Is EA’s capital invested as well as top endowments?

By Earthling @ 2023-01-28T01:47 (+8)

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).

Agustín Covarrubias @ 2023-01-28T03:08 (+3)

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.

How well-managed are pools of capital used for EA grantmaking? Are they compounding at rates comparable to those of top university endowments?

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.

  1. ^

    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 ;)

  2. ^

    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.

  3. ^

    This was estimated based on tax filings by Effective Ventures (from 2021) and tax filings by Centre for Effective Altruism USA (from 2020).