The Mormon Church Amassed $100 Billion. It Was the Best-Kept Secret in the Investment World.

A look inside the vast but little-known fund of the Church of Jesus Christ of Latter-day Saints: ‘We’ve tried to be somewhat anonymous.’

For more than half a century, the Mormon Church quietly built one of the world’s largest investment funds. Almost no one outside the church knew about it.

Some of that mystery evaporated late last year when a former employee revealed in a whistleblower complaint with the Internal Revenue Service that the fund, called Ensign Peak Advisors, had stockpiled $100 billion. The whistleblower also alleged that the church had improperly used some Ensign Peak funds. Officials of the Church of Jesus Christ of Latter-day Saints, colloquially known as the Mormon Church, denied those claims.

They also declined to comment on how much money their investment fund controls. “We’ve tried to be somewhat anonymous,” Roger Clarke, the head of Ensign Peak, said from the firm’s fourth-floor office, above a Salt Lake City food court. Ensign Peak doesn’t appear in that building’s directory.

Interviews with more than a dozen former employees and business partners provide a deeper look inside an organization that ballooned from a shoestring operation in the 1990s into a behemoth rivaling Wall Street’s largest firms.

Roger Clarke, the head of Ensign Peak Advisors.

PHOTO: LINDSAY D’ADDATO FOR THE WALL STREET JOURNAL

Its assets did total roughly $80 billion to $100 billion as of last year, some of the former employees said. That is at least double the size of Harvard University’s endowment and as large as the size of SoftBank’s Vision Fund, the world’s largest tech-investment fund. Its holdings include $40 billion of U.S. stock, timberland in the Florida panhandle and investments in prominent hedge funds such as Bridgewater Associates LP, according to some current and former fund employees.

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Church officials acknowledged the size of the fund is a tightly held secret, which they said was because Ensign Peak depends on donations—known as tithing—from the church’s 16 million world-wide members. The church is under no legal obligation to publicly report its finances.

But the whistleblower report—filed by David Nielsen, a former Ensign Peak portfolio manager—has heaped pressure on the church to be more transparent about its finances, something the church has avoided for decades.

The firm doesn’t tell business partners how much money it manages, an unusual practice on Wall Street. Ensign Peak employees sign lifetime confidentiality agreements. Most current employees are no longer told the firm’s total assets under management, according to some of the former employees; few employees understand what the money is intended for.

The Church of Jesus Christ of Latter-day Saints has 16 million members world-wide.

PHOTO: LINDSAY D’ADDATO FOR THE WALL STREET JOURNAL

In their first-ever interview about Ensign Peak’s operations, Mr. Clarke and church officials who oversee the firm said it was a rainy-day account to be used in difficult economic times. As the church continues to grow in poorer areas of the world like Africa, where members cannot donate as much, it will need Ensign Peak’s holdings to help fund basic operations, they said.

“We don’t know when the next 2008 is going to take place,” said Christopher Waddell, a member of the ecclesiastical arm that oversees Ensign Peak known as the presiding bishopric. Referring to the economic crash 12 years ago, he added, “If something like that were to happen again, we won’t have to stop missionary work.”

During the last financial crisis, they didn’t touch the reserves Ensign Peak had amassed, church officials said. Instead, the church cut the budget.

A former employee and the whistleblower in his report said they heard Mr. Clarke refer to the second coming of Jesus Christ as part of the reason for Ensign Peak’s existence. Mormons believe before Jesus returns, there will be a period of war and hardship.

Mr. Clarke said the employees must have misunderstood his meaning. “We believe at some point the savior will return. Nobody knows when,” he said.

When the second coming happens, “we don’t have any idea whether financial assets will have any value at all,” he added. “The issue is what happens before that, not at the second coming.”

Whereas university endowments generally subsidize operating costs with investment income, Ensign Peak does the opposite. Annual donations from the church’s members more than covers the church’s budget. The surplus goes to Ensign Peak. Members of the religion must give 10% of their income each year to remain in good standing.

Dean Davies, another member of the ecclesiastical arm that oversees Ensign Peak, said the church doesn’t publicly share its assets because “these funds are sacred” and “we don’t flaunt them for public review and critique.”

Mr. Clarke said he believed church leaders were concerned that public knowledge of the fund’s wealth might discourage tithing.

Paying tithing is more of a sense of commitment than it is the church needing the money,” Mr. Clarke said. “So they never wanted to be in a position where people felt like, you know, they shouldn’t make a contribution.”

Among the EliteThe Mormon Church’s investment fund,Ensign Peak Advisors, has total assetscomparable to some of the world’s largestinvestors.Sources: Fund documents and people withknowledge of the fund sizesNote: China Investment and Utah Retirement data as2018. Ensign Peak and Catholic Church are estimates.
$859 billion1261001005046.840.931.2China Investment CorporationRussia’s National Wealth FundEnsign PeakSoftBank Vision FundCatholic churchBill and Melinda Gates FoundationHarvard University EndowmentUtah Retirement Systems

Some members are now asking why details about the fund have been tightly held for so long, what the money is for, and whether tithing so much to the church should still be the standard practice.

Carolyn Homer, a church member who lives in Virginia, resolved to tithe less and give more to other charities after she heard about the money managed by Ensign Peak. A theme of the Book of Mormon, she said, is that God condemns churches that care more about wealth than feeding the poor. “When I hear members of the church say, ‘It’s none of your business how wealthy we are,’ that to me is echoing the very scripture we revere, and not in a good way.”

The church officials and Mr. Clarke declined to disclose the size of the church’s annual budget or to say how much money goes to Ensign Peak but gave estimates for its main areas of expenditure that, collectively, total about $5 billion.

A majority of the money held by Ensign Peak is from returns on existing investments and not member donations, according to Mr. Clarke. In recent years, the fund has gained about 7% annually, he said.

The former employees offered more details of Ensign Peak’s operations. During the bull market of the last decade, some of them said, the fund grew from about $40 billion in 2012 to $60 billion in 2014 to around $100 billion by 2019. About 70% of the money is liquid, one of the former employees said. As its assets swelled, Ensign Peak grew more secretive, said some of the former employees.

The firm doesn’t borrow money—the church warns members against going into debt. It also doesn’t invest in industries that Mormons consider objectionable—including alcohol, caffeinated beverages, tobacco and gambling. Mr. Clarke said the fund has pulled some of its money from an investment firm called Fisher Investments after the founder, Ken Fisher, made remarks last year that Mr. Fisher later called “inappropriate.” A spokesman for Fisher declined to comment.

A Calling

The church established the investment division, which would later become Ensign Peak, in the 1960s, during a period of economic hardship for the faith. In 1969, construction on the church’s office building was halted when the money for construction ran out.

DIVERSIFICATION

Ensign Peak invests all over the world in all types of assets. Here’s a selection of some significant investments:

Money managers

  • Bridgewater Associates–hedge fund
  • Fisher Investments–Investment manager

Individual stocks

  • Apple Inc.
  • Chevron Corp.
  • Visa Inc.
  • JP Morgan Chase
  • Home Depot
  • Google

SOURCE: Securities filings and Wall Street Journal reporting

Church leaders had long told members to put away provisions for hard times. Nathan Eldon Tanner, a counselor of the first presidency, the highest level of church leadership, said the church itself should do the same.

At first, the investment division had just three employees, and one of the church’s top three leaders had to approve every trade. By the late 1970s, the division managed about $1 billion, according to the Sovereign Wealth Fund Institute.

The investment division reported monthly to an oversight body called the investment committee, which included ecclesiastical leaders. They would compare the division’s performance against market benchmarks.

“If we were not doing as well, they’d ask, ‘How come?’” one former employee said.

In 1997, the investment division was spun off into Ensign Peak Advisors, a separate legal entity named after a hill that overlooks downtown Salt Lake. The peak has its own significance: in 1847, Brigham Young and other Mormon pioneers scaled it to survey the valley as a potential settling place.

Mr. Clarke was tapped to lead the firm and charged with “bringing the investment department into the 20th Century,” a former employee said.

Previously, Mr. Clarke had worked as a professor at Brigham Young University, which is owned by the church. He was running an investment firm in Los Angeles when the presiding bishopric called him.

“It certainly wasn’t the most attractive financial office,” Mr. Clarke said. “But you want to make a difference in your life…This was an opportunity.”

The firm has steadily grown under Mr. Clarke’s tenure. When the 2008 financial crisis hit, “We got whacked, like everybody else,” Mr. Clarke said. Ensign Peak went into a hiring freeze, but soon resumed adding staff.

It now employs about 70 people. About one in seven are women, Mr. Clarke said.

In most respects, Ensign Peak’s offices look much like those of any other investment firm. CNBC plays on the television by the entrance and newspapers are strewn across a lobby table.

But the walls hint at Ensign Peak’s religious nature. Paintings depict scenes from the Bible and Mormon history, including several that depict pioneers who trekked in the 1800s to what is now Utah.

Employees need a temple recommend—an honor, which allows them to enter the faith’s holiest spaces, that is not afforded to all members —to work at Ensign Peak. They earn far less than they would on Wall Street. One former employee said they make less than $150,000 a year, a fraction of the fortunes possible in finance.

“It was not glamorous or religious 99.9% of the time,” one of the former employees said. For most, working at the firm was “a religious calling,” he said.

Executives used to share information about the assets under management with employees. That changed in recent years; now few employees are explicitly told the number, according to Mr. Clarke and some of the former employees.

Bibles are stacked inside a church conference room.

PHOTO: LINDSAY D’ADDATO FOR THE WALL STREET JOURNAL

The firm also created a system of more than a dozen shell companies to make its stock investments harder to track, according to the former employees and Mr. Clarke. This was designed to prevent members of the church from mimicking what Ensign Peak was doing to protect them from mismanaging their own funds with insufficient information, according to Mr. Clarke.

Neuburgh Advisers LLC, one of the shell companies, held hundreds of stocks, including Apple Inc. shares valued at more than $175 million and Amazon.com Inc. shares worth more than $70 million, according to a recent regulatory filing.

From time to time, church leaders in the ecclesiastical arm that oversees Ensign Peak arranged lunch meetings with Ensign Peak employees. During Q&A sessions at the end, employees sometimes asked what the money might be used for, according to one of the former employees, who attended.

Church leaders responded by saying they wanted to know that, too, according to this person.

“It was so amorphous,” the former employee said. “It was always, ‘When we have direction from the prophet.’ Everyone was waiting, as it were, for direction from God.” The prophet is the president of the church.

The Quiet Giant

Ensign Peak’s scale went relatively unknown on Wall Street. The firm doesn’t tell business partners how much money it manages, an unusual level of secrecy in the financial world.

One outside expert said the financial industry didn’t suspect it might be approaching $100 billion. “People thought it was between $30 and $40 billion,” said Michael Maduell, president of the Sovereign Wealth Fund Institute, which tracks large pools of money.

Employees in the fund rarely shared with outsiders much of what they did, even to friends in the same line of work. A person who worked at a money management firm said when that firm sought an investment from Ensign Peak, officials at the Mormon fund declined to share how much money they managed. Ensign Peak told this person that a small investment for the fund would be about $30 million and a large investment about $350 million.

The fund invests conservatively, Mr. Clarke said, in part because it has “a longer term horizon” than many other firms. In recent years, Mr. Clarke developed a quantitative stock trading program, incorporating one of the hottest recent trends in finance.

On his office bookshelf, Mr. Clarke keeps a copy of “Principles” by Ray Dalio, the founder of Bridgewater Associates. He said Bridgewater deputies have visited in the past, and that Mr. Dalio’s firm “helped us think about what’s happening kind of in the broader economy.” Bridgewater declined to comment.

Mr. Clarke of Ensign Peak keeps an ancient Roman coin in his office, a reference to the biblical story of the widow’s mite, in which a poor widow donates to the temple treasury.

PHOTO: IAN LOVETT/THE WALL STREET JOURNAL

Mr. Clarke also keeps an ancient Roman coin in his office, a reference to the biblical story of the widow’s mite, in which a poor widow donates to the temple treasury.

“It’s just a reminder of the purpose of the funds,” he said. “Many of the funds come from people who don’t make a lot of money.”

A Debate That Started in Salt Lake

Among rank-and-file members of the church, the whistleblower report unleashed an intense debate about tithing and how the church uses its vast resources.

On a recent snowy Sunday at a Salt Lake City meetinghouse, members said they trusted church leaders with their own money, and would continue to donate 10% of their income. “They use it well,” said Lasi Kioa, a 61-year-old immigrant from Tonga and a lifelong church member. “They help other people. They build the church. I believe in that.”

But Sam Brunson, a church member and tax law professor at Loyola University, said he wished church officials would use the $100 billion to help those in need today.

“They could go a good way to eradicating malaria, or fix Puerto Rico’s electrical grid,” he said. Alternatively, he said, the church could change what it considers tithing, allowing members to give 10% of their income to charity, rather than to the church itself.

Mr. Waddell, the member of the ecclesiastical arm that oversees Ensign Peak, said that with more than 16 million members there would always be some difference of opinion, but the vast majority of members have “expressed appreciation for the success we have had in managing the finances.”

Dean Davies, left, and Christopher Waddell, right, are members of the ecclesiastical arm that oversees Ensign Peak. Gerald Causse, center, is the presiding bishop.

PHOTO: LINDSAY D’ADDATO FOR THE WALL STREET JOURNAL

Mr. Nielsen’s report, which was first reported by the Washington Post, stoked this debate. The report alleged the fund made no charitable contributions despite being incorporated as a tax-exempt charity. Fund and church officials said they haven’t violated any tax laws, and that the church organization as a whole, of which Ensign Peak is a part, puts nearly $1 billion a year toward humanitarian causes and charities. The IRS, which hasn’t accused the church of any wrongdoing, said it doesn’t comment on specific whistleblower claims. Mr. Nielsen didn’t respond to requests for comment.

Tax specialists familiar with the IRS’s whistleblower program said they didn’t expect the claim against Ensign Peak to be successful. The program receives many more claims than it acts on, and it has historically been reluctant to pursue tax issues involving churches, which have special status under the tax code. If the whistleblower’s claim is successful, that person could receive up to 30% of the proceeds collected by the IRS.

The whistleblower also accused Ensign Peak of illegally using tax-exempt donations to bail out two business ventures during the financial crisis—a life insurance company the church owned and construction of the City Creek Center, a Salt Lake City mall across the street from the church’s offices. Church officials confirmed to the Journal they had made these payments but denied they were illegal.

Gerald Causse, the presiding bishop, said the payouts during the financial crisis weren’t charitable disbursements at all, but investments. “It’s not an expenditure,” he said. “Tomorrow we can sell it and it will come back with a return.”

In the interview with the Journal, church officials maintained the payouts were not made with tithing funds, because, they said, most of the money in Ensign Peak doesn’t come directly from tithing but from returns on investment.

Tax lawyers have publicly debated whether Ensign Peak violated any laws as alleged by the whistleblower. Mr. Brunson, the tax law professor, doesn’t think so. But as a church member, he said he finds the lack of transparency frustrating, even if it is legal.

“I’m a stakeholder in the church, and society has some stake in the church too,” he said. “Even though I’m willing to tithe blindly, I would like to see what’s happening with that money.”

Government Probes Fidelity Over Obscure Mutual-Fund Fees

Boston-based firm characterizes so-called infrastructure fee as solution to ‘broken’ business model

.. By marking the charge as an infrastructure fee, the fund firms may be able to avoid disclosing it to investors.
.. Fund companies that decline to pay the amount will “be subject to a very limited relationship” with the company, the document says. Funds can either pay the fee themselves or push the cost onto investors in the mutual fund. This can increase the overall fees of a fund, causing individual investors to pay more and dent returns.
.. The fee is calculated as 0.15% of a mutual-fund company’s industrywide assets, not just on the dollar amount of assets held by Fidelity customers buying shares on the platform, the document says.

The infrastructure fee appears to be a way for Fidelity to make up for revenue the firm has lost as a result of investors flocking to reduced-cost mutual funds, a situation the firm refers to in the document as “unsustainable economics.” Fidelity also stated in the document that its traditional business model is “broken” and characterized the infrastructure fee as a solution to that problem.

.. The infrastructure fee is levied on lower-cost share classes such as those aimed at retirement accounts. The Labor Department has jurisdiction over retirement accounts that are subject to extra protections and disclosures under the Employee Retirement Income Security Act, or Erisa.

.. The document outlining the infrastructure fee, “Fidelity FundsNetwork Business & Services Guide,” is “not to be distributed to the public as sales material in oral or written form,” and “may not be shared with any third party.”

.. When a fund pays a fee that aims to result in the sale of fund shares, either directly or indirectly, securities laws require it to be part of what is known as a 12b-1 plan and to be disclosed to investors. Many lower-cost fund share classes don’t have 12b-1 plans—a reason why they are cheaper.

.. The Fidelity infrastructure fee is also the subject of a lawsuit filed last week in a Massachusetts federal court by a participant in a retirement plan offered by T-Mobile US, Inc. In that suit, the plaintiff contends that the infrastructure charge is prohibited under Erisa and that Fidelity incentivizes mutual funds on its platform to “conceal the true nature of fees associated with these funds.”

Why corporate America loves Donald Trump

American executives are betting that the president is good for business. Not in the long run

MOST American elites believe that the Trump presidency is hurting their country. Foreign-policy mandarins are terrified that security alliances are being wrecked. Fiscal experts warn that borrowing is spiralling out of control. Scientists deplore the rejection of climate change. And some legal experts warn of a looming constitutional crisis.

.. Bosses reckon that the value of tax cuts, deregulation and potential trade concessions from China outweighs the hazy costs of weaker institutions and trade wars.

.. the investment surge is unlike any before—it is skewed towards tech giants, not firms with factories. When it comes to gauging the full costs of Mr Trump, America Inc is being short-sighted and sloppy.

.. The benefits for business of Mr Trump are clear, then: less tax and red tape, potential trade gains and a 6-8% uplift in earnings.

.. During the Obama years corporate America was convinced it was under siege when in fact, judged by the numbers, it was in a golden era, with average profits 31% above long-term levels.

Now bosses think they have entered a nirvana, when the reality is that the country’s system of commerce is lurching away from rules, openness and multilateral treaties towards arbitrariness, insularity and transient deals.

.. so far this month 200-odd listed American firms have discussed the financial impact of tariffs on their calls with investors. Over time, a mesh of distortions will build up.

.. American firms have $8trn of capital sunk abroad; foreign firms have $7trn in America; and there have been 15,000 inbound deals since 2008. The cost involved in monitoring all this activity could ultimately be vast. As America eschews global co-operation, its firms will also face more duplicative regulation abroad. Europe has already introduced new regimes this year for financial instruments and data.

.. The expense of re-regulating trade could even exceed the benefits of deregulation at home. That might be tolerable, were it not for the other big cost of the Trump era: unpredictability. At home the corporate-tax cuts will partly expire after 2022.

.. Bosses hope that the belligerence on trade is a ploy borrowed from “The Apprentice”, and that stable agreements will emerge. But imagine that America stitches up a deal with China and the bilateral trade deficit then fails to shrink, or Chinese firms cease buying American high-tech components as they become self-sufficient

.. Another reason for the growing unpredictability is Mr Trump’s urge to show off his power with acts of pure political discretion.

  • He has just asked the postal service to raise delivery prices for Amazon, his bête noire and the world’s second-most valuable listed firm.
  • He could easily strike out in anger at other Silicon Valley firms—after all, they increasingly control the flow of political information.
  • He wants the fate of ZTE, a Chinese telecoms firm banned in America for sanctions violations, to turn on his personal whim.

.. When policy becomes a rolling negotiation, lobbying explodes. The less predictable business environment that results will raise the cost of capital.

.. Mr Trump expects wages to rise, but 85% of firms in the S&P 500 are forecast to expand margins by 2019

.. Either shareholders, or workers and Mr Trump, are going to be disappointed.

.. In a downturn, American business may find that its fabled flexibility has been compromised because the politics of firing workers and slashing costs has become toxic.

.. American business may one day conclude that this was the moment when it booked all the benefits of the Trump era, while failing to account properly for the costs.

Will a Corporate Tax Cut Lift Worker Pay? A Union Wants It in Writing

Speaker Paul D. Ryan, for example, said in a recent speech that “fixing the business side of our tax code is really all about helping families and workers,” adding that “cutting the corporate tax rate means more jobs here in the United States. It will foster increased competition, which will directly drive up wages for our workers.”

Yet few American companies have offered specific plans that support those promises. While many chief executives broadly praise Republicans’ efforts to cut taxes, few have detailed how they would deploy the savings from a corporate tax cut or put more money back in workers’ pockets.

The lack of pledges to create jobs has not been lost on President Trump’s top economic adviser, Gary D. Cohn, who seemed perplexed last week about the lack of corporate enthusiasm for a tax cut.

Mr. Cohn asked his audience of chief executives how many of them would invest more if the tax cut were passed. When only a few attendees raised their hands, Mr. Cohn asked: “Why aren’t the other hands up?”

.. Communications Workers of America asked several companies that employ its members to promise to give workers a pay increase if the cut in the corporate tax rate goes through.

..  corporate profit rates have been historically high since 2007, while business investment has been historically low,”

On Afghanistan, There’s No Way Out

When it comes to Afghanistan, we’ve tried everything. The lesson is: Nothing works.

.. We’ve tried “light footprint.”

.. We’ve tried big footprint.

.. We’ve tried nation building.

.. the United States had spent $104 billion on Afghan relief and reconstruction funds, most of it for security but also nearly $30 billion for “governance and development” and $7.5 billion on counternarcotics.

.. Result: As of 2015, more than three in five Afghans remained illiterate. Afghan security forces lost 4,000 members a month

.. The country ranks 169th out of 176 countries on Transparency International’s Corruption Perceptions Index, ahead of only Somalia, South Sudan, North Korea, Syria, Yemen, Sudan and Libya. Opium

.. We’ve tried killing terrorists. Lots and lots of them. As many as 42,000 Taliban and other insurgents have been killed and another 19,000 wounded

.. Result: The Taliban’s numbers in 2005 were estimated at anywhere between 2,000 and 10,000 fighters. Within a decade, those numbers had grown to an estimated 60,000 fighters.

.. We’ve tried carrots and sticks with Pakistan. In 2011, Washington gave $3.5 billion in aid to Islamabad.

.. American leverage with Pakistan has declined as Chinese investment in the country has surged, reaching $62 billion this year.

.. The group’s insistence that all foreign troops withdraw before it enters talks gives away its game, which isn’t to share power with the elected government, but to seize power from it.
.. What about two supposedly “untried” options: another surge, exceeding what Obama did in troop numbers but not limited by deadlines or restrictive rules of engagement; or, alternatively, a complete withdrawal of our troops?

But that’s been tried, too. Soviet forces in Afghanistan in the 1980s practiced a “bomb-the-stuff-out-of-them” approach to warfare, likely including the use of chemical weapons.

.. Between 1990 and 2000, tens of thousands of Afghans — as many as a million people, according to one estimate — died in three waves of civil war.

.. President Trump may think he’s trying something new with his Afghan policy. He isn’t. Obama killed a lot of terrorists. George W. Bush pursued what amounted to a “conditions-based” approach, without target dates for withdrawal. Both were often stern with Pakistan. Both conducted intensive policy reviews.

.. Even if we could kill every insurgent tomorrow, they would return, as long as they can draw on the religious fanaticism of the madrasas, the ethnic ambitions of the Pashtun, and the profits of the heroin trade.

Grassley wants review of Chinese company’s marketing of deal with Jared Kushner’s family

The head of the Senate Judiciary Committee is calling for a review of “potentially fraudulent statements and misrepresentations” made by a Chinese company in promoting property investments that are partly managed by the company of senior White House adviser Jared Kushner’s family.

.. “As I’m sure you are aware, recent press reports indicate that Qiaowai has touted its relationship with the current administration as a guarantee that potential EB-5 investors will receive lawful permanent residence in return for a no-risk investment in One Journal Square,” Grassley wrote in his letter.

.. the company advertised that the project “in a real sense guarantees a permanent green card and the safety of the investment principal, and we consider it one of the best of Qiaowai’s 87 projects to date!”