Economy in Turmoil

#Jim Ventre on Financial Aid In light of the recent economic downturn, Phillips Academy’s financial aid program will adapt to the changing needs of its students’ families. James Ventre, Director of Financial Aid, said, “The school already has a reconsideration process for any kinds for financial tragedies that a family might incur,” called “Second Review.” Familes can apply for “Second Review” regardless of their previous financial status. Families not currently supported by financial aid who seek reconsideration are called “Old News,” in that they are old students who are new to financial aid. Ventre said the financial aid office generally has about a dozen families who fall under the “Old New” category, but, “many of those families simply don’t qualify for aid because their [financial] prediction doesn’t really come to fruition.” Ventre said the turnaround time on reconsideration requests should be about seven to ten days. Typical reasons for financial aid reconsideration, according to Ventre, can include illness, loss of job and financial meltdown among others. “We work so hard to get you students here, we don’t want you to leave, ever,” he said. Ventre also said that though he has heard from a “handful of families” worried about their financial situation, Andover has yet to see a “surge” of students in response to the recent economic crisis. Andover has also escaped the effects of the home “credit crunch” because, “our individual recalculation is that we’ve never included home equity,” said Ventre. Ventre added, “I am sure that in our student body, there are families who have yet to come forward, who are still figuring out the next step. Many of these families have told me that their first priority is to support their student at Phillips Academy.” Ventre said that nationwide there has been an increase in the “Old New” category of financial aid increase. This is not the first economic crisis PA has faced. “We’ve been through periods of economic challenges before, but this is a school that is built to last,” said Ventre, “I think the foundation of Phillips Academy in terms of how we do our financial aid and our commitment to students is not going to erode in any economic climate.” He continued, “We do have some historical reference. Our program is secure and funded appropriately.” Ventre said there have not yet been any calls about families worried about losing their financial aid. The effect of the economy on overall tuition though, remains to be seen. Ventre said that Andover’s need-blind initiative will not be affected. The number of students on aid since the need-blind initiative was introduced has only risen from 41 percent to 42 percent, according to Ventre. Tuition costs are not determined until winter term when, Ventre said, there is “more clarity on what’s happening on a national level.” Ventre said, “We value our students, we value our families, and our goal is to stick together. It’s for times like this where we don’t shy away from our commitment.” Financial aid decisions are made in March, and the comptroller’s office sends out bills in July. #CIO Amy Falls on Endowment Thanks to a conservative investment strategy and precautions, Amy Falls, Chief Investment Officer for Phillips Academy, has largely managed to protect Andover’s endowment from the recent shock to the United States stock market. Falls said that she does not yet know how the market crash on Monday has impacted Andover’s endowment returns, but she anticipates that they will be lower than usual. “The endowment is well diversified, but almost everything is down. We’re not going to be immune from the market,” said Falls. More importantly, Andover’s day-to-day operations should not be altered by the market downfall, Falls said. Falls said, “So far we’re okay. I think at this stage we want to be prudent, but I think that we’re very committed to the goals of the Strategic Plan. We can manage to protect the value of the assets that have been accumulated.” She continued, “We’re still in a range that we expect, despite the market being at an unprecedented level of volatility. Our returns so far have been within expectations. This last month has been rough, but we hold long term capital and a single month just isn’t that meaningful.” However, she said that Andover did take precautions in case of a market downturn. “We decided about a year and a half ago that it would be prudent to keep five percent of the assets of the endowment in cash, in treasury bills, so that if things got volatile, we would not have to sell any investments to meet the needs of the school. We wanted to ride through two years without having to sell anything,” said Falls. Falls said that the Fiscal Year 2008 was slow, with the endowment up only 1.75 percent, but the return was relatively successful when compared to the market as a whole, which was down 13 percent. During the Fiscal Year 2007, the endowment returned 27 percent. In general, Falls said, Andover works with an assumed return of eight percent to ninepercent. According to Falls, all of the endowment is invested, but not exclusively in stocks. The Academy also has bonds, real estate, oil and gas partnerships and other commodities along with several other sectors. Falls said Andover holds many foreign investments, and while they were outperforming domestic investments last year, they are now “as bad or worse” than their domestic counterparts. PA understands, said Falls, that the endowment return will vary from year to year, but that being so widely diversified in investments greatly helps. As a testament to Andover’s financial stability, Falls said, “As far as I know, there has never been a situation where the operations of the school have been impaired because of endowment investments.” Falls said that most of Andover’s peer schools follow a similarly diversified investment program, and therefore, have seen similar returns to Andover. “This past quarter has been difficult because there has been so much volatility. If everything sells off, diversification doesn’t help you,” said Falls. “But I think as the year goes on things will stabilize a bit.” With regards to the bailout, Falls said that steps must be taken to maintain the integrity of the financial system. Falls said she thinks that the term “bailout” is misleading. “I don’t think it’s a wholesale bailout, but it was an attempt to provide enough liquidity to keep the economy going,” said Falls. Falls, who works in New York City, said, “Everyone in the financial industry is concerned. This is unlike anything that’s ever happened in most people’s lifetime. It’s certainly a volatile time. People are trying very hard not to make irrational or emotional decisions.”