Andover Endowment Valued at $641.8 Million; Down $161.7 Million From June 2007 High

Last Friday, Barbara Chase, Head of School, sent an email to all faculty and staff updating the community on Andover’s endowment, budget, fundraising and financial aid. The school recently received the return values for Fiscal Year 2009, prompting Chase to send out the letter. Endowment Andover’s endowment experienced the highest return out of its peer group of boarding schools in fiscal year 2009, according to Stephen Carter, Chief Financial Officer. As of June 30, the endowment was valued at $641.8 million, compared to its peak of $803.5 million in June 2007. The investment performance decrease of the endowment was -15.1 percent, and the overall endowment decrease, including operational costs and gifts, was -19 percent, Carter said. According to Chase’s letter, the average endowment investment losses of Andover’s peers in the Association of Business Officers of Private Schools was a 19 percent performance decrease. “Andover’s performance was in the top 15 percent of that group,” Chase wrote. The data from Andover and its peer schools will not be officially released and compared until December, according to Carter. “Earlier this year we were expecting a 25 to 30 percent decrease,” Carter said. The school projected those losses as late as March. Rebecca Sykes, Associate Head of School, described the endowment’s performance as “a welcome surprise.” “The surprise was not sudden, however,” Sykes said. “We had a good sense of where we were in July.” The administration did not officially release the numbers until now because the school’s private investments do not report their financial information until September, three months after the fiscal year closes. Carter attributed the endowment’s “nice upswing” from March to June to the bonds the school issued in December and the work of financial managers and private investors who kept the school financially “afloat” through the economic crisis. “We hire asset managers to invest the endowment. The hedge fund managers did a very good job of preserving capital,” Carter said. “We did a lot better than schools like Harvard, Yale, Duke and Brown because we have less private investments and real estate,” Carter added. According to Carter, only 13 percent of the endowment was in private investments or public shares converted to private equity by paying a slightly higher asking price. These stocks were therefore not available on the public market. Public investments made up 33 percent of the endowment. The school put 34 percent of the endowment in hedge funds, which require a performance fee but can participate in more investment and trading activity than public equities. Real assets accounted for 12 percent of the endowment, and the last 9 percent was in the form of cash and fixed income. Budget The endowment’s performance has not altered the administration’s goal of cutting $6 million out of the budget. “The endowment’s still down 15 percent. We’re still short on money,” Carter said. According to Chase’s letter, the administration has identified $5.1 million in savings so far, which leaves approximately $900,000 left to restructure out of the budget. “Over the next several months, faculty, staff and administrators will work in three teams focused on examining areas in which we believe we can find additional savings, thereby moving us closer to the $6 million reduction goal,” Chase wrote. Carter will lead two of these teams: one will analyze possible savings in technology and the other will study potential cutbacks in “other goods and services.” Maureen Nunez, Director of Risk Management and Administrative Services, will lead the third team, which will examine possible reductions in travel. In her letter, Chase cited some areas on campus where “we are doing business differently” to save money. Phillips Academy now has 31 fewer full-time-equivalent employees than budgeted last year. There are 10 fewer people in the Office of the Physical Plant (OPP) and Office of Academy Resources (OAR), six fewer from the teaching facultly and five from other departments. “This result comes from many factors: attrition, some employees working reduced hours, elimination of some open positions, phase 1 of the Voluntary Retirement Incentive Program and two layoffs from the capital projects team of OPP,” Chase wrote. John Rogers, Dean of Studies, worked with department chairs to move around faculty members to fill vacant positions without hiring more teachers. “If there’s another way to cover class sections without hiring outside the school, we’ll do it,” Rogers said. For instance, many department chairs themselves are forgoing their course reductions and teaching more classes. “There are fewer sections of classes this year, but the reduction is within the normal flux range for the number of sections in any year,” Rogers said. Rogers also said that after he spoke with department chairs to gauge their faculty needs for the next year, the administration decided to limit the number of faculty sabbaticals. According to Chase’s letter, other savings include a change in office supply vendors, expected to yield a 30 to 40 percent price reduction and closing PA from December 24 through January 1 “for all but essential personnel.” Financial Aid According to Jim Ventre, Director of Financial Aid at Andover, the school spent $400,000 in an effort to “give 29 students the opportunity to return to PA this year.” “A year ago, Financial Aid reached out to families hard-hit by the economy to evaluate unemployment and other factors,” Ventre said. In order to spend that $400,000, the administration stopped designating financial aid to certain out-of-term off-campus programs. “We have temporarily shifted financial aid support for other out-of-term off-campus programs to the grant budget to support the increased demand from current families whose financial circumstances have been seriously affected by the recession,” Chase wrote. Since these programs didn’t have adequate financial aid funding, the administration then had to temporarily discontinue them. But Chase added, “Those off-campus programs which have endowments designated for student support will continue to have access to those funds.” Rogers said “Increased need for financial aid makes it more important to meet basic financial needs than send students off campus for the term.” The financial aid office is not calculating the needs of each family any differently, despite the harder economic climate. “We’ve always had a progressive algorithm,” Ventre said. “Now, we’re just more informed about Financial Aid students on the margin [of qualifying for aid.]” The Financial Aid Office reassessed families who may not have been on aid before. “Lots of families not on financial aid have made sacrifices to keep sending their children here,” Ventre added. The administration and financial aid office hopes that this lack of funding is removed quickly. Chase continued, “Through the capital campaign we are actively seeking to raise additional endowment funding which will support these important enrichment experiences for financial aid students.” Ventre said that he knew he made the right choice in shifting financial aid funding. Ventre said he believes financial aid students would rather have money directed to tuition than summer programs. He added that he sat down with many financial aid students and spoke with them about the funding realignment.