Nurturing the Gardner
By Steven Syre, Globe Columnist | January 29, 2010
The Isabella Stewart Gardner Museum put on a big show for more than 100 guests last week, unveiling architect Renzo Piano?s design for the $118 million, four-story wing under construction next to its famous original palazzo.
Meanwhile, an entirely different accomplishment by the Gardner has received practically no attention, but should matter a great deal to museum visitors and patrons alike. In a time of shrinking nonprofit endowments, the Gardner did much better than most institutions in protecting its money, and saved everyone millions.
Endowment losses are big news on college campuses across the country.
A study of 842 colleges and universities released this week showed the average endowment shrank by 23 percent during the one-year period ended June 30.
Harvard University?s endowment, the largest in the nation, plunged by nearly 30 percent, to $25.7 billion, in the last fiscal year.
Investment losses were the chief culprits behind the shrinkage of America?s university endowments during that period, when the Standard & Poor?s 500 stock index plunged 26 percent.
The same market pressure was squeezing the endowments of other nonprofits, including Boston museums that are in the midst of an unprecedented building boom.
Major new museum additions depend mostly on special capital campaigns and borrowed funds to pay the bills. But no one wants to explain why the endowment lost a bundle while nine-figure budgets are being committed to construction.
The Museum of Fine Arts, set to open a massive new wing of its own this year, says its endowment fell from $538 million to $409 million during the last fiscal year. The MFA calls that a 21 percent decline, but my calculator says the endowment shrank 24 percent.
The more modest Gardner can?t compare with the MFA as a financial powerhouse. That fact explains a lot about why the Gardner lost a considerably smaller percentage of its money when markets around the world tumbled. Fortunate timing and a relatively conservative investment approach were both tied to a sense that the museum was in no position to lose a lot of its money.
Still, the Gardner did lose some during the last fiscal year; the endowment?s investment losses were about 16 percent. Those losses, while very real, look impressive compared with the market?s decline.
The Gardner was also collecting millions in contributions for its expansion plan but kept those funds invested separately, in money market funds. The idea of keeping important short-term money safe might seem like a no-brainer, and it?s standard policy at many nonprofits. But Harvard managed to lose $1.8 billion in the last fiscal year by investing routine operating funds with its plunging endowment.
The Gardner endowment, at $84 million last summer, has its money in a combination of stocks, bonds, hedge funds, and a modest position in private equity. The board?s investment committee and its advisers at Cambridge Associates began to turn more conservative about two years ago.
Here?s why: As a smaller museum with a limited gate, the Gardner depends on its endowment for about 40 percent of its operating budget. A big investment loss could have a serious impact on the entire museum, and the board was worried about a stock market correction. The investment shift wasn?t dramatic, but it saved big money.
Like most nonprofits, the Gardner has seen its endowment recover a lot since last summer. But the museum?s managers did their best work by limiting losses in the middle of a scary market last year.
Steven Syre is a Globe columnist. He can be reached at
syre@globe.com.
