Alfred Nobel, the Swedish scientist, inventor and entrepreneur who left most of his fortune as the foundation for the Nobel Prize, stipulated the assets from his estate should be invested in "safe securities" to sustain the endowment for the prizes. While Nobel's requirements may have been appropriate to the time and place in which he lived, in the decades since his death the Nobel Foundation and those leading the organization of have shifted their approach to meet with more modern investment styles. The goal has been to maintain stability in the endowment to award cash prizes of the same or greater amounts. However, the history of the Nobel fortune and its investment has meant there have been significant shifts in the prize value over time.
The Early Beginnings of the Nobel Prize
The first Nobel Prizes were awarded in 1901 and carried a cash award of SEK150,000, corresponding to roughly $1.1 million in 2018. For comparison, the 2016 Nobel Prizes were worth SEK8 million, or slightly less than the initial prize value in today's currency. In the intervening years, however, the cash prize associated with winning a Nobel fluctuated quite a bit, influenced at least in some part by the investment success of those managing Alfred Nobel's funds. The cash prize reached a minimum in 1919, when recipients earned SEK133,127. Though the prize climbed in value in the years following the Great Depression, from the 1940s through the 1970s it hovered around the same value. In many of these years, the prize award increased slightly, but the value of the cash prize in today's currency was roughly the same owing to inflation.
Significant Gains in Prizes in the Early 21st Century
By the 1990s, and especially into the new century, the cash value of the Nobel climbed dramatically, reaching SEK10 million in 2001 and staying there for many years. By this time, the investors managing the endowment had started utilizing hedge funds to boost capital. However, with the 2012 awards, the Nobel Foundation announced it would trim the cash prize by 20% to maintain levels of capital. At the time, the foundation also considered soliciting donations for the endowment to restore the value of the prize.
For Ulrika Bergman, CIO of the foundation appointed in 2017, the goal is to meet minimum annual returns of at least 3.5% above inflation. Since her predecessor joined the foundation in 2012, the foundation has worked to shift the investments towards active equity holdings, attempting to lower fees while maintaining efficiency. The foundation has also shifted its focus toward quant strategies in recent years. As Bergman and others aim to restructure the funds for the Nobel Prize, the goal will be to maintain and even to improve the cash award in a sustainable way for years to come.
(For related reading, see: 5 Nobel Prize-Winning Economic Theories You Should Know About.)