[Wikimedia-l] Wikimedia (Foundation) endowment

[Thomas Dalton]

On 14 March 2013 13:00, Manuel Schneider <manuel.schneider at wikimedia.ch> wrote:
> Thanks Andrew and Philippe for your explanation and links.
>
> So that is a plan to build a reserve of funds that is so big that the
> operation can be funded by the capital's gain - interest, dividends...

Yes, although "reserve" generally refers to money kept in case
something goes wrong. An endowment would be a separate fund
specifically raised for that purpose.

> Sounds interesting, even though the endowment must be huge to cover our
> yearly budgets. Another problem is that it is currently very hard to
> find an interesting investment with low risks. Interest rates have been
> reduced by the major central banks in order to overcome the global
> recession, many formerly safe and interesting investments became risky
> and those who are still safe partly have even negative interest rates
> (eg. german state bonds).

An endowment is a long-term thing. Current low interest rates probably
won't last more than a few years. Even so, it would need to be a very
large fund, yes. If you can get a return of, say, 2% over inflation
(you can get more than that if you're willing to take some risks) you
need 50 times your annual budget to fund it all from the endowment.
That would be something like $2 billion for the WMF. It doesn't need
to fund the entire budget to be useful, though, and can be built up
over time (eg. from legacies in people's wills).