I attended the Asian Art Museum's Foundation and Commission annual meeting last night to hear about their operations. The top brass presented the museum's annual report, which oddly enough I cannot find online even though it is a public document describing a civic entity's operations. I did find their audited financial statements and donor report on the museum's governance page although the reports for 2013 aren't up yet.
I noticed two financial matters from last night's meeting. The first is that the museum's endowment has assigned over a quarter of its asset allocation, in both its restricted and unrestricted funds, to hedge fund investments. That is worrisome. Hedge funds tend to underperform their benchmark indexes over time and the fees investors pay for them are exhorbitant. My second concern is that the museum intends to reduce its unrestricted fund to zero as the debt incurred to pay off the museum's relocation from Golden Gate Park is paid off through 2040. They intend to commit the entire endowment to restricted use after that date. My understanding of the word "restricted" is that donor funds in that category can only be used for specific exhibits or programs. I know that some donors like to set restrictions when they grant gifts because they like certain programs. If it were up to me, some balance of any non-profit endowment would remain unrestricted to give the institution flexibility in addressing future needs. It's not up to me after all, until someday when I'm wealthy enough to donate at a level that will obtain a seat on San Francisco's Asian Art Commission.
I did a double-take when the annual report described the KPIs the museum uses to measure success. My bias as a private sector finance guy is to default to metrics like ticket sales, gift shop revenue, and donations as the primary measures of success. The museum weights its non-financial KPIs like event attendance and website visits as equivalent to its financial metrics. Their mission is to bring art to the public, not just make money. I respect a non-profit that can increase its attendance and program offerings while breaking even if its endowment's ROI is at least beating inflation.
The Asian Art Museum is one of The City's jewels. I wrote it into my will years ago and that's why some of the big-shots running the place like having me around.
I noticed two financial matters from last night's meeting. The first is that the museum's endowment has assigned over a quarter of its asset allocation, in both its restricted and unrestricted funds, to hedge fund investments. That is worrisome. Hedge funds tend to underperform their benchmark indexes over time and the fees investors pay for them are exhorbitant. My second concern is that the museum intends to reduce its unrestricted fund to zero as the debt incurred to pay off the museum's relocation from Golden Gate Park is paid off through 2040. They intend to commit the entire endowment to restricted use after that date. My understanding of the word "restricted" is that donor funds in that category can only be used for specific exhibits or programs. I know that some donors like to set restrictions when they grant gifts because they like certain programs. If it were up to me, some balance of any non-profit endowment would remain unrestricted to give the institution flexibility in addressing future needs. It's not up to me after all, until someday when I'm wealthy enough to donate at a level that will obtain a seat on San Francisco's Asian Art Commission.
I did a double-take when the annual report described the KPIs the museum uses to measure success. My bias as a private sector finance guy is to default to metrics like ticket sales, gift shop revenue, and donations as the primary measures of success. The museum weights its non-financial KPIs like event attendance and website visits as equivalent to its financial metrics. Their mission is to bring art to the public, not just make money. I respect a non-profit that can increase its attendance and program offerings while breaking even if its endowment's ROI is at least beating inflation.
The Asian Art Museum is one of The City's jewels. I wrote it into my will years ago and that's why some of the big-shots running the place like having me around.
