A Struggling Economy and a Pop Quiz Endowment Conference engages alums in finance
In a half-day think tank session devoted to Andover’s endowment, more than 70 alumni and parents from the financial sector gathered at the Harvard Club in New York City last spring to lament the economy and to turn a crystal ball on the future. The third Future of the Endowment Conference was hosted by Trustee Thomas Israel ’62, and designed and led by Chief Investment Officer Amy Falls ’83, who set the tone: “People have always been Andover’s greatest asset. With collective intelligence, we can accomplish anything.” Perhaps to test their market savvy, Falls, who also guest teaches in instructor Carroll Perry’s economics class, then gave a pop quiz. With handheld devices, each person entered his or her answers, then a projector flashed the group results on a screen. Participants responded to a series of multiple-choice and opinionseeking questions, such as: When will
From left, Trustee George Ireland ’74, Michael Reist, director of investments at Andover’s New York Citybased investment office, and Derrick Queen ’84, managing director at Citigroup, discuss recent developments on Wall Street. In addition to working in small groups, endowment conference attendees heard presentations from, among others, school leaders Barbara Landis Chase and Oscar Tang ’56. the U.S. real Gross Domestic Product growth resume? What is your best estimate for annual inflation over the next three years? What is an appropriate return target for a diversified hedge fund program? True or false: The U.S. equity market bottomed out in March 2009. That final question (47 percent answered true and 53 percent said false) illustrated the level of uncertainly still present even among a group of seasoned financial professionals.
To help the group better understand Andover’s budget planning and strategies in response to the latest economic circumstances, Chief Operating and Financial Officer Steve Carter gave a presentation covering a range of areas, including endowment spending rates, tuition and financial aid, and annual giving projections. Falls’s estimate in May that the endowment may finish FY09 with a percentage decline in the low- to mid-20s proved not only conservative, but prudent for future planning. In fact, the endowment’s losses for the year that ended June 30 are now estimated at 15–17 percent. While Falls described the past year as a “very stressful time for the endowment” and for her NYC-based staff, she says Andover was fortunate to have sufficient liquidity to fulfill its capital commitments and to meet the Academy’s cash needs. As with the two previous conferences, Falls was interested in gaining the wisdom and advice of those whose professional experience and dedication to Andover comprise a valuable resource. While no one expected to discover a magic bullet approach to investing, Falls did walk away with reinforced convictions about opportunities across a number of markets, particularly in distressed debt, an area where the endowment had already made significant investments. In addition, concerns about future inflation were rampant, and the topic will remain a priority of the Investment Committee this fall. Participants also stressed the importance of thinking globally. With alumni in virtually every quarter, future conferences likely will build on the school’s broad international presence, with Asia being an important and obvious goal. “I can think of nothing more important,” said Falls, “than honing our understanding of economic and social trends in Asia.” —Tracy M. Sweet
Andover | Fall 2009
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