I also admit that it isnât âfreeâ to invest the money in bond, in that thereâs operational overhead involved, but with such a large amount of money held it seems worthwhile.
You said that the funds currently hold $1.1 million and that US Treasury bonds yield 1.7% a year. Thatâs $18,700 a year in foregone revenue. In 80,000 Hoursâ survey of EA organizations, a new hire was seen as worth something in the neighborhood of a million dollars in forgone donations a year. So itâs not surprising to me that the donations are held in cashâI could easily see the overhead of investing exceeding the potential returns.
Similarly, itâs not surprising that the funds are slow to be disbursed. If each fund managerâs time is valued at millions or tens of millions of dollars a year, the discount rate on the donations held in a fund isnât an overwhelming consideration.
But that raises the question, why create the funds in the first place? Someone at CEA would be best qualified to answer that. But I donât expect a timely answer, as their communication style tends (in my experience and in that of others on this forum) toward reticence and delay. (I suspect this is due to their placing higher priority on other projects rather than due to a desire to keep information private.)
If I were to speculate, Iâd say that the CEA sees the funds as an experiment, and that theyâll be abandoned if they donât eventually significantly more in donations. But it seems likely that theyâll invest some more effort before giving up.
US Treasury bonds yield 1.7% a year. Thatâs $18,700 a year in foregone revenue
Thatâs the annualized return on 3-month bonds, a short-term, zero-risk investment. Setting up such an investment would be trivial (and could surely be outsourced).
At the other extreme, you have the Wellcome Trust which holds Henry Wellcomeâs endowment; their investments have yielded an average of 14% per year since 1986. And those returns compound, too. As a result, theyâve been able to give away much larger disbursements than if theyâd simply held the money in cash.
If each fund managerâs time is valued at millions or tens of millions of dollars a year, the discount rate on the donations held in a fund isnât an overwhelming consideration. But that raises the question, why create the funds in the first place?
Quite so. They seem to be stuck in a place where thereâs enough money there for it to be wasteful to let it just sit around, but not enough for it to be worthwhile for the fund managers to make regular disbursements.
You said that the funds currently hold $1.1 million and that US Treasury bonds yield 1.7% a year. Thatâs $18,700 a year in foregone revenue. In 80,000 Hoursâ survey of EA organizations, a new hire was seen as worth something in the neighborhood of a million dollars in forgone donations a year. So itâs not surprising to me that the donations are held in cashâI could easily see the overhead of investing exceeding the potential returns.
In theory, anyone can spend 15 minutes per week moving money in and out of index funds with a 5% expected annual return. Or using Betterment. Presumably there are some tax and administrative issues which would take up more time, but overall it sounds worthwhile.
You said that the funds currently hold $1.1 million and that US Treasury bonds yield 1.7% a year. Thatâs $18,700 a year in foregone revenue. In 80,000 Hoursâ survey of EA organizations, a new hire was seen as worth something in the neighborhood of a million dollars in forgone donations a year. So itâs not surprising to me that the donations are held in cashâI could easily see the overhead of investing exceeding the potential returns.
Similarly, itâs not surprising that the funds are slow to be disbursed. If each fund managerâs time is valued at millions or tens of millions of dollars a year, the discount rate on the donations held in a fund isnât an overwhelming consideration.
But that raises the question, why create the funds in the first place? Someone at CEA would be best qualified to answer that. But I donât expect a timely answer, as their communication style tends (in my experience and in that of others on this forum) toward reticence and delay. (I suspect this is due to their placing higher priority on other projects rather than due to a desire to keep information private.)
If I were to speculate, Iâd say that the CEA sees the funds as an experiment, and that theyâll be abandoned if they donât eventually significantly more in donations. But it seems likely that theyâll invest some more effort before giving up.
Thatâs the annualized return on 3-month bonds, a short-term, zero-risk investment. Setting up such an investment would be trivial (and could surely be outsourced).
At the other extreme, you have the Wellcome Trust which holds Henry Wellcomeâs endowment; their investments have yielded an average of 14% per year since 1986. And those returns compound, too. As a result, theyâve been able to give away much larger disbursements than if theyâd simply held the money in cash.
Quite so. They seem to be stuck in a place where thereâs enough money there for it to be wasteful to let it just sit around, but not enough for it to be worthwhile for the fund managers to make regular disbursements.
In theory, anyone can spend 15 minutes per week moving money in and out of index funds with a 5% expected annual return. Or using Betterment. Presumably there are some tax and administrative issues which would take up more time, but overall it sounds worthwhile.