’s no case to be made for it (not saying there is, either, since I don’t hold strong asset class views). A 7.8% non-inflation-adjusted return from 1972 to 2020 with 0.02 market correlation doesn’t seem that terrible, although there are rather awful, extended drawdowns of course. I’m not saying that gold is or isn’t a good long-term investment, but clearly gold and other things that have uncertain intrinsic value like Bitcoin can be good investments if held during the appropriate times.
I don’t really understand what you’re saying here.
That’s true, I said that in the post. QMHIX/EQCHX might also have a worse ex-ante Sharpe ratio than GAA. The argument for investing in managed futures is that it has positive expected return (not guaranteed) and has basically zero correlation with stocks and bonds.
VC is highly correlated with equities, and as an asset class, historically it has performed worse than the S&P 500. Only the top ~quarter of VC firms have outperformed the S&P 500. Investing in, say, Sequoia seems like a good idea, in the same way that investing in the Renaissance Medallion Fund seems like a good idea, but I don’t believe any funds like that are open to new investors. If I could invest in the Medallion Fund, I totally would.
Gold has only performed well relatively recently. In the long run, there is no reason to expect gold to have a real return above 0% because it doesn’t generate any cash flows like stocks and bonds do, and it doesn’t gain value over time except via inflation. A quick search found this page, which shows gold averaged only a 1.2% real return from 1915 to 2020. Research Affiliates projects a −3.6% annual real return for gold over the next 10 years (I don’t know their methodology for predicting gold prices, but I assume it’s good because their stuff is usually good).
Yep, I looked into Good Ventures’ Form 990 recently. From what I saw, they don’t appear to invest meaningful amounts of money, they just receive money from Cari and Dustin more or less as they donate it. According to Forbes, Cari and Dustin have almost all their money in Facebook stock (which strikes me as an extremely bad idea in principle, although presumably it’s not easy for them to liquidate their stock and diversify).
I meant that if a donor isn’t going to make generic grants, like funding a GiveWell top charity, and will instead do things like fund small EA projects that might not otherwise be funded, then pursuing a more reliable investing approach would be a better bet.
If a non-generic donor pursues a risk neutral approach or invests in a single asset class, that could jeopardize their grantmaking, and from the donor’s perspective the downside of not being able to fund a considerable number of projects if there are bad investment outcomes likely outweighs the expected benefit of fractionally shifting the EA community as a whole towards choosing more unusual asset classes.
Right, and I stated that to emphasize other approaches I mentioned later in my comment that might have had and may continue to have decent returns with zero correlation.
There are a wide variety of views on whether it is wise to invest in every single asset class, from Bitcoin, to gold and venture capital which I mentioned, to managed futures which you mentioned.
I don’t have strong asset class views because Antigravity Investments follows the approach of using quantitative/evidence-based investing to allocate different amounts to different asset classes at various points in time rather than sticking with a particular one for the long haul. I think that writing off entire asset classes may not be a good approach due to the inherently challenging-to-predict nature of future investment returns.
Regarding venture capital, this document from Invesco (which is not trying to sell a VC investment) notes there was a −0.06 correlation between venture capital and large-cap equities from 1990-2014. That document also notes that “top quartile absolute returns for venture capital have historically exceeded those for other asset classes.” Top-quartile outperformance in VC is especially interesting because unlike equity funds in recent decades, it seems like VC funds may experience consistent outperformance across time. Whether that’s due to skill, simply having access to better networks and deal flow, or some combination of both is the question.
Gold definitely struggles with some of the issues commodities and currencies as a whole have (debatable long-term value), but it’s also recommended by the founder of the largest hedge fund in the world, so I don’t think there’s no case to be made for it (not saying there is, either, since I don’t hold strong asset class views). A 7.8% non-inflation-adjusted return from 1972 to 2020 with 0.02 market correlation doesn’t seem that terrible, although there are rather awful, extended drawdowns of course. I’m not saying that gold is or isn’t a good long-term investment, but clearly gold and other things that have uncertain intrinsic value like Bitcoin can be good investments if held during the appropriate times.