Re: [Wikimedia-l] investments still poor; return improved +0.3% to 1.5%

[James Salsman]

James Heilman wrote:
>
> I personally invest in stuff that gives 1.5% to 1.7% returns

Whether you call it fake news, disinformation, public relations,
manufactured consent, astroturfing, propaganda, or simply clever
advertising campaigning, bankers are thrilled when people think such
returns are reasonable, because they make so much money by turning
around those investments into payday loans, overdraft fees, student
loans, and high credit card interest rates to the vast majority of the
population which has already depleted their savings:
https://www.gobankingrates.com/personal-finance/data-americans-savings/

However, that such returns are reasonable is a false narrative which
only serves to increase economic inequality. Many nonprofits (and some
people) are in a precarious financial condition and therefore should
invest in government bonds (or cash accounts.) But the WMF is among
the most financially solvent nonprofits in the history of
civilization, and certainly beyond the level of the wealthiest
educational institutions because of the lack of physical plant
overhead. For what such institutions with competent financial
management typically earn, please see e.g. Figure 1 on page 2 of:
https://institutional.vanguard.com/iam/pdf/EndowmentPerformanceResearch.pdf

Individuals should be earning the same high rates too, and easily can,
but bankers and fund managers hate it when their customers are savvy
enough to ask for endowment-grade returns. Please see:
https://personal.vanguard.com/pdf/s342.pdf

Disclaimer: I have no financial, familial, or other ties to Vanguard,
but I like them more than their competitors, in part because of the
"number two tries harder" effect, and in part because of the fact
Renaissance was behind the effort, which shows to me that they have
lost focus on fundamental value investing because arbitrage over
politicians is (temporarily?) more lucrative, shown here:
http://firstmonday.org/ojs/index.php/fm/article/view/7090/5653

> Why is it assumed we should be investing in stocks?

I am not recommending stocks. I recommend managed endowment-grade
mutual fund(s) with divestitures using short sales with limit orders
to remove the short sale risk.

> And where is the evidence that "brilliant minds" do better at
> stocks than random chance?

Again, unless one has the resources to keep current investigations on
the fundamental financial conditions of stocks such as the top
performing endowment fund management fund companies do, I am not
suggesting one should be picking stocks. However, the evidence that
those funds are superior to what a small team (such as the Wikimedia
Endowment Advisory Board) is completely clear; see:
https://www.hks.harvard.edu/fs/rzeckhau/EndowmentsPaperPartI.pdf
and
https://www.hks.harvard.edu/fs/rzeckhau/EndowmentsPaperPartII.pdf

> The endowment is under separate management from the WMF, with
> the people running the endowment specialized in that area.

While my questions are about the Foundation's primary investments for
which an endowment-grade fund is most appropriate, but not the nascent
endowment itself, I have been trying to follow the Endowment news. Has
its Board even met yet? I have absolutely no confidence that they have
the resources necessary to outperform a top-5 endowment-grade mutual
fund. If you don't agree, please see for yourself:
http://990s.foundationcenter.org/990pf_pdf_archive/133/133947823/133947823_201312_990PF.pdf

Annette Campbell-White's Kia Ora Foundation made $73K interest,
dividends, and capital gains on $2.8 million cash, savings, and
investments, only 2.6%.

Peter Baldwin's Arcadia Fund doesn't even disclose their endowment financials:
http://www.arcadiafund.org.uk/media/10233/Arcadia-triennial-report-2013-2015.pdf

Nor have they ever. They are also not listed in GuideStar UK, Charity
Financials, nor
http://apps.charitycommission.gov.uk/Showcharity/RegisterOfCharities/registerhomepage.aspx

While they are listed at https://beta.companieshouse.gov.uk/company/IC000448
their financials are missing, and the referral has no information at
all: https://register.fca.org.uk/shpo_nosearchresultpage?search=IC000448

In any case, the thought that Wales, Campbell-White, and Baldwin have
the resources to investigate the fundamentals of tens of thousands of
investment choices is absurd, and the thought that they have any hope
of outperforming any of the top-5 endowment mutual fund is even less
likely. If there is any evidence to the contrary I would like to read
it.

Best regards,
Jim

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Re: [Wikimedia-l] investments still poor; return improved +0.3% to 1.5%

[Vi to]

10% would imply a pretty high risk or a strategy which is not compatible
WMF's values.

3-4% would balance risks with profits, there are pretty safe senior bonds
with a 2-3% yield which could balance some less-than-best rated bond giving
up to 6%.
Anyway WMF's mission imply low risks in investments plus avoiding
"speculating".

Maybe it would be worth thinking about investing extra funds in countries
were they are being originating/they are likely to be spent. For instance,
if ESAMS fees are given in Euros it might be possible to use donation in
Euros, being "parked" in Euro bonds, to pay them, without pay for exchange,
money transfer but, above all, avoiding exchange rate fluctuations-related
risks.


Vito

2016-12-12 20:12 GMT+01:00 James Heilman :

> I personally invest in stuff that gives 1.5% to 1.7% returns (the Canadian
> government mostly). If that is what the foundation is getting it sounds
> reasonable to me.
>
> Some "bankers" do really well as they have inside details / are building
> the financial instruments that they are betting against.
>
> Why is it assumed we should be investing in stocks? And where is the
> evidence that "brilliant minds" do better at stocks than random chance?
>
> The endowment is under separate management from the WMF, with the people
> running the endowment specialized in that area.
>
> James
>
> On Mon, Dec 12, 2016 at 11:27 AM, James Salsman 
> wrote:
>
> > Over the past decade, the Foundation's low rate of return on
> > investments has been dismal and embarassing, in part because it
> > reflects poor choices in the use of donors' money and sets a terrible
> > example. The ease with which the Foundation can raise funds is simply
> > not compatible with purchasing 1.5% certificates of deposit on which
> > bankers easily earn 10% or more that we could earn by cutting out the
> > banking middlemen. It's time to set a better example.
> >
> > Please see pages 9 and especially 10 the Audit Report released in
> October:
> > https://wikimediafoundation.org/wiki/File:Wikimedia_
> > Foundation_Audit_Report_-_FY15-16.pdf
> >
> > In particular, Foundation investments increased from $38 million in
> > June 2015 to $54 million in 2016, and investment income increased from
> > $445,000 to $813,000.
> >
> > 1. Why is Foundation, which presumably has the benefit of the most
> > brilliant volunteer minds in the world, during years of record high
> > stock market prices, with income so secure that detractors have to beg
> > every year on this list for fundraising to be halted when it reaches
> > its goal, only earning 1.5% interest for its donors?
> >
> > 2. Are there any practical reasons not to liquidate 90% of the
> > Foundation's stock, bond, fund, and REIT investments over the next
> > quarter and deposit the balance in a top-5 nonprofit foundation
> > endowment-grade fund? E.g.:
> > https://institutional.vanguard.com/VGApp/iip/site/
> > institutional/clientsolutions/endowmentfoundation
> >
> > 3. How does the Foundation intend to convince donors that the
> > endowment is a good idea when investment stewardship is so poor?
> >
> > 4. What proportion is invested in fossil fuel interests?
> >
> > 5. Should we divest from fossil fuel interests?
> >
> > 6. Does the Foundation have any strategic investments in sustainable
> > technologies such as wind and solar power, power-to-gas,
> > gas-to-liquids, underground compressed air and pumped hydro power
> > storage, and composite lumber?
> >
> > 7. Should we divest from interests opposed to single payer health care?
> >
> > 8. Should we divest from interests in support of the payroll tax?
> >
> > 9. Should we divest from educational interests which have not shown a
> > firm commitment to public school class size reduction?
> >
> > 10. Should we divest from interests opposed to increasing public
> > school teacher salaries?
> >
> > We can offset mutual fund holding investments in such interests with
> > short sales (while there is a risk with doing so, that risk can be
> > completely offset with limit orders.)
> >
> > Best regards,
> > Jim Salsman
> >
> > ___
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> > wiki/Mailing_lists/Guidelines
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> > 
>
>
>
>
> --
> James Heilman
> MD, CCFP-EM, Wikipedian
>
> The Wikipedia Open Textbook of Medicine
> www.opentextbookofmedicine.com
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> 
>

Re: [Wikimedia-l] investments still poor; return improved +0.3% to 1.5%

[James Heilman]

I personally invest in stuff that gives 1.5% to 1.7% returns (the Canadian
government mostly). If that is what the foundation is getting it sounds
reasonable to me.

Some "bankers" do really well as they have inside details / are building
the financial instruments that they are betting against.

Why is it assumed we should be investing in stocks? And where is the
evidence that "brilliant minds" do better at stocks than random chance?

The endowment is under separate management from the WMF, with the people
running the endowment specialized in that area.

James

On Mon, Dec 12, 2016 at 11:27 AM, James Salsman  wrote:

> Over the past decade, the Foundation's low rate of return on
> investments has been dismal and embarassing, in part because it
> reflects poor choices in the use of donors' money and sets a terrible
> example. The ease with which the Foundation can raise funds is simply
> not compatible with purchasing 1.5% certificates of deposit on which
> bankers easily earn 10% or more that we could earn by cutting out the
> banking middlemen. It's time to set a better example.
>
> Please see pages 9 and especially 10 the Audit Report released in October:
> https://wikimediafoundation.org/wiki/File:Wikimedia_
> Foundation_Audit_Report_-_FY15-16.pdf
>
> In particular, Foundation investments increased from $38 million in
> June 2015 to $54 million in 2016, and investment income increased from
> $445,000 to $813,000.
>
> 1. Why is Foundation, which presumably has the benefit of the most
> brilliant volunteer minds in the world, during years of record high
> stock market prices, with income so secure that detractors have to beg
> every year on this list for fundraising to be halted when it reaches
> its goal, only earning 1.5% interest for its donors?
>
> 2. Are there any practical reasons not to liquidate 90% of the
> Foundation's stock, bond, fund, and REIT investments over the next
> quarter and deposit the balance in a top-5 nonprofit foundation
> endowment-grade fund? E.g.:
> https://institutional.vanguard.com/VGApp/iip/site/
> institutional/clientsolutions/endowmentfoundation
>
> 3. How does the Foundation intend to convince donors that the
> endowment is a good idea when investment stewardship is so poor?
>
> 4. What proportion is invested in fossil fuel interests?
>
> 5. Should we divest from fossil fuel interests?
>
> 6. Does the Foundation have any strategic investments in sustainable
> technologies such as wind and solar power, power-to-gas,
> gas-to-liquids, underground compressed air and pumped hydro power
> storage, and composite lumber?
>
> 7. Should we divest from interests opposed to single payer health care?
>
> 8. Should we divest from interests in support of the payroll tax?
>
> 9. Should we divest from educational interests which have not shown a
> firm commitment to public school class size reduction?
>
> 10. Should we divest from interests opposed to increasing public
> school teacher salaries?
>
> We can offset mutual fund holding investments in such interests with
> short sales (while there is a risk with doing so, that risk can be
> completely offset with limit orders.)
>
> Best regards,
> Jim Salsman
>
> ___
> Wikimedia-l mailing list, guidelines at: https://meta.wikimedia.org/
> wiki/Mailing_lists/Guidelines
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> 




-- 
James Heilman
MD, CCFP-EM, Wikipedian

The Wikipedia Open Textbook of Medicine
www.opentextbookofmedicine.com
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[Wikimedia-l] investments still poor; return improved +0.3% to 1.5%

[James Salsman]

Over the past decade, the Foundation's low rate of return on
investments has been dismal and embarassing, in part because it
reflects poor choices in the use of donors' money and sets a terrible
example. The ease with which the Foundation can raise funds is simply
not compatible with purchasing 1.5% certificates of deposit on which
bankers easily earn 10% or more that we could earn by cutting out the
banking middlemen. It's time to set a better example.

Please see pages 9 and especially 10 the Audit Report released in October:
https://wikimediafoundation.org/wiki/File:Wikimedia_Foundation_Audit_Report_-_FY15-16.pdf

In particular, Foundation investments increased from $38 million in
June 2015 to $54 million in 2016, and investment income increased from
$445,000 to $813,000.

1. Why is Foundation, which presumably has the benefit of the most
brilliant volunteer minds in the world, during years of record high
stock market prices, with income so secure that detractors have to beg
every year on this list for fundraising to be halted when it reaches
its goal, only earning 1.5% interest for its donors?

2. Are there any practical reasons not to liquidate 90% of the
Foundation's stock, bond, fund, and REIT investments over the next
quarter and deposit the balance in a top-5 nonprofit foundation
endowment-grade fund? E.g.:
https://institutional.vanguard.com/VGApp/iip/site/institutional/clientsolutions/endowmentfoundation

3. How does the Foundation intend to convince donors that the
endowment is a good idea when investment stewardship is so poor?

4. What proportion is invested in fossil fuel interests?

5. Should we divest from fossil fuel interests?

6. Does the Foundation have any strategic investments in sustainable
technologies such as wind and solar power, power-to-gas,
gas-to-liquids, underground compressed air and pumped hydro power
storage, and composite lumber?

7. Should we divest from interests opposed to single payer health care?

8. Should we divest from interests in support of the payroll tax?

9. Should we divest from educational interests which have not shown a
firm commitment to public school class size reduction?

10. Should we divest from interests opposed to increasing public
school teacher salaries?

We can offset mutual fund holding investments in such interests with
short sales (while there is a risk with doing so, that risk can be
completely offset with limit orders.)

Best regards,
Jim Salsman

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