Endowment Closes Fiscal Year Better Than Projected

Investment return tops peers and benchmarks

September 25, 2009 — During the most turbulent economic period in recent history, the investment return for Phillips Academy's endowment was negative 15.1 percent. The unofficial 2009 performance marks a year in which many other notable institutions and benchmark indicators suffered more severe losses.

According to NACUBO (National Association of College and University Business Officers), the median performance of college and university endowments is projected to be down 18 percent, while the S&P 500 declined 26.2 percent. Institutions like Harvard and Stanford saw their endowments decline 25 to 30 percent.

Totaling approximately $642 million as of June 30, 2009, Andover's endowment comprises a wide variety of funds with a wide variety of purposes, including unrestricted funds, financial aid, faculty chairs, the Addison Gallery, the Peabody Museum and other donor-specified intents. In fiscal year 2009, the endowment provided about 38 percent of the Academy's total revenues.

Amy Falls '82, Andover's chief investment officer, attributes the respectable year-end outcome to the prudence, experience and judgment of her colleagues—from trustees to fund managers to members of the Finance Office and the Investment Committee. “We kept a very steady commitment to the investment principles that underpin our long-term strategies,” she said. That strategy includes maintaining an appropriate asset allocation and rebalancing as necessary, as well as closely monitoring the selection and performance of fund managers.

She adds that because the endowment held an appropriate amount of cash and was able to meet the Academy's budget needs, it was not forced to sell assets at “fire sale” prices, and thus, it has been able to benefit from the recent market rebound. “We are not market timers; we stayed invested and maintained our goals and targets. That consistent approach, we expect, will continue to serve us well in the long term.”

The Academy also has been well-served by the head of school's and trustees' forward-looking approach to finances during this tumultuous period, said Steve Carter, chief operating and financial officer. “We remain focused on the big picture: careful management of the endowment, disciplined budgeting, and the involvement of the community,” he said. “Each component of our strategy has helped to buffer the effects of the market downturn.”

Falls remains cautious, however, and said it is impossible to know whether the market truly “bottomed out” during the dark days of March when the S&P hovered around 700. “There is still a healthy degree of sobriety and still a lot of uncertainty out there.”