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.
Thanks for sharing your thoughts! I think that making some fund distributions in the present also serves to demonstrate the decision making and grantmaking capabilities of the fund's grantmakers. Some donors might consider it an uncertainty to donate to a fund that has not made any grants for, say, three decades, whereas having the fund make microgrants or having a version of the fund that makes grants demonstrates that the fund has been and will continue to make a positive social impact.
I'm the founder of Antigravity Investments, an EA social enterprise and SEC-registered investment advisor with the mission of donating millions of dollars to high-impact causes by increasing returns on charitable capital held by donors, nonprofits, foundations, etc. We've advised over $20 million in charitable capital and been supported by CEA's EA Grants program, the Berkeley SkyDeck accelerator, American Express, and Ashoka.
If anyone would like implementation assistance, I think we're a good alternative to Alpha Architect—we also operate in the evidence-based investing space, and we provide free advising to EAs along with lower-cost investment management. We're an advisor on the Interactive Brokers platform and also support other brokerage firms like Vanguard.
I like the breadth of content covered in this post. 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." Separately, I think there's a high likelihood that this approach (i.e. 100% in QMHIX or EQCHX) will underperform a balanced portfolio, GAA, and a lot of other approaches over a short-term, medium-term, and long-term timeframe.
If someone is taking the approach of diversifying into other assets that most of the money in EA is not invested in, I'm more enthusiastic about speculating in asset classes that have historically experienced good returns (venture capital or even gold), or perhaps more promising, investing in a market that isn't that efficient or that the investor believes they might have an edge in (cryptocurrencies, prediction markets, angel investing, etc).
I believe that Good Ventures' investment data may be available on their Form 990. I am writing an upcoming article on how EAs can use Form 990 data to increase funding for charitable causes, potentially by millions of dollars with only a few hours of effort. I will try to update this comment when my article is out.
That's great, I'm happy fiscal sponsorship exists within EA now! I'll definitely refer any projects I'm aware of. Now I'm wondering how long it'll take for DAFs to pop up!
I agree that the second bullet point is likely more novel/compelling. Regarding the first point, I think that barriers like "high minimums to create a DAF, high annual fees, high minimum grant amounts, high minimum maintenance amounts, and limited investment options" mentioned in my post may reduce the counterfactual amount that would otherwise go to DAFs from EA by a considerable degree exceeding the $200,000 figure mentioned. For example, the minimum to create a DAF at Vanguard Charitable is $25,000, which is a somewhat large amount of capital for some people just to invest their money in something safe like a 2% savings account or money market fund prior to donation.
I think that some DAF applications I mentioned are more novel/compelling than others, such as allowing people to easily invest intended donations, fund their own future charitable work in a tax-deductible manner, and create additional "EA funds" offering a wider range of cause areas and methodologies beyond what the existing EA Funds offer.
I think that the second bullet point is viable so long as all appropriate best practices are followed, such as giving fair compensation for the level of future work (e.g. not paying people $500,000 a year for work that charities normally pay $50,000 a year for) and ensuring that all future work is actually charitable and appropriately documented.
I find it unlikely this will cause any PR issues unless this is actually broadly advertised to the general public, and even if so, it's important to note that this idea requires people to actually do charitable work in the future at a lower pay rate as opposed to simply saving for retirement in a 401(k) which offers similar tax and investing benefits. It only seems amazing to us because we would actually like to work full-time on charitable work in the future at a low pay rate—this is not an idea that seems popular in the mainstream.
Regarding fiscal sponsorship, some EA organizations like CEA and CFAR have done something similar, albeit to a highly limited extent. CEA and CFAR have occasionally hosted efforts seen as independent initiatives under their legal entity. I think this demonstrates the value fiscal sponsorship can bring to the community.
Fiscal sponsorship generally refers to the service of hosting independent efforts under the same legal entity with the associated expectations: (1) explicitly offered as a service, (2) allows independent efforts to remain under the umbrella organization for an indefinite period of time, (3) allows independent efforts to migrate their assets to another organization at any point in time, (4) allows independent efforts to independently fundraise under their own brand name, (5) offers an administrative portal, tools (such as expense reporting and fundraising portals), and procedures to reduce the administrative overhead of offering such a service, (6) accepts applications to use the service on an ongoing basis, (7) accepts a significant number of applications onto the service to fulfill the service's goal of making it easier to people to launch social impact efforts, (8) offers the service at scale to a large number of independent efforts, (9) tracks the finances of each independent effort separately from other independent efforts, (10) financed based on flat monthly fees and/or a percentage fee charged on incoming donations.
CEA may have offered something similar at some point in time, but it doesn't seem like they are currently focused on doing fiscal sponsorship. It is not my understanding that CEA is advertising or accepting applications for such a service, and is only hosting a very small number of efforts that could be seen as independent, which are the most important distinctions. CEA probably offers at most expectations 2, 3, 4, 5, and 9.
Also, CEA does not look like it's in the business of offering DAFs (I can provide an enumerated list of DAF provider expectations if that would help clarify), although the EA Funds are vaguely reminiscent of "collective DAFs."
Have you chatted with John Beshir? He mentioned to me that he was working on setting this up as a trust in the UK in mid-2019.
Update: Some difficulties came up, so John is not actively pursuing this right now.
Thanks for sharing your thoughts! Which of the applications of fiscal sponsorship seem most promising to you?
Regarding DAFs, I'd have to do the math, but I think that the benefit of the $15,000–$25,000 could be realized extremely quickly. For example:
I think it's highly unlikely an existing DAF provider will customize their offerings (for example by offering to pay individuals a salary directly to do charitable work instead of just regranting to 501(c)(3)s) because their expected benefit from doing so is simply too low to justify the time investment.
Are you referring to the DAF or FS side of things, or both? My prior was that it would be fairly straightforward because there are UK DAFs in existence, and CEA does both DAF-like and FS-like things to a limited extent (sponsoring EA orgs and running EA funds).
While CEA might have charitable purposes that seem restrictive, it doesn't seem like that's impacting their ability to try to do everything under the sun.
You tried to create a trust to do this before, but it was rejected because the charitable objects were too broad?
It's interesting you mention that! In my post I link to the article Long-term investment fund at Founders Pledge which relates to patient philanthropy, and I also left a comment on that article.
I think one of the many possibilities made possible by an EA DAF provider would be to enable people to set up DAFs that are designed to impact the far future. It might or might not be better to run a centralized fund as a separate entity. A separate entity might be able to focus more on survivability; however, DAF providers are by their very nature designed a last a long time, so offering a long-term fund as part of a DAF provider's offerings might be an even better way to guarantee that the fund lasts into the future. For example, Vanguard Charitable has billions of dollars within it, and is thus very likely to have an outsized impact and last for many years to come.