The Wall Street Journal’s daily human interest story featured a holiday season tale of the Fuggerei, a Roman Catholic housing compound for the poor in Germany. The price of admission for those lucky enough to get in is yearly rent of one Rhein guilder, which equals 88 euro cents or $1.23, plus daily prayers for the founder, Jakob Fugger and his descendants.
How does such a marvel exist? The settlement is funded by a charitable trust, and the rent remains unchanged since the trust was established…in 1520.
Think about that. Can you think of another pool of capital that has lasted that long, let alone a commercial enterprise? The Fugger family is still well off, but no where near as rich as in Jakob Fugger’s day.
The story does not give much detail about how the trust survived (a few nasty events like the German hyperinflation and World War II intervened), and gives a few tidbits about the last 200 or so years.
The core holding is forestry properties, which is both a renewable resource and inflation-hedged (admittedly with some volatility) and also owns some local real estate. The article does not indicate whether it holds securities.
Annual returns have been 0.5% to 2.0% over inflation
A fund manager who has quite a successful track record and manages money for families once told me that most investors fail to understand the importance of preserving capital and the value of keeping inflation. He said if you could consistently beat inflation by 2 or 3 percent, you would do far better than most understand. But too many investors chase greater returns, take on undue risk and in the long haul wind up worse off than if they had set more modest and attainable objectives (and note that this manager does seek and generally achieves higher returns because that is what customers want).
There is a second, behavioral issue with seeking higher returns and accepting the attendant risks. Let’s say you do have a good year, or perhaps even a run of good years. You come to perceive this level of returns as sustainable, when it may be luck or an unusual set of investment conditions that will not persist. But human nature being what it is, most people would increase their expenditures in line with their new level of wealth, and are ill prepared for a reversal of fortune, as the last year has shown.
Bob Brinker, who my wife listens to, is still preaching dollar cost averaging and balanced portfolio in this market….if we all thought the same life would be boring, right?
Thanks for the posting! I liked the part about thinking patterns of experience must continue unbroken….change is consistent.
Pah, German Johnny-come-latelies.
“One very early spin-off from the harbour was the creation in 1498 of the Aberdeen Shore Porter’s Society, whose lorries can still be seen on roads of the north east over 500 years later.”
@dearieme: the spirit is willing but the example is weak. The ASPS is a business, rather than a pool of capital.
There are plenty of British endowments that are older than the Fuggerei, I am sure. Oxbridge colleges, Cathedral chests (but not the CofE funds, as these probably came from the monasteries), the London Livery companies, the Inns of Court, the London Bridges Trust (although that has toll revenues) and countless local schools and almshouses.
Many of these, though, have probably had additional endowments at points, whereas it is unclear (but unlikely) that the Fuggers re-endowed the Fuggerei. How it survived Weimar, if it did, is a miracle.
I’ve found a list: apparently we in the European world must take second place to Nippon.
@rtah: I defend my example by reference to the end of Yves’s sentence “Can you think of another pool of capital that has lasted that long, let alone a commercial enterprise?” Anyway, it seems that the Shore Porters was a spin-off of the much older Aberdeen Harbour business. But they didn’t have to survive much in the way of earthquakes, as presumably the Japanese businesses had to. The story of the Eskimo in his kayak will have to wait for another time.
$1.23 per year! That huge capital infusion isn’t going to help much. One thing you missed, Yves, is the prayer for the founder. Maybe that is their secret!
This is a helpful reminder of owning acreage in forestry. This is not an exceptionally easy investment to make, however.
Forgive me, Yves, but here’s another find.
“Almshouses were established from the 10th century in Britain, to provide a place of residence for poor, old and distressed folk. The first recorded Almshouse was founded in York by King Athelstan, and the oldest still in existence is the Hospital of St. Cross in Winchester, dating to circa 990.”
But how secure is forestry for the very long term, going forward?
If we finally (finally!) get paperless offices and Kindle replaces books, and if advances in materials science and construction mean we someday end up using, I don’t know, genetically-engineered spider silk in house construction instead of lumber… trying to think ahead blue-sky style for the next four or five decades… will demand for wood hold up? How secure an investment is forest land for the next century or so, for university endowments and Fuggerei-type institutions?
I wonder if there are any comparable assets to forestry, that have the property that they greatly increase in value over time, for free with little or no maintenance (just add sunshine and rain and the passage of time). The only thing I can think of is some kind of hypothetical genetically-engineered marine organism that accumulates dissolved precious metals from seawater into its body slowly over the course of decades, which can be harvested in the end. Perhaps along these lines, Japan is trying to extract uranium from seawater using genetically-modified seaweed.
Did the fund manager(s) go long opium and coke?