The Mormon Church’s secret $100bn investment fund

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. [00:00:06][4.1]

Audio Clip: [00:00:07] In 2019, he revealed the Church of Jesus Christ of Latter Day Saints had a $100 billion investment fund. [00:00:14][7.3]

Sascha: [00:00:15] Recently it was revealed that the Mormon Church, a.k.a. the Church of Jesus Christ of Latter day Saints, had a secret $100 billion investment portfolio. That headline caught our attention because it sparked so many questions. How do you keep $100 billion a secret? Why did it need to be a secret in the first place? How does the church amass so much money? And do all churches have that much money? It's Monday, the 20th of March, and today I want to get up to speed on the Mormon Church as a $100 billion portfolio. To get me there, I have the co-founder of Equity Mates Media. It's Alec Renehan. And Alec, welcome to The Dive. [00:00:56][41.5]

Alec: [00:00:56] Thanks, Sascha. Good to be here. This is a fascinating story. [00:00:59][2.8]

Audio Clip: [00:01:00] For many years, the Mormon Church has been stockpiling 1 to $2 billion of surplus, tithing into a reserve of the reserves inside a501c3 non-profit. [00:01:11][10.4]

Alec: [00:01:12] So I think let's put the hundred billion US dollars into context and compare it to some of the other major religious organisations out there. So all in US dollars and all estimated religions don't have to and often don't choose to disclose how much wealth they have. But Scientology is estimated to have about $2 billion in assets. The Church of England, a.k.a the Anglican Church is estimated to have about 12 billion U.S. dollars in assets. The Catholic Church in Australia alone is estimated to have 20 billion USD in assets. The Catholic Church globally is immeasurably wealthy, easily the most wealthy religious organisation in the world. In Australia, as we said, 20 billion in France, 23 billion in Germany, 26 billion. Who knows how much in the Vatican or globally? But Sascha, outside of the Catholic Church, can you guess the wealthiest religious organisation in the world that we could find when researching this episode. [00:02:18][65.5]

Sascha: [00:02:18] That we could find That seems like the crucial piece of information. I'm going to say Hillsong, basically, because I know that a lot of celebrities are attached to it. So I feel like there must be some big financial backing that. [00:02:31][12.7]

Alec: [00:02:31] Well, Sacha, I've just done a quick Google. According to the Australian Charities and Not for Profits Commission, Hillsong has two and a half million dollars in non-current assets and another million dollars in current assets, so not quite as big as the biggest we could find. The Greek Orthodox Church has €700 billion in assets. [00:02:52][21.3]

Sascha: [00:02:53] When you say it has $700 billion in assets, what do you actually mean? Because I, of course, get that image of Scrooge McDuck going through his swimming pool of cash. But that's not what it is in actuality, is it? [00:03:05][12.1]

Alec: [00:03:05] No. So when we're talking about religious organisations were mainly talking about real estate, that's their key asset, the churches they own and the land that the churches are built on. But much like other asset managers, much like you or I or any other retail investor out there, it can be made up of other assets as well. These religious organisations do invest in stocks and bonds. The moment $100 billion fund was invested with fund managers, including Ray Dalio's, Bridgewater Associates, and in individual companies including Apple, Visa and Home Depot. [00:03:42][36.3]

Sascha: [00:03:42] We're going to go further into that story in just a minute. But before we do, how do these religious organisations amass so much wealth? [00:03:50][8.3]

Alec: [00:03:51] So I think there's three key ingredients. If we were going to start our own religious organisation, these are the three things we would be looking for. The first ingredient is tithing. Now a quick definition. Tithing is the portion of your income that's given as an offering to your local church or charity. Fun fact the word tithe literally means 10th in Hebrew. Okay. In many denominations of Christianity, tithing is expected, but it's not an explicit amount of your income. You know, it's not 10% or 5%, but there's an expectation of giving in Islam. Zakat is one of the five pillars of the faith, with Muslims expected to give 2.5% of their income to charity or to the community in Mormonism, which is what we're talking about today. There's an expectation that you give 10% of your wealth to the church each year. So, number one, Sascha, tithing. [00:04:46][55.3]

Sascha: [00:04:47] What's number two. [00:04:48][0.6]

Alec: [00:04:48] Achieving tax exempt status now in Australia, not for profit companies that are not tax exempt pay 30% tax in the US. If you're not tax exempt, you pay 21% fairer. Income tax. But if you are tax exempt, then it's in the name. You don't pay tax. [00:05:06][18.2]

Sascha: [00:05:08] It's pretty self-explanatory, isn't it? [00:05:10][1.6]

Alec: [00:05:10] Yes, it is. It is. And churches in most parts of the world are tax exempt. And so that 20 or 30% that they would be paying to the government, they get to keep in their pocket. The classic example of this of how important it is is Scientology. I don't know if you've seen Louis Thoreau's Scientology documentary or you've kept up to date with any of them. [00:05:31][21.6]

Sascha: [00:05:32] Yeah, I've watched that. And also going Clea is a brilliant documentary. Yeah. [00:05:36][4.2]

Alec: [00:05:37] David Miscavige, when he quote unquote beat the IRS and got Scientology tax exempt status as a religion in America, it was cause for massive celebration. [00:05:48][11.7]

Audio Clip: [00:05:49] The pipeline of IRS false reports won't keep flowing across the planet. There will be no more nothing. Because on October the first, 1993, the IRS issued letters recognising Scientology and every one of its organisations as fully tax exempt. [00:06:06][17.4]

Sascha: [00:06:08] All right, Alec, let's move on to the third ingredient. [00:06:10][2.9]

Alec: [00:06:11] It's all about investing. Many of these religious organisations now operate as endowments, rather than taking the tax free tithing and distributing it to church operations or charitable endeavours that same year they now invest it for a rainy day in the future. So similar to a university endowment, many of these religious organisations have built billions of dollars of wealth taking that money and investing it rather than distributing it. [00:06:39][27.9]

Sascha: [00:06:39] So essentially every year many of these organisations collect money from their members, don't pay tax on it and then invest it. I am a dedicated listener of get started investing, but you don't necessarily need to listen to understand how the wealth builds very quickly. So with that context in mind, can you tell me the story, Alec of the Mormon Church as $100 billion fund? I love saying that amount of money. It's so ridiculous. [00:07:05][26.0]

Alec: [00:07:07] Well, yeah, Well, the Mormon Church started an investment division in the 1960s during a period of economic difficulty for the church. In 1969, construction on the church's office building was halted because they ran out of money for construction. At first, it was pretty small. The investment division had just three employees, and one of the church's top three leaders had to approve every trade. But like we keep preaching on get started investing, Sascha, from little things, big things can grow. And by the late 1970s, the investment division managed about $1 billion. That's an estimate from the Sovereign Wealth Fund Institute. Fast forward 27 years. In 1997, the investment division was spun off into Ensign Peak Advisors, a separate legal entity. And then by 2019, about 60 years since the investment division was started and signed, Peak was estimated to have $100 billion. Now, this was a tightly held secret in the Mormon Church, according to the Wall Street Journal, and signed peak employees signed lifetime confidentiality agreements. [00:08:19][72.2]

Sascha: [00:08:20] The magic of compound interest. Alec. That's all I can say in response to that. Of course, everything changed in 2019 when a whistleblower revealed this secret fund to the IRS, America's tax authorities, and that kicked off a number of federal investigations. We're going to take a break and then unpack what happened next in just a minute. 

Audio Clip: [00:08:46] Sam, have you heard the story about how the Mormon Church has a $100 billion hedge fund? And this 90 page memo published by the news site Religion Unplugged? David Neilson asked the U.S. Senate Finance Committee for oversight. 

Sascha: [00:08:58] Welcome back to The Dive. Today we're talking about the Mormon Church's secret $100 billion investment fund. Alec, let's pick up the story. In 2019, a former employee blew the whistle and revealed the fact that the Mormon Church had amassed this $100 billion in holdings. What did the whistleblower think that the church was doing wrong?

Alec: [00:09:21] So the whistleblower mentioned two things in their complaint. The first was that Ensign Peak was using the Mormon Church as tax exempt status, but it wasn't giving any money to charitable endeavours. That investigation never really went anywhere. The Mormon Church is tax exempt. But the second allegation was around disclosures and reporting. Investment managers with at least $100 million under management in the United States must publicly report their stock holdings every quarter. This is called a 13 F form, and they're then made public. And we can go online and see what these big asset managers are buying and selling. 

Sascha: [00:10:02] Yeah, I know that you and Bryce have actually done a number of Equity Mates investing episodes about this, where you go and look at traders and investors that you love and admire and see what they're buying and selling.

Alec: [00:10:13] Well, Sascha, not to jump ahead, but I've actually looked at what the Mormon Church owned now that they have been forced to start disclosing. But we'll get there. 

Sascha: [00:10:20] Well, now I'm going to have to listen right to the end of the episode. 

Alec: [00:10:23] So when the whistleblower blew the whistle in 2019 and Sinopec was estimated to have $100 billion under management, a lot more than $100 million threshold, but they weren't disclosing which led to an investigation by America's Securities and Exchange Commission. According to the SSA, to avoid disclosing Ensign Peak and the Mormon Church filed their assets under the names of 13 different shell companies located throughout the United States. And that meant that none of the 13 had over $100 million, and then they didn't have to disclose to the public how much wealth they had. So essentially, they spread the wealth out through all those shell companies to avoid having to report anything. Yeah, according to the SSA, the Mormon Church itself was aware of and signed paycheques misleading disclosures. 

Sascha: [00:11:14] So why, if the church wasn't breaking any laws building this wealth, why wouldn't you just disclose what you're buying and selling. 

Alec: [00:11:22] According to the church? Is this on? I'm not sure. 

Sascha: [00:11:26] I mean, this is defence, isn't it? So take it with a grain of salt. 

Alec: [00:11:30] According to them. They didn't want Mormons following the insane pigs trade. 

Sascha: [00:11:35] Okay. 

Alec: [00:11:36] I think the more likely reason is that Mormons would be far less likely to donate 10% of their income every year in tithing if they knew that the church had $100 billion stashed away.

Sascha: [00:11:48] It's difficult to kind of promote that idea of a rainy day if you know that the Rainy Day fund has that amount of money in it. Hmm. So I guess that leads to the bigger question, which is what is the rainy day? Why does the Mormon Church need $100 billion?

Alec: [00:12:04] So in 2020, the Wall Street Journal tried to estimate the Mormon Church's operating budget, which they put around $5 billion a year. Okay. So it's not cheap to run a worldwide religious organisation. And, you know, the $100 billion gives them 20 years worth of runway if they need it. The church also suggested to the Wall Street Journal that as it grows its membership in poorer areas of the world like Africa, members can't donate as much and it will need to draw on inside Peak's investments to help fund basic operations. 

Sascha: [00:12:38] Okay. 

Alec: [00:12:38] Interestingly, Sascha and I cannot stress how much this is alleged not by us, but by the 2019 whistleblower. There was another story reported at the time. The whistleblower said they heard Mr. Clarke, who is the who was the head of the investment fund, refer to the second coming of Jesus Christ as a part of the reason for insane pigs existence. Now, Mormons believe before Jesus returns, there will be a period of war and hardship. And so I guess the implication there is that they needed this fund for that period of war and hardship. Yeah, the Mormon Church disputes what the whistleblower said. They say the employee must have misunderstood his meaning. And importantly, when this second coming happens, quote, We don't have any idea whether financial assets will have any value at all. And you know what? That's probably fair enough. 

Sascha: [00:13:30] So, crucially, a lot of these dates are 20, 19, 20, 20. We're talking about this in 2023. Why is this being reported on now? Is it because the investigation has been resolved?

Alec: [00:13:42] Yes. So that's why this story is back in the headlines now. The SSA settled with the Mormon Church in February of this year and signed Paik agreed to pay a $4 million fine. And the Mormon Church itself agreed to pay a $1 million fine. 

Sascha: [00:13:56] Hang on. 4,000,001 million. 

Alec: [00:14:00] Yeah. Quick math. That's 0.005% of assets under management. 

Sascha: [00:14:06] Yeah. Okay. Yeah. Parking ticket. 

Alec: [00:14:09] Yeah, exactly. And as part of the settlement, the church and Ensign Peak didn't admit fault. They just agreed to pay a fine. 

Sascha: [00:14:17] All right, Well, Alec, you gave a really good tease before that. You've actually gone and looked at what they're investing in. So as part of the settlement, I'm assuming that as you've got access to that information, they've had to start disclosing. 

Alec: [00:14:31] Surprisingly, perhaps not surprisingly, Ensign Peak started making disclosures right after the whistleblower came forward, and I think they filed their first in February 2020. 

Sascha: [00:14:41] Tell me, what are they investing in now? 

Alec: [00:14:43] We want to give a big plug to ticker here, TKR dot com slash Equity Mates. That's where we got this data from. And you can pull data from 13 F's across the investment spectrum. Warren Buffett, Joel Greenblatt, Seth Klarman. If you want to see what the biggest investors in the world are investing in, you can go to ticker and as a listener to an Equity Mates podcast, you can get 15% off an annual subscription for the month of March using the code mate 15. 

Sascha: [00:15:14] And you're not going to say this, Alec so I'll say it for you. You and Bryce are pretty savvy and pretty hard to impress, and you always use ticker and you refer to it all the time. So it is something that we genuinely use in Equity Mates HQ. 

Alec: [00:15:28] Yeah, we genuinely use it. I'm about to finish off this story. I said this, I said that you can follow some of the biggest investors in the world and the Mormon Church or one of the biggest investors in the world. So we had a look at ticker and how to look at their portfolio, their top five holdings, Apple, Microsoft, UnitedHealth Group, which is a big health insurer, Alphabet, a.k.a Google and Exxon, ExxonMobil. 

Sascha: [00:15:55] Pretty boring, really. 

Alec: [00:15:57] Nothing too surprising or controversial. They're just some of the biggest companies in America. So then Dorsey and I gave ourselves a challenge. We wanted to find out if we could call out the Mormon Church with their in if they're investing didn't align with their values and Mormons have a number of practices not drinking tea or coffee, not drinking alcohol, not smoking and a few other things. And Sascha, I'm going to be honest, I went through the list of 200 companies in Ticker and I couldn't find anything. 

Sascha: [00:16:30] Wow. 

Alec: [00:16:31] Darcy reckons that McDonald's is a maybe the Mormon Church owns McDonald's. McDonald's sells coffee, but I think that's tenuous at best. 

Sascha: [00:16:40] Right? Nothing too controversial, Alec, But a reminder, if you do want to keep up to date with what the Mormon Church is investing in, then go to ticker. I'll put the link in the show notes. And as you're an Equity Mates media listener, you get 15% off your annual membership for the month of March. You just need to use the code mate. 15. As I said, I'll put the link in the show notes. We'd love to keep the conversation going, so please contact us by email with thedive@equitymates.com or hit, follow or subscribe wherever you're listening right now and then you'll never miss an episode again. Alec, thanks so much for joining me for The Dive today. 

Alec: [00:17:16] Thanks, Sascha. 

Sascha: [00:17:17] Until next time.