One of our institutional members recently posed the following question:
Our museum has a restricted account to be used for acquisition and conservation of the collection. This account is invested with a brokerage firm and due to the current economic crisis this account has been losing money – we are currently down 14%. Are museums riding out the storm or are they moving their funds to “safer” investments (such as cds)?
Here’s what the collective wisdom of the MANY membership had to say:
1. First of all, an investment policy is a good thing for all organizations to have. This is the document that outlines the "risk tolerance" of the board and staff to help an investment advisory firm.
For us, we have split our endowment. We have moved 1/2 of it to an active investment management firm whose goal is to minimize our exposure. We have retained the other 1/2 with a traditional and conservative banking institution. We rely on these institutions to preserve our position. The banking institution has held some of our portfolio in cash.
Mark Mortenson, President & CEO
Buffalo Museum of Science
2. If the account is only down about 14% they are doing better than most people. The middle of the storm is not the best time to be switching. It would have the effect of solidifying their losses.
The key going into this and coming out is diversification of assets. No one can really outguess the market for timing, winners and losers. They should have professional advisors help them spread their account into a variety of asset classes.
Approaching this year, many organizations moved a greater percentage of assets from equity to fixed income investments. But none of us should be giving advice from afar.
They might start by talking to the people who handle their account and get their perspective. Ask for comparisons to other similar size accounts, ask for analysis against the basic indexes.
A lot depends on size. The smaller the account the less llikely it can be shaped in any meaningful way. The larger the account, the more likely they will have meaningful options.
Michael Botwinick, Director
Hudson River Museum
3. We’re riding out the storm as taking $$ out of down investments only cements the loss. Given that restricted accounts are there for the long term, our investments are relatively conservative to begin with and we have great faith that they will regain their value.
What we’re doing on a day-to-day basis is looking at unnecessary expenditures, not replacing open positions for the immediate future, and behaving cautiously in all spending and budget projections for the next 12-18 months. I don’t know what is happening with the NYS budget but here in Pennsylvania, the public funds via the state arts and humanities councils are being trimmed on average by 5% or so for the FY2008-2009 cycle in terms of grants already announced. What will happen with the 2009-2010 grant cycle is anyone’s guess as those applications are all due in December of this year with the funding to be announced next summer.
Cara A. Sutherland, Executive Director
Everhart Museum of Natural History, Science & Art
4. In the case of our acquisition fund, we invest it in a Money Market fund and have for some years - the reason being we can have access to the funds readily. Not the case with endowment, which is invested diversely, but still taking a hit (!) right now. With endowment we are not allowed to invade the principal --so it is invested and until six months ago was doing fine.
Geoffrey Platt, Director
Boscobel Restoration, Inc.
5. Shaker Heritage Society decided to put all funds from the sale of collections into a series of CDs. These fund are restricted by state law so, we didn't feel that we could risk losing any principle.
Personally I think that if the funds are restricted by the board, (and are not derived from the sale of collections) they can invest however they want to. Their decision about how to invest the funds would depend largely on when they might need to access the funds, how large the fund is and what type of investments they hold. Obviously they would want to make a change if they hold a lot of stocks in the financial and automotive industry. Some other sectors might do well over the long run and may be worth holding onto. They will need to research the market a bit to help with their decision. I don't think it's a good idea to just go with whatever their broker says. We went to the Community Foundation in Albany and discussed our restricted funds with one of their board members and staff. It was very helpful. Maybe this museum could seek similar guidance. We ended up placing all of our funds with the Foundation because we simply don't have the resources to manage the fund ourselves. So far, we are pleased with the results.
Starlyn D’Angelo, Executive Director
Shaker Heritage Society
6. The Suffolk County Historical Society is going to stay put for the time being and keep our eye on our investments. It is certainly painful to sell when your investments have lost so much value. Our broker has told me a number of times that there has never been a period of 20 years when investments have not made money. (I think I have that right.) The point being that stock market investments are not for the short haul, but should be thought of as long-term investments. That being said, we will more than likely be going through a painful “belt-tightening” period.
Wally Broege, Director
Suffolk County Historical Society
7. We haven't sold any part of our invested endowment (a stock portfolio plus Vanguard mutual funds) because we have faith that the markets will recover in the long run, and in the short run our dividends derived therefrom are holding up pretty well even though the paper value of the investments has declined substantially. What we have done because of recent events is to spread out the "cash" (Money Market and CDs) we are saving toward construction of a new Educational Center at our Mabee Farm to maximize FDIC insurance protection, taking advantage of the new limit of $250,000 in any one bank.
Edward Reilly, President
Schenectady County Historical Society
8. We have an endowment fund (with several restricted smaller funds) that is down by about 30% from its high in January this year. We pay an investment management firm to manage our endowment fund. The managers are generally putting a bit more into "safer" investments like govt. bonds, and increasing the cash holdings within the endowment fund. Otherwise, they manage the fund pretty much the same. [Now's the time to buy high yielding stocks at bargain prices.] The museum takes 5% of a rolling 12 quarter average of our endowment each year for use as operating dollars in our budget. Since the worst investment quarter was only recently, we still have a pretty healthy amount that we can budget from our endowment for 2009, more than we did for 2008.
The annual gift appeal from the membership and local foundation grants are a different story altogether! Those will all be down considerably in 2009's budget.
Amy Wilson, Director
Chemung County Historical Society
Our museum has a restricted account to be used for acquisition and conservation of the collection. This account is invested with a brokerage firm and due to the current economic crisis this account has been losing money – we are currently down 14%. Are museums riding out the storm or are they moving their funds to “safer” investments (such as cds)?
Here’s what the collective wisdom of the MANY membership had to say:
1. First of all, an investment policy is a good thing for all organizations to have. This is the document that outlines the "risk tolerance" of the board and staff to help an investment advisory firm.
For us, we have split our endowment. We have moved 1/2 of it to an active investment management firm whose goal is to minimize our exposure. We have retained the other 1/2 with a traditional and conservative banking institution. We rely on these institutions to preserve our position. The banking institution has held some of our portfolio in cash.
Mark Mortenson, President & CEO
Buffalo Museum of Science
2. If the account is only down about 14% they are doing better than most people. The middle of the storm is not the best time to be switching. It would have the effect of solidifying their losses.
The key going into this and coming out is diversification of assets. No one can really outguess the market for timing, winners and losers. They should have professional advisors help them spread their account into a variety of asset classes.
Approaching this year, many organizations moved a greater percentage of assets from equity to fixed income investments. But none of us should be giving advice from afar.
They might start by talking to the people who handle their account and get their perspective. Ask for comparisons to other similar size accounts, ask for analysis against the basic indexes.
A lot depends on size. The smaller the account the less llikely it can be shaped in any meaningful way. The larger the account, the more likely they will have meaningful options.
Michael Botwinick, Director
Hudson River Museum
3. We’re riding out the storm as taking $$ out of down investments only cements the loss. Given that restricted accounts are there for the long term, our investments are relatively conservative to begin with and we have great faith that they will regain their value.
What we’re doing on a day-to-day basis is looking at unnecessary expenditures, not replacing open positions for the immediate future, and behaving cautiously in all spending and budget projections for the next 12-18 months. I don’t know what is happening with the NYS budget but here in Pennsylvania, the public funds via the state arts and humanities councils are being trimmed on average by 5% or so for the FY2008-2009 cycle in terms of grants already announced. What will happen with the 2009-2010 grant cycle is anyone’s guess as those applications are all due in December of this year with the funding to be announced next summer.
Cara A. Sutherland, Executive Director
Everhart Museum of Natural History, Science & Art
4. In the case of our acquisition fund, we invest it in a Money Market fund and have for some years - the reason being we can have access to the funds readily. Not the case with endowment, which is invested diversely, but still taking a hit (!) right now. With endowment we are not allowed to invade the principal --so it is invested and until six months ago was doing fine.
Geoffrey Platt, Director
Boscobel Restoration, Inc.
5. Shaker Heritage Society decided to put all funds from the sale of collections into a series of CDs. These fund are restricted by state law so, we didn't feel that we could risk losing any principle.
Personally I think that if the funds are restricted by the board, (and are not derived from the sale of collections) they can invest however they want to. Their decision about how to invest the funds would depend largely on when they might need to access the funds, how large the fund is and what type of investments they hold. Obviously they would want to make a change if they hold a lot of stocks in the financial and automotive industry. Some other sectors might do well over the long run and may be worth holding onto. They will need to research the market a bit to help with their decision. I don't think it's a good idea to just go with whatever their broker says. We went to the Community Foundation in Albany and discussed our restricted funds with one of their board members and staff. It was very helpful. Maybe this museum could seek similar guidance. We ended up placing all of our funds with the Foundation because we simply don't have the resources to manage the fund ourselves. So far, we are pleased with the results.
Starlyn D’Angelo, Executive Director
Shaker Heritage Society
6. The Suffolk County Historical Society is going to stay put for the time being and keep our eye on our investments. It is certainly painful to sell when your investments have lost so much value. Our broker has told me a number of times that there has never been a period of 20 years when investments have not made money. (I think I have that right.) The point being that stock market investments are not for the short haul, but should be thought of as long-term investments. That being said, we will more than likely be going through a painful “belt-tightening” period.
Wally Broege, Director
Suffolk County Historical Society
7. We haven't sold any part of our invested endowment (a stock portfolio plus Vanguard mutual funds) because we have faith that the markets will recover in the long run, and in the short run our dividends derived therefrom are holding up pretty well even though the paper value of the investments has declined substantially. What we have done because of recent events is to spread out the "cash" (Money Market and CDs) we are saving toward construction of a new Educational Center at our Mabee Farm to maximize FDIC insurance protection, taking advantage of the new limit of $250,000 in any one bank.
Edward Reilly, President
Schenectady County Historical Society
8. We have an endowment fund (with several restricted smaller funds) that is down by about 30% from its high in January this year. We pay an investment management firm to manage our endowment fund. The managers are generally putting a bit more into "safer" investments like govt. bonds, and increasing the cash holdings within the endowment fund. Otherwise, they manage the fund pretty much the same. [Now's the time to buy high yielding stocks at bargain prices.] The museum takes 5% of a rolling 12 quarter average of our endowment each year for use as operating dollars in our budget. Since the worst investment quarter was only recently, we still have a pretty healthy amount that we can budget from our endowment for 2009, more than we did for 2008.
The annual gift appeal from the membership and local foundation grants are a different story altogether! Those will all be down considerably in 2009's budget.
Amy Wilson, Director
Chemung County Historical Society
Photo: Tang Teaching Museum, Skidmore College
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