A couple days ago, the Tribune reported that for the third straight quarter the church had lost billions of dollars on its investment portfolio. As it stands, on September 30, 2022, Ensign Peak Advisors, the church’s investment arm, had $40.3 billion of assets under management, down from a high of $52.3 billion on December 31, 2021.
Now frankly, that the church’s investment portfolio is down is no surprise to anybody who has made the mistake of looking at their retirement account over the last year or so; the markets in general are down. But I was curious how the church’s returns compared to the market in general. And it turns out that Ensign Peak Advisors is required to file a quarterly report listing the value of its assets under management (you can find the reports here). It’s been filing the reports for every quarter since the quarter ending December 31, 2019. So I took its quarterly reports, stuck them in an Excel spreadsheet, and graphed them.
And how has the church’s portfolio done over the last three years? Well, it’s up from three years ago, though down significantly from its peak.
Of course, while this tells us something, it doesn’t tell us much. More interesting is how the church’s portfolio has done compared to the market at large. To figure that out, I looked at the performance of the Dow Jones Industrial Average and the S&P 500 over the same time period. (The Dow Jones and the S&P 500 each reflect the weighted value of a basket of stocks. They aren’t the stock market, but they do give some indication of its value.)
Now, if I had used the actual values, the graph would be impossible to read. Ensign Peak Advisors’ assets are worth tens of billions of dollars; the Dow is in the tens of thousands, and the S&P 500 in the thousands. So I’ve divided each value by the appropriate amount that they’re all in the tens. If you want to see the actual value of EPA’s assets, multiply by 1 billion. For the Dow, multiply by 1,000. And for the S&P, multiply by 100.
So how does the church’s return compare to the market at large?
It reflects the broader markets almost perfectly. Like, the church would have almost the exact same return if it had just invested in a SPDR (or another similar ETF or mutual fund that reflected the value of either index).
To be clear, the church still has a lot of money; the losses largely represent paper losses and the three-year trend is still up. But in some ways, I think it’s important to see that the church’s investment return more or less matches the market. Because it undercuts any idea of the prosperity gospel. That is, the church isn’t wealthy because it is righteous. A growing portfolio doesn’t represent God’s approval. At the same time, losses don’t demonstrate divine disapproval.
Rather, they reflect the broader economic conditions. The church is subject to those conditions—the ups and downs—in the same way as any other investor. In the same way as my retirement fund and your kids’ college funds and basically every other pot of money out there.
Note: while there may be a way to embed a spreadsheet on the current version of WordPress, I don’t know off the top of my head. And I actually have to get work done so I don’t have time to figure it out. If you want to see the underlying data in the form I used it, you can view it here.
UPDATE 1/12/23: Per Chris’s suggestion and Dave’s explanation of how to do it, I have a normalized chart of the returns here. While ultimately EPA did a little better than the Dow and a little worse than the S&P, this chart emphasizes how much its returns since Q4 of 2019 have mirrored the broader market.
By Common Consent, a Mormon Blog 
Good stuff, Sam. So I apologize that this will sound like criticism instead of praise.
At a glance, a reader might get the impression that Ensign Peak does better in every period than the DOW or S&P. Refining the way you normalize would fix that.
I appreciate the prosperity gospel (not) observation. It’s a new observation for me, just learning what others are thinking. I had thought the concern or to-be-negated argument was about prescience, the idea that the Church invests with seer-like knowledge of the future.
If one were talking about prescience, ask why Ensign Peak didn’t move into cash at the beginning of 2022? Having been in conversation with my economist brother about that very decision, I know that it wouldn’t have taken a miracle or revelation. Just someone smarter than I am.
Hi Chris, I take your point, and I worried about it. But ultimately, I didn’t have enough time to even write this post, much less do math more complicated than dividing by 1 with some number of zeros after it. So I’m counting on my readership to understand that the relevant part of the charts is the slope, not the absolute numbers.
Honestly, the idea of prescience didn’t even occur to me; to believe that the church is prescient about investments would require an utter disregard of so much church history (including, notably, the Kirtland Safety Society).
But also, for long-term investments, ignoring swings is critical. I guess if you had perfect knowledge, moving to cash at the peak of the market isn’t a bad idea if you buy back at the bottom. But for most investors without perfect knowledge—me included!—not responding to swings is generally a better idea.
Tl;dr: I didn’t have time to normalize the numbers the way Chris suggests. So look at slopes, not absolute values!
Take each value for each fund, and divide it by the starting value for that fund. (i.e. Divide all the Ensign Peak numbers by 37.9, Dow by 28.6 and S&P by 32.4.) Now each fund starts at 1, and each subsequent value represents the fraction of the starting value that remains. Ensign Peak is up 6.3% from the start of your data, Dow is up 1.0%, and S&P is up 20.7%
Thanks Dave. The was easy enough that I’ve update the post with a chart reflecting that normalization.
1. The updated series shows that Ensign Peak tracked the S&P closely and overperformed the Dow through the second quarter of 2021. Over the next year, the pattern was reversed–it tracked the Dow closely and underperformed the S&P. In the last two quarters, it has underperformed both indices.
2. I only notice that because I am an economist who, until recently, made his living paying attention to small changes and trying to figure out whether they represented the start of a new trend or a blip that would soon revert to the mean. Two changes in the same direction (see 1 above) was the worst. Enough to make me nervous, but not enough to forecast a trend.
3. I, and all of my former colleagues, found the Dow to be useless for broader economic forecasting purposes. In this case, the comparison with the S&P should be given greater weight.
Thanks, lastlemming. That’s helpful.
And to be clear to everybody, I didn’t choose the Dow or the S&P because they’re objectively good or right or anything; I chose them because they’re common indices, well-known, and easy to find data on.
It would be interesting to know how often and how much the church decides to harvest those market gains. As individuals saving for retirement, you ride out some ups and downs so that you can (hopefully) rely on the funds to pay for the years that you’re not producing income.
But the church is an ongoing institution without a “target date” of any sort. It seems unlikely that they would sell off at a loss during a dip. But it also seems likely that they would keep well-performing assets in the game while things are sunny with the market. If you’re not inclined to liquidate when things are either very hot or very cold, I wonder when you do so?
I’m sure to be oversimplifying, but I can see how they might prefer to make relatively modest sell-offs over time, provided that the overall bucket is growing and not shrinking. The good news is, they’ve got financial decision makers who understand the implications and forecasts much better than me.
And what if the Church had given a very big chunk of cash to charities around the world in early December 2021 to Light the World! Use it or lose it!!
In terms of real wealth, it is important to point out that when the stock market drops, the world is not one grain of rice poorer. All that stock values are is a snapshot of what the market thinks those assets are worth at the moment. So, technically, the Church has not lost a penny. You only win or lose money in the stock market when you sell your shares. That’s why we don’t pay capital gains taxes on the ups and downs of the market. You pay taxes only when you sell your shares for more than you paid for them.
Hey Tom, just to put on my pedantic tax professor hat, some taxpayers do, in fact, pay taxes on their unrealized gains (and take deductions for their unrealized losses) for tax purposes. Specifically, dealers in securities are required to, while traders can elect to. I would tend to disagree with you that increases in the NAV of assets doesn’t increase real wealth. It does—as my securities portfolio (or home or any other asset) grows in value, the value of my assets has increased, even if I haven’t realized the gain. And I can even harness the increase in value for consumption purposes. Among other things, I can borrow against that increased wealth (which, in fact is a significant part of the wealthy’s “buy, borrow, die” strategy).
A few notes from someone who works in the wealth management space:
1. This analysis doesn’t take into consideration that the EP portfolio would have any exposure to fixed income (i.e., bonds). Those investments typically counterbalance stocks, but 2022 was a uniquely strange year in that bonds suffered as well. Comparison against the S&P 500 as a benchmark only works to the extent the EP portfolio is essentially 100% large domestic stocks, which it almost certainly isn’t. EP probably has a fair amount of international equity exposure as well, which is more volatile than the S&P.
2. While people like to speak in retrospect how it would have been wise to “go to cash” at some point by magically guessing the bottom of the market cycle, professional managers almost never do that because missing just one or two days when markets turn upward again can represent huge missed opportunity. When retail investors and amateur day traders are selling (going to cash), institutional investors are often buying at bargain rates because they’re playing a much longer game. They will patiently ride out downturns because of the certainty of an eventual upward swing. This is likely more true for EP as the church’s captive manager because EP is les worried about the church moving its portfolio to a different manager because they’re disappointed in EP’s performance.
3. It’s highly likely that EP selectively sold some positions in late 2022 to harvest losses and offset capital gains. Because those losses can be carried forward into other tax years, this is a widely deployed strategy by large investors to minimize taxes generated by investments.
mwolv, it’s a fair point that there are probably bonds in the mix. Bonds should have prevented the portfolio from falling as much as a pure equity portfolio in a bear market, but it was a weird year.
And you’re absolutely right: going to cash is stupid. It was only brought up to discard the idea that somehow church leaders have a perfect revelatory understanding of markets. (If you could see the future perfectly, going to cash at the top of the market and reinvesting at the bottom would make sense.)
Finally, given that both EPA and the church are tax-exempt, I assume they’re not harvesting losses. Or, at least, I truly hope they’re not harvesting losses.
Interesting point about EPA being tax exempt, Sam. Unusual for an advisory firm to be in that category, but that indeed appears to be the case as confirmed on the IRS database. I was assuming the portfolio was at least partially taxable as unrelated business income not directly tied to the church’s exempt functions, though it’s possible the entire amount is tax-exempt in which case you’re correct that harvesting losses wouldn’t be helpful.
Doesn’t all this suggest that Church officials should fire EPA and hire Vanguard (or some similar management organization) to manage it’s investments? The Church appears to spend way too much on unhelpful consultants.
Roger,
My thought exactly. EP hasn’t really shown much value compared to the index, but they are likely trying to do it within the church’s investment parameters, which might be harder than it sounds.
The next joke thought is, just as President Monson took an interest in picking motab songs, maybe one day we’ll have a prophet interested in picking stocks.
While I’m not familiar with it, I know there are some members whose donations in kind come in the form of stocks, bonds, real estate, ect. I wonder if that ends up in another silo, or if all market-based assets come under management of Ensign Peak? That could certainly become a pretty wild grab bag of well-performing and underperforming securities. Somewhere, somebody has to figure out how to make the best use of those donations, and it’s probably best in most respects to not liquidate right away.
To be clear, I understand that the great majority of the fund is intentionally acquired and managed. But, I don’t think the church has the luxury of being completely passively managed with index funds or ETFs in light of their need to sort out and maximize that mix of donations.
That’s a good point, Sute. I don’t know what the church’s investment policies are, but I suspect they do some version of ESG (at least, it wouldn’t shock me to find out they don’t invest in alcohol or tobacco producers). I also know that, in general, the church is relatively conservative in its investment strategy.
Larry, I also don’t have first-hand knowledge, but my impression is that charities that accept donations of publicly-traded stock generally liquidate the stock they receive almost immediately and reinvest it according to their investment preferences. There’s no downside to doing that—as an exempt org, they don’t have to pay taxes on the gain—and generally they’re not going to receive enough to move the market.
Sam, I know I’m probably a bit naive on this question so forgive me.
Just curious if there is any way to reverse engineer the numbers or look at the actual shares from the SEC report in order to get a clue as to the quarterly amount of contributions rather than performance interest the church might be making or pulling out. Since that Q3 was a downturn compared to the upturn of the S&P 500, is it possible the church may have pulled a significant quantity out? I guess I’m wondering about the times when gross tithing underperforms the expense threshold or maybe the sheer number of new temples might require more spending than in the past? Or maybe tithing coming in has lessened, etc.
Richard, a totally fair question, and securities regulation isn’t my area of expertise. EPA isn’t publicly traded, so there’s a very limited amount of disclosure it has to do. As I understand it, investment advisors have to report their holdings when those holding exceed some threshold amount, but I don’t see anything on the SEC’s website besides a quarterly snapshot of EPA’s net assets under management. As far as I know, we can’t get details about its portfolio, or about how much money it has put in or taken out during any given period, unless it voluntarily discloses those amounts. So the short answer is, I really don’t know.
Larry the Cable-Guy: “But the church is an ongoing institution without a “target date” of any sort.”
But wouldn’t it be really entertaining if we could figure out from EPA’s performance if it did have a target date? I mean such a date could surely mean only one thing: The Second Coming!
Responding to several things up above.
The church will typically sell your in-kind donation as soon as it is received, as do many other entities.
The church is basically it’s only actively managed fund and the full time employees who run it are really bright and talented. It’s hard to beat indexes and there will be correlations to market returns, but EP does a good job.
EP does have an “ESG” policy and it looks nearly exactly like what you would expect. They really need to remove tea and coffee products from the restricted list. They also need to add some other categories (like guns).
Public stocks in only a part of their portfolio. They do a lot of alternative/private investments, as they should. You really won’t see reports there and I’m not aware of reports that would show their fixed income investments. They also own so much land that I think you have to take that into account when constructing their portfolio.
I’m one who would prefer that the church spend more, but the only thing worse than hoarding is spending in stupid ways. I really hope someone in the church employment ranks somewhere is tasked with working on a plan to spend more in ways that get maximum bang for the buck.
Good points, David. All we know is the church’s return on some securities investments (though that’s why I’m comfortable charting it against stock indices).
It’s also probably worth keeping in mind that a good portion of the outsized returns you see from private investment funds are the result of leverage (that is, borrowing). For its own institutional purposes, I suspect that church doesn’t borrow to juice its returns. And, because there are bad tax consequences to tax-exempts that borrow to make investments, I’m basically entirely sure it doesn’t.
“The Kirtland Safety Society, a financial institution established by Church leaders including Joseph Smith, collapsed in 1837 as part of a national financial crisis known as the Panic of 1837.”
https://www.churchofjesuschrist.org/study/history/topics/kirtland-ohio?lang=eng#:~:text=The%20Kirtland%20Safety%20Society%2C%20a,as%20the%20Panic%20of%201837.
I keep thinking of this, when ever EPA is discussed.
Mike H,
If the EPA was selling stock in the church, your point would be ecen more potent. As is, broadly speaking, the church is hitching its horses to the US economy such for a variety of reasons is the linchpin for the global economy in ways that wasn’t true in the 1800s. If your argument is being connected to the US economy is a mistake, fair enough, but if the US goes down (for long term, not talking blips), everywhere else does even more so. That doesn’t mean the bubble won’t ever burst, but where should the money be? In real estate? In commodities? Redistributed to members and consumed away? All of these are equally if not more so vulnerable to bubbles.
The church fund is likely set up so the church can run for a year or two in a future of low tithing and declining members. A lot of that bubble wealth can disappear in a short term, leaving a lot of expensive assets to maintain.
I suppose an argument could be made that the stick market is now increasingly divorced from actual value production and is just layering bubble on top off bubble with only a hope of future value creation, but it’s a proxy the economy, which all of us are apart of, depends on.
The large areas I could see resources flowing into from a stewardship perspective is water resources, long term agriculture land development and energy production. No idea what the church is asking three, outside of some farm and ranching land you occasionally hear about in FL.