Another LDS Church fund worth billions is drawing scrutiny

Questions are simmering over a lesser-known multibillion-dollar fund of The Church of Jesus Christ of Latter-day Saints, this one operated on behalf of its employees, including top church leaders.

Salt Lake City-based Deseret Mutual Benefit Administrators oversees pension and health plans worth nearly $9 billion for nearly 35,000 workers and retirees from the church and auxiliary firms.

This is separate from Ensign Peak Advisors, the faith’s investment arm, which is thought to manage upward of $150 billion in church-owned stocks, bonds, real estate, private equity and more in what the Utah-based church describes as a “rainy day” fund to buffer it from economic downturns and buttress church operations.

Ensign Peak has drawn attention from news outlets and government regulators in recent years after a whistleblower’s 2019 assertions to the IRS that the church-owned fund built from members’ tithing had ballooned above $100 billion without any expenditures for charitable purposes.

In February, the U.S. Securities and Exchange Commission ordered the church and Ensign Peak to pay a combined $5 million in penalties for failing to properly disclose past stock holdings and deliberately trying to obscure the size and scope of the faith’s investment portfolio in a ruse involving so-called 13F reporting.

But the nonprofit pension fund, created in 1970, has until recently drawn relatively little public attention although there are hints of similar patterns in how it has — or perhaps hasn’t — reported its investments.

The church did not respond to detailed questions about the pension fund but confirmed that it was part of the SEC’s probe, though the federal inquiry makes no mention of DMBA.

“During the SEC’s investigation, DMBA’s filing practice and investment portfolio were discussed,” spokesperson Doug Andersen wrote in an email. “...We did discuss DMBA’s 13F filing practices with the staff in the course of the Ensign Peak matter.”

“The church has received no notice that DMBA, or any church entity, is currently being investigated for its filing practices,” he added. “We understand the matter is closed.”

As a general rule, the SEC does not comment on pending or current investigations.

A look inside DMBA

DMBA, often called Deseret Mutual for short, was created in 1970 and is a subsidiary of Deseret Management Corp., the global operating company over the church’s for-profit entities.

DMBA manages benefits for 25 major church employers, including familiar names like Brigham Young University and Ensign College; KSL’s parent, Bonneville International Corp.; Ensign Peak Advisors; church land companies such as Property Reserve, AgReserve, City Creek Reserve and Hawaii Reserves; Deseret Book and the Deseret News; insurance firm Beneficial Life; as well as high-level ecclesiastical leaders, workers and retirees from the church itself.

With its billions in holdings, the fund is fully solvent and capable of covering its obligations to its tens of thousands of plan participants.

Public documents also reveal DMBA is a sizable investor with its own diversified portfolio of holdings, some of which it has managed directly and others that it farms out to scores of leading money managers and hedge funds, including Goldman Sachs, JPMorgan, Vanguard and BlackRock.

Pension fund disclosures filed with the U.S. Department of Labor show DMBA’s investments in corporate stocks alone — potentially subject to SEC reporting — were worth a total of at least $1.46 billion at the end of 2021, the most recent data available.

Nearly $2.5 billion was reportedly invested in partnerships and joint ventures. The portfolio held an estimated $1.2 billion in interest-bearing cash, U.S. government securities or corporate bonds, with another $758 million in real estate, with the rest made up of insurance-related investments.

Total assets reported by DMBA started 2021 worth $7.93 billion, disclosures show, and ended the year valued at $8.96 billion.

Analysis of the reports extending yearly back to 2009 also indicates that some of the U.S. securities that DMBA owned and managed directly may have at times exceeded $100 million in value over that time, which would have required they be disclosed separately to the SEC.

Yet DMBA managers did not file their first SEC report, referred to as a 13F, until mid-February 2020, disclosing the pension portfolio’s size as of the last quarter of 2019 at $126 million.

Those findings were initially reported on a website called The Widow’s Mite Report, compiled by a dozen or so unnamed current and former Latter-day Saints with professional backgrounds in finance, business, real estate, law and related fields.

The site asks, “”Were DMBA’s 13F violations prior to 2020 intentional or mistakes?”

Documents reveal DMBA’s first SEC filing was also made the same day that Ensign Peak submitted its first 13F disclosure in February 2020, revealing its holdings in 1,659 U.S. stocks and mutual funds to be worth more than $37 billion. Ensign Peak’s latest filing, in 2023′s second quarter, shows an overall value of more than $49 billion.

‘An unusual spike’

The SEC later would conclude that Ensign Peak, with the knowledge and approval of top church leaders, had created 13 shell companies and reported ownership of those stocks under their names instead of its own, as a way to hide church ownership through Ensign Peak — even though, SEC investigators said, Ensign Peak “retained control over all investment and voting decisions.”

The SEC settlement, which appears to have closed the agency’s investigation, resulted in fines of $1 million for the church and $4 million for Ensign Peak for violations of reporting rules. The SEC charged the church with “causing these violations.”

In its own news release posted soon after the SEC announcement, the church expressed its “regret” for what it referred to as errors and noted that “investment returns,” not members’ tithes, would be used to pay the fines to the U.S. Treasury.

Widow’s Mite notes that DMBA’s six 13F disclosures — covering only its stock holdings above $100 million — filed after the first one between early 2020 and mid-2021 each lists a handful of investments, worth about $203 million as of the first quarter of 2021.

The rest of its corporate stocks holdings revealed in pension filings — pushing that total to the $1.4 billion range — were reported as managed by third parties.

Three months later, in its next quarterly report, those holdings reported to the SEC jump dramatically in size and value, to 501 separate investments valued at a total of $412 million and held directly by DMBA.

The Widow’s Mite Report refers to this as “an unusual spike in the data,” saying it prompts the question: “Has DMBA owned U.S. stocks in the past? If so, this would have added to prior 13F reporting requirements.”

The church spokesperson did not address that question.

Clarification • Sept. 8, 1:30 p.m.: This story has been updated to clarify DMBA’s direct management of corporate stocks in 2021.

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