James Felton KeithMode Equity Partners

@JFKii

Working Paper:Conjoined Wealth Funds (CWF)

Spreading the wealth for mutual benefit

http://conjoinedwealthfunds.info@ConjoinedWealth

October 2013

Working Paper: This paper presents preliminary findings and thoughts and is being distributed to readers solely to stimulate discussion and elicit comments. The views expressed in the essay are those of the author and are not necessarily reflective of views of affiliate institutions or confirmed through rigorous research in the field.

Abstract:

Rooted in theory from Integrationalism that all things in existence are connected in some form or fashion, the economics of connectivity suggest that the more participants independently represented in a closed system, the greater the chances of the system for evolving sustainably. Originally derived from the investment activity of the Sovereign Wealth Funds (SWF) from emerging economies into those of the USA and the most stable economies on the planet; a Conjoined Wealth Fund (CWF) is a privately-owned investment fund (account) or group of funds composed of financial or physical assets such as property, precious metals, stocks, bonds, or other financial instruments. The expansion of the global economy depends on adequate participation for individuals and institutions regardless of scale of investment potential. Conjoined Wealth Funds invest capital globally to leverage global growth opportunities while maintaining stringent domestic reinvestment initiatives in order to spur and even subsidize growth in local geographic locations (municipalities, cities, states). A glocalization tool; CWFs are an economic education tool for influencing culture, as American non-profit entities use their unique legal and social status to engage cultures around the globe through 21 st century financial solutions to cultivate progressive social growth in the radii of their local mission’. Lastly CWFs aim to form a grid of intelligence to quantify and streamline and communicate the efforts between varied entities holding CWFs within their corporation.

@JFKii

Table of Contents

Page 1 – Introduction

Page 2 – Objective

Page 2 – Definitions and Disclosures

Page 4 – Problem

Page 6 – Solution & Theory

Page 8 – Implementation of CWF

Page 11 – Broad Effects

@JFKii

Introduction:

Figure 1 - CWF life cycle

A Conjoined Wealth Fund (CWF) is a privately-owned investment fund (account) or group of funds

composed of financial or physical assets such as property, precious metals, stocks, bonds, or other

financial instruments. Conjoined Wealth Funds invest capital globally to leverage global growth

opportunities while maintaining stringent domestic reinvestment initiatives in order to subsidize

depressed geographic locations (municipalities, cities, states).

Conjoined Wealth Funds are usually held (but not exclusively) by non-profit organizations that acquire

and accumulate funds in the course of their management of existing operations and affiliated

benefactor initiatives within their community. Conjoined Wealth Funds are a source of major economic

stimulus in their region.

@JFKii

The accumulated capital is used to sustain local communities that are in some instances to opaque or

sparse to receive the highest quality of goods and services a sovereign nation has to. While Conjoined

Wealth Funds engage the global equity markets, their core investment focus is assisting a locale in the

creation and sustainment of self-sufficient socio-economic communities and municipalities.

Objective:

After a review of the global financial system’s potential, we are aiming to establish the viability of a

fundamental shift in the ideal use of American tax-exempt organizations to seek revenue growth

through investment or unearned income as a hedge to expenditures after gifts or primary income. This

paper is to predate field research.

Definitions and Disclosures:

While looking at tax exempt organizations and exploring those with specific interests per their budgets

and their missions to extreme local or neighborhood initiatives we derived that faith based organizations

best represented the least sophisticated types of organization from a fiscal management standpoint,

based on complete filing of Form990s with the IRS and members of staff listed on filing as dedicated to

fiscal and fiduciary matters.

Guidestar.com reports a conservative estimate of $78,800,000. We know that a number of organizations

outside of our ability to qualify have avoided filing a Form990 with the IRS and we estimate that these

organizations round upward of the $100,000,000 mark in holdings per the geographic location.

@JFKii

Figure 2 - GuideStar.com search criterion

Sovereign Wealth Funds (SWFs) are a state-owned investment fund investing in real and

financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments

such as private equity fund or hedge funds. Sovereign wealth funds invest globally. Most SWFs

are funded by revenues from commodity exports or from foreign-exchange reserves held by the

central bank.[1]

@JFKii

Figure 3 - SWF Institute frequently tracked SWFs

Glocal Growth Opportunities

o Per wikipedia’s categorization of the list of countries based on the real Gross Domestic

Product (GDP) growth rates, the growth opportunities are rigidly those that create

tangible economic value. See Appendix A for all 220.

Figure 4 - List of countries per real GDP growth rates

@JFKii

Pacifying Problems

o Organization’s missions – initiatives like gifting to the poor and to the faculty of the

organization. Missions in expenditures without investment growth are inefficient and

less effective than they could be. While more time is required to be spent investigating

the investment strategy of the thousands of potential CWF organizations in our study

locale. We have found dozens of organizations using strategies to invest in real estate

exclusively. Strategies were carried out before, during, and after the economic

recessions of the 2000s, and persist during migrations away from failing urban areas.

o Organization’s attempt to grow value fiscally – point out investment in real estate in

areas that aren’t growing.

Revenues

o CWF revenues

Earned Income – gifts (including tax deductible) from constituents of sorts

Unearned Income – profits from investments (look for formal definitions)

Problem:

The global financial system has a culture about itself that is similar to most cultures that house both elite

and mediocre extremes.[1] In the current American political climate pundits are talking about

entrepreneurism as a replacement to jobs and emergence of new markets, but entrepreneurism alone

won’t compel local American communities out of poverty and public policy cant distribute

entrepreneurism as a culture.[2] While people come together to trade their passions through trials and

triumphs, there are few real-world solutions that facilitate significant change in how we trade value

between economic classes and culture sects. I’ve always thought that an idea without resources is

@JFKii

merely a hallucination. Entrepreneurship is always welcomed, but is a luxury that perspective provides.

There is also a cultural element to entrepreneurism that political policy can’t create alone. Rallying,

political activism, positive speech and action, policy reform, all create the kinds of noise that is needed

to warrant change, yet none of those actions facilitate change.[3] As we build out the political

infrastructure of our locale we much also build out our socio-cultural infrastructure. That activity is of

economic means and not rhetoric alone. Some progressive socio-economic action on the part of local

private stakeholders must accompany the political warrant and policy alike.

While traveling between the poorest (Africa) continents and the wealthiest (N. America) continents over

the past decade, I’ve realized a common disconnect between the cultures across oceans. Considering

the hyper growth of South Africa (SA) specifically and the relative recession of the United States (US), I

spent the better part of the 2000’s acting as an intermediary between US investors and SA financial

firms. I regularly found resistance because of a lack of knowledge about the investment region by the

investor. The United States has enjoyed two centuries of domestic growth that, while impossible in

some regions, can only compare to the international economic growth of the Brazil, Russia, India, China,

S. Africa/Korea (BRICS) and smaller countries today.[5] The past few years of economic difficulties

following the great-recession of 2008 have done a good job of showing lots of the cultural disconnects

that the oceans hold. The economics of the modern day don’t justify the need for interconnectivity to

make rational political decisions regarding foreign/domestic policy which will compel small business

decisions.[5] In a world where people are literally starving in both geographic extremes of national

economic power, people find themselves consumed by the deeds of the day, unable to venture outside

of their comfort-zone.[6] Instead of forcing the confined cultures of locale further away from each other,

we should be leveraging the few professionals with some global perspective to create a glocal strategy

that compels economic development.[7] In an effort for clarity, economic development can be defined in

@JFKii

this context as: committing capital growth to locale. Glocal can be defined as: a newly coined blend of

globalization and localization refers to a concept to describe individual, group, organization, product or

service that reflects not only global standard but also local one.

Solutions & Theory:

During an initial think tank at the Enxit Group (@enxit) at Sandton, South Africa in 2008 the objectives

were laid out for how to engage social changes in any region. An economic solution was deemed most

formidable. The ideal that participation is necessary to provide any formidable exchange of value holds

consistent with CWFs. As technology has created electronic exchanges and new transparencies in

executive profiles and event based news, we thought it possible to implement the strategies used by the

largest investment funds on a more micro scale. [8] Sovereign Wealth Funds are a state-owned

investment fund investing in real and financial assets such as stocks, bonds, real estate, precious metals,

or in alternative investments such as private equity fund or hedge funds. Sovereign Wealth Funds

(SWFs) invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-

exchange reserves held by the central bank.[9] The work came in looking for private investable funds in

an average American community, or at least a locale that could be identified across multiple

municipalities.

Our theory was that there is more cash in small neighborhoods across the United States than in their

municipality’s annual budget. We were wrong in some cases and correct in others. Faith-based

organizations were our target indicators of weekly cash-flows. During the economic recession of 2007-

present we estimated that our benchmark locations had access to upwards of one-hundred-million US

Dollars ($100,000,000) on an annual basis. Guidstar.com proved to be more valuable than any other

resource, as it gave past balance sheets of non-profit institutions in everyone of our American

@JFKii

benchmark locations over the past decade. Considering the foreign exchange rates and that these were

gifted funds, largely from individuals to tax-exempt institutions, we considered them to be a large

opportunity for development.

Similarly SFWs invest famously in foreign assets to distribute gains among their stake holders, which are

commonly state pension holds, or constituents of the sovereign.[10] The language is sometimes confusing

and context is important, as it is necessary to consider one’s investment goals before executing strategy.

Depending on which news station is reporting the ideal of growth can be skewed, as it is relative to the

investor, but generalized for common speech. CNBC comments frequently on the difference between

“growth stocks” and “blue chips”: meaning that the growth stocks have high risk and potentially a high

rate of return for that risk; moreover, blue chips are the trust slow growth vanguards of the equity

exchange.[11] In the world growth in look at slightly different and the terminology is quite different as

well. Growth funds are compared to contra funds of contrary funds, these are those that are managing

more risk or complexity than merely equities that are expected to grow over time; they could include

derivatives on equities that are expected to fail or more risky high growth or fledgling equities. [12] The

one thing commonality that can be derived from the differences in investment strategy by institutions

globally is that investing can be specific to preference and is not an exact science. For instance, the

largest SWF on the plant is Norway’s government pension fund which is actually two separate but large

funds specific to the government employee pensions and an oil reserve funds. The fund is most

distributed over the assets reviewed as the most sustainable and ethical in terms of the stake holder

constituencies understanding.[14] Regarding CWFs this strategy may not be best suited, as short term

growth is more desirable and necessary on the relatively small amount of capital. While Norway’s fund

has an estimated worth of 785,000,000,000 US Dollars and entire locale of US private account holder

@JFKii

might fail to reach 100,000,000 US Dollars. Both sums are potentially substantial if deployed will with

their stake holder’s glocal interests in mind.

Implementation of a CWF:

While interviewing some faith-based and non-profit community leaders in Detroit, MI during 2009 (one

of the benchmark locations for study) I confirmed another theory of ours about small businesses. Most

of these entities take in revenues in cycles and expend upwards of 90% on missions of leaders. The

modern world financial efficiency is illusive; hence, the mission potential of these organizations is stifled

by the lack of access to opportunity based on my interviews. They simply don’t know that there are

opportunities. The mathematics behind domestic investment potential abroad is elementary. Modest

leveraged to buy into some financial asset for a term limit or more plainly a loan is 10:1 or $1 to be

loaned ten times its value: ~$10. Typical buying power of currency exchange in emerging markets for $1

varies, but the smallest of all BRICS has an exchange rate of ~10 South African Rands to 1 US Dollar.

Hence, our identified $100,000,000 is actually ~$1,000,000,000 without leverage (loan) or

~10,000,000,000 with some standard rates.[14]

The first objective of CWFs is designed to give small non-profits (< $50,000,000 US Dollars under

management) access to the opportunity of the largest investment initiatives globally. The second

objective is to create some spending efficiency while remaining effective at executing core missions. The

third objective of CWFs is designed to help organizations identify the most effective local reinvestment

missions to serve their constituencies. The fourth and last objective is designed to create a grid of

individual CWF activity in order to quantify the effects and make new opportunities easily identifiable for

outsiders.

@JFKii

The greatest expectation of CWFs is to create an environment where the every-day person has some

identifiable interaction with markets across land and ocean barriers; further, bridging the gap of

ignorance towards intercultural promise that comes from working together well. Cross cultural

education is and will yield the ideas that drive future progress. Consider a single middle aged woman

earning just above the minimum wage investing $10 USD per week in her church’s general fund with the

hopes of their missions to build a better world for her to exist in. If her institution (church) doesn’t

engage the global markets and reinvest in building infrastructure of sorts locally her investment is likely

not meeting her expectations, but more importantly it is not meeting her needs if she plans on

competing in the global economy. The form990’s of many of these non-profits designated as churches

are widely reported as have few or no investments. Aside from the reported corruption in local news

throughout the United States, these types of institutions are investing in pacifying problems instead of

solving them or combating them.[15] While it seems prudent to invest the majority of capital collected in

missions that prop up those ailing economically, it would also be prudent to invest 10% in identifiable

growth initiatives.

Broad Effects

We’ve identified resources to facilitate the change in management of funds and access to opportunity

across land and ocean. In 2008 CNN called personal financial planners a “recession proof job”. [16] Today

these positions are still in high demand and should provide no shortage in producing the kinds of talent

able to identify opportunities for investment of more sizable accounts to produce steady growth. [17] The

diagram below is representative of the change in financial models that CWFs bring to the majority of

small non-profits in the US. According to dozens of the Internal Revenues Service (IRS) form 990’s on a

sample of Detroit tax-exempt organizations, they have no investment method, model, or holdings to

@JFKii

report. Although there are instances where these tax-exempt organizations will hold an interest in the

development of local real estate, this is not views as an investment strategy or an attempt at a portfolio.

Figure 5 - CWF model

CWFs capitalize on the unique local experience that each holding entity (non-profit org) has. Referencing

the four aforementioned objectives, CWFs should never be jointly held. They are individual actors that

pursue the best strategy for their individual investment profile and local reinvestment missions. CWFs

identify an optimal portion of funds to invest in the real global growth. Nations around the world are

growing 5-10 times the rate of the United States: their companies, commodities, and currencies follow

suit. These phenomena present an opportunity that many small non-profit organizations can afford to

invest in to realize greater growth than what is attainable domestically. They create sustainably agile

pools of capital for local reinvestment missions, and build knowledge about foreign nations and cultures

potential among the eldest and youngest generations linked to CWF holding organizations.

CWFs are a macroeconomic model that can be applied to a wide variety of non-profit businesses. An

ideal situation is for individual CWF endeavor to overlap in a given geographic location. Imagine a

@JFKii

scenario where 10 non-profits have a local mission radius of 10 city blocks – they adopt a CWF strategy

and grow revenues x10 – their local mission radius grows to 100 city blocks. The reinvestment potential

is enormous enough to: subsidize educational efforts, gift information technology to citizens, cultivate

new business, underwrite green business initiatives, spur agricultural initiatives in sparse regions, create

independent energy grids, subsidize community transportation advancements, facilitate new brands of

international trade, and ultimately create new think centers.

Figure 6 - tax exempt org financial support locale

Resources are abundant. Every strategy will be somewhat unique per the organization that seeks a CWF

strategy, but the general guidelines will remain the same. In a world where every dollar that is gifted to

an organization that we patronize weekly is invested well to create wealth, there are few political needs

other than general city services. Eventually tax incentives will diminish, social progression will be

@JFKii

realized through access to ideas and investment, and lowering of technological barriers will yield the

quality of life that people desire glocally.

Resources identified in Target city Detroit, MI between 2008 and 2010:

100,000,000 USD in investable assets per region

1000 unemployed minority investment professionals per city

1000 minority owned investment vehicles in emerging markets

US 501(c) law protects capital gains and reinvestment initiatives

Political will on shrinking cities welcomes and assists social innovation

Effects:

Existing liquid assets in the USA can enhance global financial markets

Diminish the burden of failed municipal bonds and local financial engagement

Revenues generated augment local communities that protect the conjoined quality of life

Diminish potential and existing tax anomalies because of population shrinkage locally

Transform the glocal socio-cultural and socio-economic

Local financial security Local Job creation Private investment is the best way to

influence human rights in private firms globally.

Top Reinvestment Initiatives (in no particular order):

Home Sourcing Urban / Sub-urban Agriculture Fair-Trade Retail Online and Physical Education Subsidies

Community Transportation Urban / Sub-urban Energy Production Community Communication Grids Heightened International Trade

The real-world benefits can be quantified here because of human kind’s ability to be innovative and find

solutions to new problems through consistent interaction. New ideas will emerge even as individuals

read this document. One thing that we are sure of through social networking technologies is that higher

quality of communication connectivity is achievable. CWFs are an attempt to add some economic and

social connectivity.

@JFKii

_______________________________________________________

1. Wikipedia retrieved October 22, 2013, Soveriegn Wealth Funds http://en.wikipedia.org/wiki/Sovereign_wealth_fund2. Charles H. J. Reuter Finance, 2011/1 (Vol. 32) Page 75-152, A survey of ‘culture and finance’ http://www.cairn.info/resume.php?

ID_ARTICLE=FINA_321_00753. Scott Shane Small Business Economics August 2009, Volume 33, Issue 2, pp 141-149, Why encouraging more people to become

entrepreneurs is bad public policy http://link.springer.com/article/10.1007/s11187-009-9215-54. Mark J. Gasiorowski, The American Political Science Review, Vol. 89, No. 4 (Dec., 1995), pp. 882-897, Economic crisis and political

regime change: An event history analysis http://www.jstor.org/discover/10.2307/2082515?uid=3739832&uid=2&uid=4&uid=3739256&sid=21102799986037

5. Karl P. Sauvant; 6 J. World Investment & Trade 639 (2005); New Sources of FDI: The BRICs - Outward FDI from Brazil, Russia, India and China; http://heinonline.org/HOL/LandingPage?collection=&handle=hein.journals/jworldit6&div=41&id=&page=

6. Nassim Nicholas Taleb, October 18, 2013, NYU-Poly; Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES), The Skin In The Game Heuristic for Protection Against Tail Events https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2298292

7. David J. Pete,r International Regional Science Review January 2009 vol. 32 no. 1 19-39, Typology of American Poverty http://irx.sagepub.com/content/32/1/19.short

8. Jeffrey S. Brooks ,Educational Policy January 2010 vol. 24 no. 1 52-82, Educational Leadership and Globalization: Literacy for a Glocal Perspective http://epx.sagepub.com/content/24/1/52.short

9. J Econ Geogr (2013) doi: 10.1093/jeg/lbt029 First published online: September 10, 2013; Sovereign Wealth Funds: Legitimacy, Governance, and Global Power http://joeg.oxfordjournals.org/content/early/2013/09/10/jeg.lbt029.short

10. Wikipedia retrieved October 22, 2013, Soveriegn Wealth Funds http://en.wikipedia.org/wiki/Sovereign_wealth_fund11. Lee Hudson Teslik, Council on foreign relations January 18, 2008 Sovereign Wealth Funds

http://relooney.fatcow.com/0_New_2799.pdf12. JeeYeon Park | CNBC.com Stock Market Writer, Published: Tuesday, 26 Apr 2011 | 12:00 PM ET, http://www.cnbc.com/id/4276424613. Chandrima Das, Sujit Nath Banerjee , Indian Journal of Finance and Economic Management Volume 1, Issue 1, 2013 A Study of

Growth Style Funds Vs Contra Style Funds with Reference to Different Parameters in India for the Period 1999-2009 http://www.indjst.org/index.php/ijfem/article/view/38000

14. Gordon L. Clar, Ashby Monk, Rotman International Journal of Pension Management, May 12, 2010, The Norwegian Government Pension Funds: Ethics over Efficiency http://rijpm.metapress.com/content/73211015t7851m82/

15. Investopedia February 26 2009 , How does leverage work in the forex market? http://www.investopedia.com/ask/answers/06/forexleverage.asp

16. CBS2, retrieved October 23, 2013, Investigates: Lawsuit Claims Pastor Squandered $15M Of Church's Funds http://losangeles.cbslocal.com/video/7903275-cbs2-investigates-lawsuit-claims-pastor-squandered-15m-of-churchs-funds/

17. Aaron Smith, CNNMoney.com staff writer. Last Updated: April 29, 2008: 5:31 PM EDT, Recession-proof job: personal financial adviser http://money.cnn.com/2008/04/28/news/economy/financial_adviser/

18. Halah Touryalai, Forbes Staff 8/08/2012 @ 3:17PM , One Of The Fastest-Growing Careers Is In Desperate Need Of Young Talent http://www.forbes.com/sites/halahtouryalai/2012/08/08/one-of-the-fastest-growing-careers-is-in-desperate-need-of-young-talent/

@JFKii