It Pays to Be Smart? Not Anymore

It Pays to Be Smart? Not Anymore

What do Barack Obama, Marie Curie, Paul Krugman, Nelson Mandela and Samuel Beckett have in common?

Answer: They’re all Nobel Prize winners.

You may know a bit about the Nobel Prize. Here’s our own CliffsNotes description: The Nobel Prize is awarded annually to six cool people who do some really cool things to better our world. Things like, say, discovering the cause of malaria (Ronald Ross) or putting an end to racial segregation (Martin Luther King, Jr.).

But what you might not know is that big, Nobel Prize-winning names like those above haven't been earning the big bucks the way they used to. Yep, we said it: It doesn’t pay (as much) to be smart anymore.

The 2012 winners will each receive a cash prize of $1.1 million. A whopping sum, to be sure. But consider the 2011 cash prize of $1.4 million. This year’s cash prize represents a 20% drop in value.


Get started with a free financial assessment.

While the cash is only one feature of the prize—think global recognition and celebration—it’s an important one, too. In fact, many Nobel Prize winners donate a portion of their winnings to charity. (Check out this New York Times article on Obama’s choice organizations.) As it turns out, giving large amounts of money to smart people is a smart strategy. And LearnVest readers can be the wisest givers out there thanks to our guide!

But sometimes, even the smartest investors can experience losses. Here’s what happened to the Nobel Prize fund:

Before 2011, the Nobel Foundation—the foundation that invests and protects the money pool for the six Nobel Prizes—invested primarily in equity. But from 2011 onward, the Foundation split its investment portfolio between equity, fixed-income investments like bonds and alternative investments like properties. When the Foundation combined this shift with low interest rates, they watched their money shrink.

Things are looking up, though. Or so says Lars Heikensten, Executive Director of the Foundation. In a recent CNN interview, he explains: “There is good reason to believe that we are in an adjustment period.” How long will this period of transition last? Heikensten can’t be sure, but knows that the low interest rates mentioned above will continue to affect his team’s investments in spite of any internal changes they make to their investment spread. And changes are on the horizon. For example, Heikensten has hired an outside team to reassess the Foundation’s investment choices.

For now, a $1.1 million cash prize will have to do.


Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!