The Gates Foundation and financial mega-holdings: how to subordinate the planet?

МОСКВА, 31 декабря 2021, Институт РУССТРАТ.

The Bill & Melinda Gates Foundation is considered the largest charitable foundation in the United States. At the end of 2020, according to the latest annual report of the Foundation, its assets amounted to almost $52 billion. The famous Rockefeller, Ford, Carnegie and similar foundation, born at the beginning of the last century, have assets that are several times or an order of magnitude less than the Gates Foundation has, which was established only in 2000.

The founder of the foundation is billionaire Bill Gates, who at that time was the main figure in Microsoft Corporation (in the management of the corporation and in its capital). Gradually, a significant part of Bill Gates’ capital from Microsoft Corporation flowed into the charitable foundation in his name and the name of his wife Melinda.

The priority areas of the Gates Foundation’s activities were declared: health care; education; the fight against poverty (in the countries of the «poor South»). According to the latest annual report of the Foundation, last year assistance was provided under 41 programs. 2,136 grants were issued for a total amount of about $6 billion. The number of grant recipients is 1,357.

Bill Gates has repeatedly stressed that his Foundation is a charitable institution of a new generation. It is based on the philosophy of «venture philanthropy». We are used to the phrases «venture business», «venture financing», «venture development».

And here is a very strange expression, almost an oxymoron (a combination of contradictory concepts): «venture philanthropy». Bill Gates is sure that the grants issued by his foundation should eventually turn into some new technologies, products, projects, markets that will bring profit. And, as can be seen from many examples, this philosophy works.

There is no need to go far for examples. The so-called «COVID-19 pandemic» that has begun in the world has dramatically intensified the activities of the Gates Foundation in such areas as pharmaceuticals and the promotion of vaccination in the countries of the «poor South» (as part of the broader «Healthcare» direction).

In the spring of last year, the Foundation allocated grants for the development of covid-testing tools and coronavirus vaccines in the amount of $350 million. In November of the same year, he added another $70 million (mainly for COVAX, a vaccination assistance program in poor countries). The Foundation sends a significant part of the grants to GAVI (Global Alliance for Vaccination and Immunisation), through which vaccines are promoted in developing countries.

In fact, GAVI is a «subsidiary» structure of the Foundation. Its main task is to raise funds around the world to help promote vaccines in developing countries. At the end of 2020, GAVI raised funds totalling $8.8 billion.

Eventually, these billions will turn out to be (they already partially turned out to be) on the accounts of Big Pharma corporations such as Pfizer, Moderna, Johnson & Johnson, AstraZeneca. With this in mind, we can say that the Gates Foundation is a kind of «icebreaker», making its way to the world market for Big Pharma vaccine drugs.

I want to turn to another aspect of the Gates Foundation’s activities, which is very rarely talked about and written about. What are the sources of such a powerful charity of the Foundation? It’s no secret that a typical American charitable foundation distributes grants at the expense of profits (if you distribute the main capital of the foundation, then in a few years such a foundation will cease to exist). And where does the profit come from? From investments in various securities traded on the stock market.

According to my estimates, the Gates Foundation’s profit last year amounted to about $7 billion (about 90% of the profit went to the distribution of grants, the remaining 10% went to capital increment). At the beginning of last year, the Foundation’s assets amounted to slightly more than $51 billion. It is not difficult to calculate that profitability (returns) of the Foundation’s assets amounted upon the year’s results to 13.7% at the end of last year.

This is an indicator that companies in many sectors of the American economy could envy even in prosperous years. But last year, 2020, was a failure for the American economy, and half of the companies had negative asset returns in general. The highest profitability of the Gates Foundation against the background of the viral economic crisis resembles a “feast during the plague”.

There is a desire to understand the structure of assets (investment portfolio) of the largest charitable foundation in the USA. The Gates Foundation’s financial statements are very murky. I find the necessary clear information from analysts of the US stock market.

In Aman Jain’s review «These Are The Top Ten Stock Holdings Of Bill Gates”, the data for the main assets of the Bill and Melinda Gates Foundation at the end of the 1st quarter of 2021 is presented. The author lists the top 10 companies that account for the largest part of the Foundation’s investment portfolio. He placed companies in ascending order of their share in the specified investment portfolio (%):

FedEx – 2.02

United Parcel Service – 2.27

Schrodinger – 2.54

Crown Castle International – 4.18

Ecolab – 4.46

Walmart – 4.93

Canadian National Railway – 7.70

Caterpillar – 11.24

Waste Management – 11.47

Berkshire Hathaway – 45.23.

As we can see, almost half of all the assets of the Bill and Melinda Gates Foundation account for shares of a company called Berkshire Hathaway. And this is a well-known investment holding, which belongs to an American billionaire of the same «caliber» as Bill Gates – Warren Buffett.

It was these two billionaires who for a number of years alternately occupied the first and second positions of Forbes’ ranking of the richest people in America. But they are united not only by approximately the same number of zeros in digital estimates of wealth. They have been sailing in the same «boat» for a long time, called the Bill & Melinda Gates Foundation. 

It turns out that back in the noughties Warren Buffett began transferring part of his capital to the specified foundation. The first transfer was made in 2006. In June 2010, Buffett made a resonant statement — about the gratuitous transfer of $37 billion to five charitable foundations. The largest part of the donation went to the Bill and Melinda Gates Foundation.

This act became the most generous act of charity in the history of mankind. It can be assumed that all Berkshire Hathaway shares in the Foundation’s portfolio are most likely the sum total of those charitable contributions that Warren Buffett made over several years.  

It’s no stretch to say that the Gates Foundation is a joint venture of two billionaires with approximately equal shares (due to the recent divorce of Bill and Melinda Gates, probably some part of the Foundation’s capital will be assigned to Bill Gates’ ex-wife; the division of property between the spouses has not yet been completed). Apparently, in order not to attract the attention of the public, the «modest» Warren Buffett refused to have his name on the signboard of the Foundation.

There is a certain distribution of functions in the Foundation between Bill Gates and Warren Buffett. The first one is responsible for the distribution of grants and ensuring their targeted use. The second one is responsible for the revenue side of the Foundation as the main owner of the «cash cow», called the Berkshire Hathaway investment holding.

Despite the fact that Warren Buffett very generously distributed his capital for philanthropic purposes, he remains a key shareholder of Berkshire Hathaway today. Since 2016, Buffett’s share in Berkshire’s voting power has been 31.7%, and in the total number of shares – 18.0%.

Almost two-thirds of Berkshire’s shares are owned by institutional investors. The largest of them are three financial mega-holdings: Vanguard Group; BlackRock and State Street Corporation. They are followed by the Gates Foundation.

That’s what a pack of seasoned financial wolves the philanthropic Bill and Melinda Gates Foundation is in. Bill Gates flaunts himself on the stands of various forums and summits, talking about «health as the highest value», «pandemic», «climate warming», «unfair distribution of wealth and poverty» (in developing countries). Meanwhile, Warren Buffett participates in tough games on the stock markets, where «unfair distribution of wealth» is the main principle.  

The bet of Bill Gates (as well as his «high mentors» from the «deep state», who helped him make a career and continue to mentor him on the priorities and goals of the Foundation) on the Berkshire investment holding is sure and well thought out. This holding is unsinkable, because even more unsinkable mega-holdings Vanguard, BlackRock and State Street participate in its capital.

Moreover, they guarantee Berkshire Holding high profits. Berkshire shares have grown by 38% over the year (from the end of the first quarter of 2020 to the end of the first quarter of 2021). This is not just a good, but a brilliant result, given that during this annual period of time the American economy was in decline, and the shares of many companies were falling.

By the way, most of the other companies in which the Gates Foundation invested, shares in the mentioned annual period also grew. Record growth was demonstrated by the shares of FedEx (transport services, e-commerce and business services) — 60%. And here are the share price gains of a number of other companies in which the Foundation invested (%): United Parcel Service – 33; Caterpillar – 50; Waste Management – 36.

Of course, one can admire the intuition (or professionalism) of the Foundation’s managers Bill Gates and Warren Buffett, who managed to form such a profitable investment portfolio. But I think that part of the credit must go to the mentioned mega-holdings Vanguard, BlackRock and State Street. After all, they are not just players in the financial market.

They are, to put it simply, market-makers. They are the ones who «make the market”. And such ones, by definition, can only «win». After all, if you dig a little, it turns out that the ubiquitous troika of mega-holdings Vanguard, BlackRock and State Street is present in the capital of almost all those companies in which the Foundation has invested.  

However, the investment side of the Foundation’s activities is also important in order to promote new products and ideas as quickly as possible through companies controlled by the Foundation. Thus, until recently, the Berkshire investment holding was interested in many sectors of the economy (both the real sector and the service sector), but the pharmaceutical industry was somehow «behind the scenes».

But then the «covid pandemic» began, a hysterical vaccination campaign unfolded, and Berkshire Holding began to rapidly turn towards pharmaceuticals. In the spring of this year, the media reported that Berkshire Hathaway bought large stakes in well-known pharmaceutical companies Abbvie (ABBV), Bristol Myers Squibb and Merck. Moreover, the legendary «king of investments» Warren Buffett urged others to follow his example and invest in these companies.

The Gates Foundation is a clear example of American «philanthropy». Such foundations are needed by large capital, first of all, as «tax havens»: the profits of companies and banks transferred to the foundations are exempt from taxes.

The state also needs similar foundations: they can be used by the authorities as a kind of «wallets» when for some reason it is impossible to use the funds of state budgets. For example, there is a need to strengthen Washington’s influence on the World Health Organisation (WHO). It is possible to use such a «wallet» as the Gates Foundation for additional contributions to the WHO.

In addition, modern charitable foundations with the help of grants can really engage in «venture philanthropy». Small amounts of grants can open up large markets for big business. Thus, the Gates Foundation has invested several hundred million dollars in the GAVI Alliance.

In its turn, thanks to these grants, the GAVI Alliance has managed to mobilise almost $10 billion worldwide to promote Big Pharma vaccines. And if it will be managed «to put on the needle» of constant revaccinations the countries of the «poor South», then the sales of Big Pharma companies can be measured by many tens of billions of dollars. Such is the cynicism of the Gates Foundation’s «venture philanthropy.»

So, as they saying goes, «one barber shaves another gratis”. The «Big Three» mega-holdings help (through Berkshire) the Gates Foundation to rake in a lot of money, and the Foundation acts as an instrument influencing world politics and the economy in the interests of the «Big Three» (and those behind these mega-holdings). Maybe it’s time for Russia to adopt the advanced investment and charitable experience of American business sharks?

Институт международных политических и экономических стратегий Русстрат

(@russtrat)