Endowments – PEA, PA, SPS, Deerfield, Groton

Prep School Admissions
1

<p>A couple of questions have piqued my curiosity, especially as all data readily available seems outdated.</p>

<p>Would anyone know the current state of endowments, performance of investments etc. for the aboe schools? After the substantial dip in 2008-2009, how has recovery been at each school?</p>

<p>On the same note, how have the maximum % losses differed from school to school? Their 990s show a range of 15% (Deerfield) to 22% (SPS), but I doubt these are final figures. They also fail to take into account the recovery of each endowment.</p>

<p>Another question is about variability of allocation in 3 categories of endowment funds (as defined by the IRS “Permanent”, “Board-designated or quasi”, and “Term Endowment”). Andover and SPS show no "Term" component, while Deerfield's records show a quite similar division across the three categories. What bearing (if any) does the composition of total endowment have on the flexibility of use in times of an economic decline or financial distress?</p>

2

<p>The total endowment for PEA was $860M by Aug 31, 2010, and the total endowment for PA was $695M by June 30, 2010. It’s been reported that PA hada great year in FY 2010 with a 8%+ gain in endowment while PEA did poorly in the same period with a gain of merely 2%+. </p>

<p>Other news: The CIO at PA is leaving in March. She reported at the end of last year that the endowment gain for FY 2010 was 14.5%, which was inconsistent and didn’t add up to the $695M as published on the school website.</p>

3

<p>Thank you. Does the difference in gains reporting have anything to do with the CIO’s departure? Either way, the gains seem quite impressive in today’s market.</p>

<p>Anyone familiar with up-to-date SPS/Deerfield/Groton figures, please post. Again, I was curious about
(1) recovery from the 2008-09 downturn for each school (and any other top schools you may be familiar with) and
(2) what effect, if any, does the composition of the endowment have on the resilience of a school during tougher times. Is one setup more flexible than another, or it has no relevance whatsoever?</p>

<p>Thank you for any insights.</p>

4

<p>SPS endowment by June 30, 2010 was $381M. I think the smaller the total assets the less fluctuation it’s likely to experience. Before the downturn, Exeter endowment reached 1B and Andover $800M at some point. There is still some distance to travel but as Exeter’s CIO (or FA director - I don’t remember) pointed out, it is not whether but when it’ll go back to $1B. Hope he is right.</p>

5

<p>

I’m not sure what you mean by “final figure” as they are final figures as of the end of that fiscal year - they have to be for the IRS filings. </p>

<p>Disclaimer: I work for a non-profit that has an endowment. I am not a finance director, but do with with our auditor and finance committee. My knowledge is solid, but not detailed.</p>

<p>Perm restricted means you can not ever spend the original gift - only income generated from it. HOWEVER, that does not mean that the VALUE of that original gift can’t go down, it is tricky because the restricted amount stays the same but the current value goes down. </p>

<p>Board Restricted - not donor restricted but the Board has voted to restrict, usually to use only the income. </p>

<p>Unrestricted - can use anything.</p>

<p>Most schools (colleges as well and also non-profits with endowments) use a rolling average to figure how much they will “draw” and use. For example, a common number is 3-5% of a 3-5 year rolling average. That way, you know that your income generated is greater than that and if your mix of perm/board and not restricted accounts is good you are not dipping into perm restricted principle. </p>

<p>Yes DAndrew - it is not IF but WHEN it will go back up. I think all of us with endowments will agree with that statement. My organizations is on it’s way up, it is not at it’s high point but it is inching back up there.</p>

6

<p>Very informative replies, thank you all. </p>

<p>Would anyone know how the Exeter endowment surpassed Andover’s? It seems that in 2000 they stood equal around 660 million each: (under"Net assets or fund balances at end of year")
[Trustees</a> Of Phillips Academy in Andover, Massachusetts (MA) - faqs.org](<a href=“http://www.faqs.org/tax-exempt/MA/Trustees-Of-Phillips-Academy.html]Trustees”>http://www.faqs.org/tax-exempt/MA/Trustees-Of-Phillips-Academy.html)
[Phillips</a> Exeter Academy in Exeter, New Hampshire (NH) - faqs.org](<a href=“http://www.faqs.org/tax-exempt/NH/Phillips-Exeter-Academy.html]Phillips”>http://www.faqs.org/tax-exempt/NH/Phillips-Exeter-Academy.html)</p>

<ul>
<li>then Exeter took off and by 2004 it was 200 million higher than Andover. Was it a major capital campaign or simply better (or luckier) investments accounting for this difference? (some 4 science centers’ worth of difference validates the question…)</li>
</ul>

7

<p>I’ve never asked that question. Looking at the links you provided, it seems that starting from 2003, the total amount of donations to Exeter has been significantly higher than that to Andover year after year. It’d be interesting to know the stories behind the numbers, especially why the sudden surge in 2003 and how the donations have been maintained at about the same levels for many years after.</p>

8

<p>I believe Exeter ran an Endowment Campaign in order to dramatically increase financial aid.</p>

9

<p>Then obviously that was a very successful campaign. Any major donors that made to the headline?</p>

10

<p>I have never looked, but does Exeter post their Annual Report on their web site? If so, and if they have a few years back still up, you should be able to see the donor list of those willing to be listed.</p>

11

<p>From the 08-09 Annual Financial Report:</p>

<p>

</p>

12

<p>I wonder how Exeter surpassed Andover in the early 2000s, though.</p>

13

<p>I think that fundrasing campaign started in early 2000s, so maybe in 2003 and 2004 a huge influx of donations came in.</p>

14

<p>Just so we deal with the same numbers… the IRS 990’s for 2009 (the latest reported period) actually shows a decline for Deerfield of 19.1% ($378,460,186 to $305,989,770) not 15%. Not trying to be a stickler, just correcting facts. </p>

<p>A few other thoughts:

  1. Raw investment totals do not tell the entire picture since the schools vary in size (at the time of the last 990’s) from St. Paul’s at 524 students to Andover at 1,105. Endowment per student is a more telling picture.</p>

<p>2) Timing of the last/current/future endowment campaigns can skew the numbers dramatically, as cited in the Exeter comments, or that SPS is currently #2 behind Exeter in endowment per student, before their current $175mm capital campaign. They will move to #1 (if they are successful) and if no other school has a new campaign (which they will) and depending on the impact of Exeter’s just completed campaign. So these numbers are constantly in flux. </p>

<p>3) You are correct that liquidity has become an important focus for all of these schools. Just look at the liquidity problems that Harvard, Dartmouth and many others had to face. But always beware of valuation numbers (even on 990’s) for illiquid investments listed as “other securities”. When were they valued? Is there a ready market?</p>

<p>It is safe to assume that all of these schools have substantially recovered to their pre-recession levels. I can only address St. Paul’s directly. Their endowment is back to $427mm (before the capital campaign) and their liquidity position is exceptionally strong. As an aside… Moody’s rates St. Paul’s, Andover and Exeter all Aaa. I will not mention any other ratings. </p>

<p>BUT PLEASE LETS NOT ALL GO OVERBOARD ON RANKING THESE SCHOOLS BY THESE OR ANY OTHER MEASURES! (sorry to shout) They are all wonderful wonderful schools. Great kids get phenomenal educations at each of them.</p>

15

<p>

</p>

<p>That cracked me up. Whatever their numbers are, they are all robust financially, and safeguard assets prudently. So how much flexibility is there in the post-recovery numbers for deferred maintenance and new initiatives? SPS’s 10-year Finance Review mentioned low recent capital expenditures possibly leading to deferred maintenance issues. I have also seen the phenomenal “Millville Makeover” plans with near-, mid-, and long-term strategies. Very impressive. But how does it all add up (inflows/outflows in a quite volatile economic climate)? How bold is each school in its approach to such pressing matters?</p>

<p>We know that Nature will not defer Her blows, so how do leading schools strengthen their positions - including protecting the physical endowment: dorms and superb facilities?</p>

<p>(Just read about Harvard’s billion-dollar plan about an extensive house [dorm] “renewal” program, to begin in 2012. Made me think of all other lovely places where weather unforgiving - not to mention the young inhabitants).</p>

16

<p>

But isn’t that a matter of choice? If a school with a bigger endowments wants to have a bigger endowment per student, they may choose to by reducing their enrollment, right? I am asking only because I don’t quite understand the significance of endowment per student. I mean if it is so important, why any school that have bigger endowment than SPS’s wouldn’t choose to achive that by reducing its enrollment? </p>

<p>

If SPS reduces its enrollment to Groton’s level, wouldn’t it move to #1 for sure?</p>

17

<p>Yes, you could expel all students but one, I suppose (a Reductio ad absurdum argument). I am unclear if you are seriously questioning why people analyze endowment per student or if you were merely in an disputive mood last night. I will assume the former, hence:
[ul]
[<em>] At Trustees meetings, each of these schools examines endowment per student because it is what permits you to keep tuition low and/or increase discounting, and/or increase scholarships.<br>
[</em>] In papers like Andover’s Phillipian, they periodically publish comparisons on this basis. Citing their administration, they reported

[<em>] If you Google Endowment per Student you will see extensive discussion and reporting on the analysis.<br>
[</em>] In Boardingschoolreviw you will see the same.[/ul]</p>

<p>If it was the later then -30-.</p>

18

<p>Yes, you are right that I was asking a serious question and was not in “a disputive mood”, and especially not in a mood of promoting or degrading any school.</p>

<p>First, what do you mean by “you could expel all students but one”? My point is that endowment per student in a way is a choice while total endowment is not. More importantly, endowment per student being as high as possible is not unversally pursued by all schools while total endowment being as large as possible is. The significance of a big enough endowment is that it enables a school to implement its values and priorities effectively and sometimes the priorities don’t inlcude reaching the highest endowment per student.</p>

<p>

</p>

<p>Would highest endowment per student necessarily lead to lowest tuition fees, most financial aid and scholarship money or highest percentage of students recieving it? Is SPS in such a position? By that, I am not blaming SPS. I am simply trying to say that endowment (totoal or per student) does show the strength of a school but the differences in range doesn’t necessarily make a difference in all aspect of the school operation on a daily basis.</p>

<p>Endowment per student is telling, but it’s not more telling than the total endowment. Endowment’s function is mainly long term. It shows the financial resources the school can draw from in good and bad days. In really bad days, a school with huge endowment may cut back on enrollment and still survive. What about the schools with smaller endowment but higher endowment per student already? There’s no room for them to cut back and they’d have to close the door. Of course, I am talking about extreme senarios, which may never happen.</p>

19

<p>A 150-student school on a 150M endowment – its $/per student notwithstanding – will not be able to construct a spacious science complex, a superb gym, or a magnificent library, or sustain a substantial campus. Size matters to the point where stability and sustained growth probably become more pivotal.</p>

<p>And flexibility. Which brings me back to me original point about endowments: really not its relative or absolute size (whether per institution or student). Why care above a healthy level? I am certainly not asking rankings or confirmation of one or another being “superior”. At any level of endowment, I was seeking palpable signs of endowment utilization, such as new construction, extensive revival of existing buildings, scholarship-, curricular-, and extracurricular initiatives. Allgreat schools have these, but sometimes intentions remain just that.</p>

<p>So depending on leadership (crucial at all times), pressing on in the face of adversity is something some schools do more than others. Yes, in Zurich the gnomes may sit on a pile of gold and nothing happens for half a century as the pile grows incrementally larger. So what? These schools are living organisms, not museum relics.</p>

<p>So how bold are school trustees when it comes to opening the coffers or enlisting alumni support for new initiatives such as the above? In other words, do some schools display more confidence, daring to view the future in a rosier light?</p>

<p>Are assets managed largely the same way, or are some schools more venturesome? Because for 2008, (please note: the following links will directly open the 990 PDFs)</p>

<p><a href=“http://dynamodata.fdncenter.org/990s/990search/990.php?ein=020222227&yr=200906&rt=990&t9=A[/url]”>http://dynamodata.fdncenter.org/990s/990search/990.php?ein=020222227&yr=200906&rt=990&t9=A&lt;/a&gt;
p. 21 shows 19.25% investment loss for SPS (457 minus 88)
<a href=“http://dynamodata.fdncenter.org/990s/990search/990.php?ein=042103563&yr=200908&rt=990&t9=A[/url]”>http://dynamodata.fdncenter.org/990s/990search/990.php?ein=042103563&yr=200908&rt=990&t9=A&lt;/a&gt;
p.19 shows 10.14% investment loss for Deerfield (367 minus 38)</p>

<ul>
<li>with other schools in between (assets minus losses, not accounting for any non-investment in/outflows). Would this hint at SPS’ bigger appetite for risk, or do the above numbers result merely from inopportune timing at some schools and not at others? (n.b. I am not only not picking on SPS (I am sure by searching for more schools one can easily find schools with higher temporary losses), I am hailing calculated risk-taking within limits. I do prefer a certain dose of courage, without which life is such a drag.)</li>
</ul>

<p>Incidentally, Moody’s AAA vs AA1 (or below) is not unlike 800 vs 760 on the SAT. These schools are really all very strong financially. But they are not the same in their decision-making when applying these funds (whether investments in the school, or in the markets). Some lead – and some follow. Leadership takes courage. Thanks for the insights.</p>

20

<p> Slow down you are getting way way ahead of yourself Yes I was comparing “Investment” totals both publically traded and other securities on the respective balance sheets from their 990’s… Perhaps the Schedule D attachment number would be better… That is a different argument.
BUT Before you go any further… you are comparing apples to oranges. So you simply cannot leap to conclusions about risk taking or portfolios based on the numbers you are looking at. </p>

<p>**Andover, Exeter, St. Paul’s, Groton and most schools I am familiar with use a 6/30 Year-end. Deerfield uses an 8/31 year-end. **
So what difference does it make? Well…</p>

<p>Between 6/30/08 and 6/30/09 the [size=+1]DJIA declined 31% <a href=“from%2012,255%20to%208,438”>/size</a> All Schools But Deerfield.
Between 8/31/08 and 8/31/09 the [size=+1]DJIA declined only 17%<a href=“from%2011,543%20to%209,544”>/size</a> Deerfield’s filing period.</p>

<p>So any schools on a 6/30 year-end will indicate a much much larger decline than Deerfield who uses an 8/31 year-end. Deerfield’s apparently better results simply reflect different time frames in a very turbulent period in the market. Watch the apples and oranges. You can compare schools with identical year-ends, but then I will have to post again about portfolio valuations for thinly traded securities or untraded partnership interests. Investments are my field and they are wonderfully complicated.</p>

<p>Absit invidia</p>