Shifting to Equity Paybacks

Innovations in fiduciary finance, and the innovation of fiduciary activism

How we got to where we are

  • 1830 – Harvard v Amory, The Massachusetts Rule of the Prudent Person familiar with such matters – private trusts for life income with a charitable remainder = Civil Society Endowments

  • 1870-1900 The Gilded Age, a boom fueled by capital markets capture of insurance company money that went bust in the Panics of 1893 and 1907, requiring Teddy Roosevelt to ride in to bust up the trusts while state legislatures made it illegal for insurance companies to speculate with policyholders’ premiums

  • 1890 through 1950s – innovation of the social trust as a mutual aid society built and operated according to the laws of actuarial science to average the actual cost making contractually calculated payments to contractually qualified recipients at contractually specified intervals for income security in a dignified retirement for evergreen populations of current and future retired works, subsidized by tax-exempt investment earnings = Workforce Pensions

  • 1914-1918 – the Great War

  • The Roaring Twenties – another capital asset pricing boom, this time fueled by capital markets capture of bank deposits,

  • The Crash of ’29, and the Great Depression: the boom goes bust, with catastrophic consequences

  • 1933 – FDR: The Four Freedoms and the New Deal: A New Hope

  • 1936 – John Maynard Keynes – General Theory of Employment, Interest and Money

  • 1939 – 1945 World War II

  • 1947 – The Mt. Pelerin Society and the Manifesto of Neoliberalism: The Markets Strike Back

  • 1952 – Harry Markowitz – Portfolio Selection = Modern Portfolio Theory of mean-variance mathematics for constructing portfolios that mimic the markets overall

  • 1969 – Cary and Bright: Report to Ford Foundation on The Law and the Lore of Endowments

  • 1970 – The Friedman Doctrine: “The social responsibility of business is to increase its profits.”

  • 1972 – Uniform Management of Institutional Funds Act = Modern Portfolio Theory is fiduciary

  • 1973 – Cambridge Associates becomes the world’s first Asset Manager, receiving a mandate from Harvard Management to run a portfolio for the Harvard Endowments

  • 1974 – Employee Retirement Income Security Act (ERISA) – federal regulation of business workforce pensions

  • 1978 – 401(k) company sponsored, tax-deferred retirement savings accounts