"Moron." "Jesus Christ."
How Dr. Anthony Fauci invests.
Fauci invests his money about the way I would expect an 81-year-old practicing physician to invest.
After questioning by Kansas senator Roger Marshall yesterday, Dr. Fauci was caught on a hot microphone saying "moron" and "Jesus Christ" in frustration. The senator's comments were accusations and statements, disguised as questions. The senator asked:
As the highest paid employee in the entire federal government, yes or no, would you be willing to submit to Congress and the public a financial disclosure that includes your past and current investments?
The answer to the question is YES, and Marshall and his staff should have known it. Fauci has been making financial disclosures for decades.
https://www.documentcloud.org/documents/7014520-Fauci-Disclosure
Fauci's income as a full-time physician is commonplace. Salaried government physicians generally make less than ones in private practice, but the government needs to be competitive to staff its military and VA hospitals. Fauci has been getting step increases for 37 years.
He owns a fraction of an Italian Restaurant in San Francisco, from which he gets token income. He also co-edited a medical text, Harrison's Principles of Internal Medicine, and he gets something over $100,000 a year from McGraw-Hill. It is two volumes and sells for $221 in hardcover/ $187 on Kindle. This side income is typical for people with long careers. For example, a man with a successful logging operation might own a log-truck repair building used by someone else, from which he is paid rents. A physician might own a part of a surgery center. Fauci wrote a book used in medical schools. No surprises here.
Government disclosure forms disguise the amounts of money, but not the income and gains from it. An experienced eye can make guesses. Dr. Fauci appears to have a couple of million dollars invested. There are no individual stocks of the kind one would see if Fauci were interested in making money from "inside" knowledge. He delegates investment decisions. He mostly owns equity funds, not bonds. He doesn't need investment income. He has earned income.
His Schwab advisor put him in a variety of institutionally-priced funds. Some generate income: Hamlin High Dividend Fund. There is a mid-cap growth fund: JPMorgan Mid-cap Value Fund. There are funds holding international stocks, the Matthews Pacific Tiger Fund and Tweedy Brown Global Value Fund. No retail investor, including Fauci, has any influence or fore-knowledge on the investments in these funds. What I see is huge diversification that essentially represents a little of everything. He might simply have bought three index Exchange Traded Funds and saved money on fees. A 30% SP500 index ETF; 30% a global total market index ETF; 30% municipal bond ETF; and 10% cash would create a return essentially identical to what Fauci experiences.
The mix of funds is the Schwab advisor's way to demonstrate value for the fee they charge for investment advice. After all, they picked JPMorgan Mid-Cap Value Fund, presumably for some good reason, instead of a different, essentially-identical one. The Schwab advisor's fee for investment advice bundles their more general advice on estate planning, education of grandchildren, etc. The multiple funds, even if they end up representing the whole market, demonstrates attention and care. This would be useful for Schwab and its advisor if there were to be a 60% drop in the stock market. The client might be unhappy. The stock funds in this account would drop 60% as well, of course, but at least it will look like Schwab advisor tried to do well. The loss would be attributable to the market, not to careless advice. Diversification of this kind allows an advisor to take action during bad markets. One can make trivial changes, selling one East Asian fund for a different one. In bad markets clients like Advisors to show they are doing something.
The multiplicity of funds protects Fauci, too. Fauci can credibly plead that he has no special investment favorite because he has so many investments that bundle yet more investments. He can credibly say that the Schwab advisor made the decisions, not him. The portfolio is not the most efficient, but it serves a purpose for Fauci. It fulfills the Hippocratic principle: First do not harm.
Fauci did what he could do to avoid suspicion and criticism. It doesn't matter. Senator Marshall had an agenda.