According to the official website of the Nobel Prize, the Nobel Foundation has decided that the prize money for each Nobel Prize in 2023 will be increased by 1 million Swedish kronor (approximately 660,000 yuan), which means that the 2023 winner will receive 11 million Swedish kronor (approximately 7.34 million yuan). This will be the largest prize amount in the history of the Nobel Prize in more than 100 years.
In 2001, the 100th anniversary of the Nobel Prize, the prize amount reached 10 million Swedish kronor for the first time and continued until 2011. The occurrence of the financial crisis caused the principal of the Nobel Foundation to shrink. In 2012, the Nobel Prize prize money was reduced to 8 million Swedish kronor. In 2017, the bonus amount increased from 8 million Swedish kronor to 9 million, and in 2020 it was increased to 10 million.
Regarding the increase in bonuses, the Nobel Foundation stated that as of the end of 2022, the foundation's total investment capital market value was 5.799 billion Swedish krona (approximately 3.874 billion yuan). The foundation chose to increase the award because "it was financially feasible to do so."
The Nobel Prize Foundation is responsible for managing the property of Swedish dynamite inventor Alfred Nobel. In his will in 1895, Nobel entrusted the foundation with a legacy of 31.5 million Swedish krona. From 1901 to the present, after experiencing two world wars and multiple economic crises, how does the Nobel Foundation manage Nobel's legacy and achieve a century-old legacy? Two researchers from Shanghai Jiao Tong University tried to give the answer through their research.
According to the schedule, the list of 2023 Nobel Prize awards will be announced from October 2. "Intellectuals" will also enter the "Nobel Prize Golden Week" to bring readers more information about the natural science fields of the Nobel Prize.
The specific time for the announcement of the 2023 Nobel Prize list:
October 2nd - Prize in Physiology or Medicine 11:30 CET (17:30 Beijing time)
October 3rd - Physics Prize 11:45 CET (17:45 Beijing time)
October 4th - Chemistry Prize 11:45 CET (17:45 Beijing time)
October 5th - Literature Prize 13:00 Central European Time (19:00 Beijing time)
October 6 - Peace Prize 11:00 Central European Time (17:00 Beijing time)
October 9th - Economics Prize 11:45 CET (17:45 Beijing time)
From internal to external, from individuals to organizations, the all-round “preservation” of Nobel institutions has kept the Nobel Prize still young and rejuvenated for a century. What’s even more amazing is that Mr. Nobel’s legacy donation of approximately 31 million Swedish kronor has not only been distributed for more than 100 years, but has also increased in value to today’s 5.799 billion Swedish kronor! And in terms of nominal value alone, the bonuses issued in 2015 (SEK 40 million) were enough to consume this original donation. So, how does the Nobel Foundation, as the financial steward of the Nobel Prize, manage Mr. Nobel's legacy so that the money can continue to support the distribution of prizes and increase in value at the same time?
One of the "Three Views" - Keeping Sufficient Wealth
Nobel in his youth (Alfred Bernhard Nobel)
Source: WIki
Legacy donations are the initial source of investment capital for the Nobel Foundation. Mr. Nobel was not only a famous Swedish chemist, but also an engineer, inventor, and entrepreneur. He held 355 patents in his life, and used them to establish nearly a hundred factories in 20 countries and build a global industrial empire. This man, who was called "the richest man in Europe" by the great French writer Hugo, left only a small amount of property to his family members after his death. Most of his realizable property was used to establish a fund, which was invested and managed by the executor, and the annual investment income was distributed in the form of bonuses to those who made the most outstanding contributions to mankind in the previous year. The total net value of Mr. Nobel's legacy donation exceeds 31 million Swedish kronor. This huge sum of money laid an extremely strong financial foundation for the launch and development of the Nobel Prize.
Investment income is a regular source of investment capital for the Nobel Foundation. The Nobel Foundation does not raise funds from outside, so there is no external funding to supplement it. In order to prevent the long-term shrinkage of investment principal caused by inflation, it is necessary to form an internal hematopoietic function of funds. According to the Charter of the Nobel Foundation (hereinafter referred to as the Charter), the foundation must allocate part of its investment income to the investment principal every year. There are two ways to determine this amount. One is to multiply the current year's inflation rate with the fund's market value, and the other is to directly allocate 10% of the total income for that year. For example, the first approach was taken in 2012, with SEK 26 million being transferred to the principal to maintain the inflation-adjusted fund value, while the second approach was taken in 2013, with SEK 13.2 million being transferred.
Tax-free benefits are an implicit source of investment capital for the Nobel Foundation. At the beginning of its establishment, the Nobel Foundation's investments faced a heavy tax burden. For a long time, the Nobel Foundation was the largest taxpayer in Stockholm. Fortunately, Sweden and the United States granted the nonprofit organization tax-exempt status in 1946 and 1953 respectively. In a sense, the tax exemption is equivalent to the government's annual principal contribution to the Nobel Foundation. In addition, according to the Charter, “If the winner refuses to accept the Nobel Prize, or the prize check is not cashed in accordance with the provisions of the Board of Governors before October 1 of the following year, the prize will be included in the principal of the Foundation.” “If for some reason the prize is not awarded, the prize will be retained until the next year. If the prize cannot be awarded by then, the prize will be included in the principal of the Foundation.” These are some possible sources of investment principal.
Despite the impact of principal shrinkage, the Nobel Foundation's investment principal has been preserved and has grown beyond inflation in the long term due to the huge amount of start-up capital as the cornerstone, as well as the two-way protection of income repatriation (open source) and tax exemption (reduction). As of the end of 2014, including its own properties, the Nobel Foundation's investment market value reached 3.87 billion Swedish krona (approximately 3.1 billion yuan), and its actual value increased by 226% compared to the beginning of its establishment.
Nobel’s will丨Source: nobelprize.org
The second of "Three Views" - Manage money well
Due to their special missions, many foreign foundations pay more attention to safety and stability when using the capital market to maintain and increase the value of their assets. The early Charter stipulated that the Nobel Fund could only invest in fixed-income, guaranteed or mortgaged products such as bonds and loans. However, this overly conservative financial management approach limited the growth of income, making it increasingly difficult to pay out the Nobel Prize. In 1953, the Swedish government relaxed its policies, allowing the Nobel Foundation to freely invest in stocks and real estate, asset classes that were once off-limits. Driven by both tax exemptions and liberal investment policies, the Nobel Foundation's investment management changed from passive to active, and successfully reversed the impairment trend of investment funds, becoming a landmark change in its investment history.
Entering the 1980s, the Nobel Foundation ushered in a good time for investment. The stock bull market prevailed from 1982 to 1999, which also coincided with the real estate boom in Stockholm. The Nobel Foundation, which invested a large amount of real estate there, made considerable profits. In 1986, the assets of the Ford Foundation, the largest foundation in the United States at the time, less than doubled from US$2.8 billion (in 1970) to US$4.7 billion, while the market value of the Nobel Foundation nearly quintupled during the same period. In 1987, the Board of Directors transferred the majority of the foundation's real estate to an independent public company, Beväringen, and sold its shares in the company before the real estate bubble burst in the early 1990s. Stieg Rammel, then the executive director of the Nobel Foundation, not only identified the trends in the real estate market, but also focused on diversifying investments globally to reduce risks and tap investment growth points. He is responsible for domestic investments in Sweden, while cross-border investments are handed over to external financial consultants. This integrated internal and external management method highlights its advantages in an increasingly complex investment environment.
In 2007, Nobel Fund invested 67% in stocks, most of which were stocks of European and American companies. Since the global financial crisis in 2008, foundations have become more risk-averse in stock investments, with the investment ratio basically maintaining a level of just over 50%. The investment ratios of stocks and bonds have both shown a downward trend, and the foundation's key investment areas have extended to high-yield alternative investments such as hedge funds and real estate in line with market trends. As shown in the figure below, as of the end of 2014, the Nobel Foundation's investment portfolio categories were stocks (55%), bonds (12%), and alternatives (33%). It is worth noting that hedge funds accounted for nearly 1/4. Although the investment performance of the Nobel Foundation was not optimistic during the crisis, it has recovered slightly in the past two years. For example, the total investment returns in 2013 and 2014 were 16.4% and 11.8% respectively. The Nobel Foundation's main investment income still comes from stocks (26.6%, 2014). In addition, the return rate of private equity (16.7%, 2014) has also improved. The newly added convertible bond investment at the end of May 2014 had an annualized investment return rate of 16.7% at the end of that year.
Nobel Foundation’s asset allocation (December 31, 2014)
Author's drawing
With reasonable asset allocation, global diversification of investments, and expansion of alternative investments, the Nobel Foundation's investment management has withstood the test of the market, but there have been counterexamples. Wenner-Grenska Samfundet, an almost unknown institution, was also a Swedish foundation. It was established in 1937 with donations from Swedish industrialist and tycoon Axel Wenner-Gren and his wife. The background of the establishment of the foundation is very similar to that of the Nobel Foundation. However, the projects it invested in were too risky, and the investment director's strategy made serious mistakes. As a result, the assets that once amounted to 40 million Swedish kronor were reduced to less than a few million. Moreover, members of the foundation have been prosecuted since November 1973. Someone once predicted that if the foundation's assets were used for securities investment, the asset size at that time would exceed the Nobel Foundation.
The third of the "Three Views" - dispersing quasi-money
The amount of the Nobel Prize is determined by the Foundation Council, and the amount of each individual prize is equal. Specifically, 10% of the Nobel Foundation's net investment income each year is reinvested in principal, and the remaining 90% is divided into five equal parts and handed over to each award-winning organization. After each institution receives the corresponding funds, 25% will be deducted as award fees and Nobel Institute funding, and the remaining 75% will be the amount of each Nobel Prize that year. Over the past 100 years, the amount of Nobel Prize prize money has changed a lot. According to Nobel's last wish, the bonus of about 150,000 Swedish kronor in 1901 was exactly equivalent to 20 years' salary of a professor at that time. Subsequently, the amount of the bonus rose and fell, until 1991, the bonus of 6 million Swedish krona was equal to the actual value of the first bonus 90 years ago.
According to Mr. Nobel's last wish, only the foundation's direct income, that is, interest and dividends, can be used for the Nobel Prize. However, starting in 2000, the Nobel Foundation was allowed to use capital gains from the sale of assets to pay bonuses and meet daily expenses. In 2001, the 100th anniversary of the Nobel Prize, the prize amount reached 10 million Swedish kronor for the first time and continued until 2011. The occurrence of the financial crisis caused the Nobel Foundation's principal to shrink and its income to be bleak. However, at the same time, the Nobel Foundation's expenses continued to increase year by year. Lars Heikenstein, the current executive director of the Nobel Foundation, said that under this situation the foundation can still maintain for 30 years, but the Nobel Prize is an eternal cause, "we should respond to this." Starting from 2012, the Nobel Prize prize money has been reduced to 8 million Swedish kronor to reduce the loss of principal and ensure the sustainable payment of prize money. In addition, the Nobel Foundation also has emergency reserve funds. Even in the almost impossible extreme situation of not receiving investment income for two consecutive years, the foundation can still distribute bonuses as usual without having to use the principal.
In 1968, on the occasion of its 300th anniversary, the Riksbank donated a large sum of money to the Nobel Foundation and established the Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The prize money for this prize is not provided by the Nobel Foundation. Instead, the Swedish central bank sponsors the same amount of money as the Nobel prize money each year. Moreover, the Riksbank needs to pay additional funds to the Nobel Foundation equal to 65% of the current year's prize amount to make up for the selection costs of the economics prize winner. After the establishment of the Economics Prize, the Nobel Foundation decided not to add any more awards under Nobel's name.
From the perspective of bonus withdrawal, the Nobel Foundation controls the following two aspects: First, strict bonus withdrawal rules and emergency preparations enable the foundation to formulate a reasonable and reliable bonus amount, which not only ensures the continuous award of Nobel bonuses, but also avoids the use of principal. Second, unswervingly adhere to the original award of the Nobel Prize, neither increasing nor decreasing. This not only respects Mr. Nobel’s last wish, but also prevents extraneous matters from causing the dispersion of energy and financial resources, thereby ensuring the sustainability of the Nobel Prize itself.
1901, the first Nobel Prize Award Ceremony
Held at the Old Royal Academy of Music in Stockholm丨Source: nobelprize.org
The road to sustainable funds
Endowment funds can be divided into two models, spending type and perpetual type. The principal of a spending fund can be used up immediately or within a certain period, while the principal of a perpetual fund cannot be used, but is used for investment to obtain income, and the income is used for needs. The essence of the latter's operation is to combine strong principal, professional investment, and reasonable expenditure, so that the original capital can continuously generate benefits.
Taking Mr. Nobel's legacy donation as a starting point, the Nobel Foundation controls asset management around the "three concepts" of keeping enough money, managing money well, and dispersing money accurately, and has embarked on the right path of a sustainable fund. Keep enough money: Having a strong original fund is an advantage, but only by not using the investment principal and retaining the actual value of the principal through annual income retention can you still have enough capital to make money in the future. Manage money well: adjust investment strategies in a timely manner according to market conditions and policy trends, gradually change from conservative and passive to active and proactive, and explore new investment growth points, so as to continuously realize the appreciation of principal. Dispersed quasi-funding: Flexible bonus amounts and fixed award ranges make the outflow of foundation funds reasonable and controllable.
A century of uninterrupted operation has accumulated a brand for the Nobel Prize, and the economic lifeline to maintain its operation is particularly important. It can be said that the sustainable asset management model is indispensable to the successful operation of the Nobel Prize. This is also the management model adopted by many foreign university endowment funds. However, the operating models of the Nobel Foundation and university endowment funds are different: on the one hand, the Nobel Foundation does not raise funds from the outside, and its principal mainly comes from Nobel's one-time huge donations and continued investment income retention, while the university endowment fund raises funds year-round, and its principal comes from ongoing social donations and continued investment income retention; on the other hand, the Nobel Foundation only provides funding for the Nobel Prize, while the university endowment funds support the development of the school from many aspects such as overall finance, scientific research investment, faculty, and student scholarships. Therefore, the sustainable model of university endowment funds is more complex, and the effects of the sustainable financial management model are also more obvious, requiring more and in-depth research.
Foundations in my country have emerged since the 1980s. As of early February 2015, the total number of foundations has reached 4,268. Corporate and individual donations continue to increase, and large donations appear frequently. In 2014, 24 people in my country made annual donations of more than 100 million yuan, and most of them were concentrated in public welfare fields such as higher education. A large number of non-public foundations have emerged, especially foundations established by domestic enterprises. They usually have funds first and then establish the foundation according to its purpose and charter. However, due to the short time, my country's foundations are still in the exploratory stage in terms of project operations, fund management and other aspects. Drawing on the Nobel Foundation’s sustainable financial management experience will help make our country’s foundations an eternal cause, allowing donated funds to be effective year after year.
Design drawing of the Nobel Center, expected to start construction in 2017 and open in December 2019
Will include Nobel Prize-related exhibitions, lectures and educational facilities
Source: NobelCenter
Written by | Yu Kai, Xu Yang
Editor | Chen Xiaoxue