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Minnesota Orchestra’s endowment needs deeper dive

The Minnesota Orchestral Association’s management-cited source of today’s crisis is the roughly $90 million gap between what its endowment has, and what in 2007 it had calculated to now have.

Management’s urging that financial “analysis” address merely the future of today’s unfortunate situation asserts that past actions are not relevant and only the remaining crisis-asset-level is germane. To some witnessing this state’s orchestral demise, that would be folly.

Make no mistake. All major stock indices are higher today than in 2007, as are bond indices (thank you, Fed). There have been six years of intervening dividend and interest payments — perhaps 2%+ per year — as well. Plus contributions.

So why is the MOA’s endowment so woefully behind?

Certainly it has been dipped into for operating needs, but nowhere near $90 million. The MOA’s FY2009 (ending 8/31/09) IRS Form 990 may be telling. It cites nearly $14 million in losses from securities sold in that fiscal year alone. Interestingly, the midpoint of that period was the stock market bottom in March of 2009.

Some wonder if MOA’s financial management did not endorse an asset-shift more into equities around its fateful 2007, now known as a cyclical market top, and then — perhaps frightened — allow a shift back out at or near the bottom, thus catching much if not most of the decline, but little of the recovery.

If so, management needs to come clean about its strategic asset decisions, so that donors and patrons alike can demand change and regain confidence that future donations will hereafter be managed with a steady, balanced hand on the tiller.

If this is not the case, management should be eager to let the sun shine on the endowment’s longer-term books, confident that it has been an admirable steward.

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Comments (2)

  1. Submitted by Paul Brandon on 06/03/2013 - 09:28 am.

    The flaw in this account

    Is that if the Recession of 2008 had not occurred, the MSO’s investments would not be worth what they were in 2007; they’d be worth much more (at least 25%).
    Contributions have also been less than normal (for the same reasons; the assets of contributors have declined; fewer profits to write off).
    So the current value of the MSO’s assets is much less than it had been -predicted- to be, even if stock indices have recovered.

  2. Submitted by Steve Titterud on 06/06/2013 - 08:39 am.

    Nothing will substitute for the light of day illuminating…

    …the Orchestra’s management of its assets.

    There is no real substance behind various speculations about the reasons for loss, interesting though these may be. Let’s see the books, and let’s know who made the decisions.

    The Orchestra seems to be absolutely terrified of the author’s suggestion – “let the sun shine”. If there was no mismanagement leading to the current “crisis”, then what’s the problem ?

    Something about this Orchestra’s leadership just doesn’t smell good.

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