“A fundamental premise of successful investing is ‘sell high, buy low.’ So what explains the New York City Opera board’s decision to do the opposite?” writes James Stewart in Friday’s (10/11) New York Times. “In what appears to have been panic selling, the City Opera board sold all the equities in the opera’s endowment and moved to cash in October 2008, as the stock market was plunging to new lows.… The fate of the endowment, established to ensure the existence of City Opera in perpetuity, is a stark measure…. City Opera had an endowment of $51.6 million in 2001. By June 2013, the market value had dwindled to just $5.2 million…. Endowments exist to generate cash for current operations and … to ensure an institution’s survival, especially in difficult times.… A spokeswoman for New York attorney general’s office, Melissa Grace, said: ‘The attorney general’s office supported City Opera’s application to access its endowment … on the condition that City Opera take certain steps to strengthen its financial controls and internal governance. Unfortunately, their efforts did not succeed.’ ” Nonprofit-governance expert Jack B. Siegel says in the article that endowments should “never be raided,” and that he sees “the collapse of City Opera ‘as a warning for the rest of the country’s cultural institutions.’ ”
Posted October 16, 2013
