Will the Nobel Prize ever run out of money?

When Alfred Nobel was presumed dead in 1888, a French newspaper printed an obituary referring to him as "The Merchant of Death." In reality, it was Alfred's brother Ludvig who had died of a heart attack in France.

But due to some misunderstanding, one French newspaper believed that it was Alfred who had died, and they wrote a harsh obituary criticising him. Even the obituary headline read, "The merchant of death is dead."

In 1867, Nobel invented dynamite, which was widely used in both construction and warfare. Nobel was immensely wealthy and owned nearly 100 factories that made explosives and munitions.

So naturally, the newspaper was harsh toward Alfred, stating that he "made his fortune by finding ways to kill more people faster than ever before."

Nobel was deeply disturbed by the idea that his legacy would be one of death and destruction, that the people would remember him as someone who brought death and destruction all over the world.

This incident profoundly affected him, making him determined to create a different legacy. This led him to establish the Nobel Prizes with his fortune to honour those who have contributed to science and humanity.

When Alfred Nobel died in 1896, he left a will in which most of his fortune, valued at around 31 million Swedish kronor at the time (equivalent to approximately $265 million today), was designated for the establishment of the Nobel Prize. He wanted to establish a series of prizes to honour "those who shall have conferred the greatest benefit on mankind", in his own words.

However, out of curiosity, there is a question that will the Nobel Prize ever run out of money? Due to shifting markets, rising costs, and changing global economies, it's worth considering what would happen if it were to stop or take a pause.

The Nobel Foundation was established in 1900 to implement Nobel's directives. Being a private institution, tax-exempt in Sweden, its mission is to preserve and, when possible, increase the value of the original funds, using the returns to cover prizes, ceremonies, selection committees, and administrative expenses.

The Nobel Foundation operates on a capital fund that generates returns through investments. The prize money is awarded from the interest earned, not the principal.

The capital itself is never to be touched according to Nobel's will. Only the profits are distributed as prize money and also used to run the foundation, bear its administrative expenses, and cover ceremonies. This model protects the principal fund and allows it to continue.

The Nobel Foundation manages the capital as an investment fund, with assets allocated across various investments. This strategy has helped the fund's value grow over time.

According to reports from the official Nobel Prize website, the allocation of capital is split among equities (stocks), fixed income (bonds and cash equivalents), real estate, infrastructure, and alternative assets, such as hedge funds.

By the end of 2022, approximately 53 per cent in equities, 22  in hedge funds, 17 per cent in fixed income and cash, and 9 per cent in property or infrastructure were invested.

In 2024, the return on invested capital was 11.6 per cent, with an annual growth rate of approximately 9.2 per cent over five years and 8.3 per cent over ten years.
Despite generally strong results, there are nonetheless some risks.

In some years, investments have earned negative returns. In 2022, the fund suffered a return of -2.0 per cent. If losses happen repeatedly, the ability to cover prize money and administrative expenses comes under pressure.

Even with healthy returns, inflation, currency fluctuations, the cost of ceremonies, security, travel, and selection processes can decrease purchasing power or increase expenditure.

So if the Nobel Prize ever faces a genuine financial squeeze, what might the foundation do?

They can reduce the prize money. In fact, this has happened already. In 2012, prize money was cut from 10 million SEK to 8 million.

They can also cut administrative or ceremony expenses. Scaling back ceremonies or reducing overhead can help preserve funds.

External funding might also be a last-minute strategy. Although the original concept is that the fund be self-sustaining, the foundation may solicit donations for administrative expenses. Historically, some discussions have occurred about sponsorships or external contributions for non‐core functions.

Though given the current data, running out of money entirely seems unlikely. The foundation has built a robust portfolio based on diversified investments, generally achieving profitable returns on its investments. From the present perspective, they can continue indefinitely.

However, "unlikely" is not the same as "impossible." A combination of sustained poor market returns, high inflation, rising costs, unexpected global crises, or legal constraints can strain the fund.

But for now, the legacy of Alfred Nobel continues to shine without any signs of slowing down.

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