June 2, 2006 | Read Time: 7 minutes
Chart: How the Curtis Institute of Music’s endowment has fared
Chart: Where Curtis has invested its endowment
Chart: Endowment-spending rates at Curtis
Database: How endowment investments fared at 247 nonprofit groups
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The Curtis Institute of Music here, which has trained hundreds of classical musicians since its founding in 1924, has many fine traditions. Housed mainly in four turn-of-the-20th-century mansions, the school enrolls only enough students each year — about 160, mostly college-age musicians — to fill its orchestra, and other slots in its opera, composition, and conducting programs. It has always provided full-tuition scholarships to all students; and it has long held a Wednesday-afternoon tea for its entire student body, faculty, and staff in its richly decorated, dark-wood-paneled common room.
But for many years, Curtis did not follow one basic tradition of most nonprofit institutions: fund raising. Until the mid-1980s, the music conservatory relied on two endowments to cover nearly all its expenses.
“There was no perceived need to raise money because the endowment paid for everything,” says Charles Sterne III, the institution’s acting director of development.
By 1986, when Gary Graffman, a prominent pianist, took over as the school’s director, Curtis officials were starting to fret over finances. The two endowments were worth a total of $45.5-million, and the school was able to cover 95 percent of its annual budget with earnings from the endowment. But costs were rising fast, and Curtis officials worried that the school would start depleting its assets.
To broaden its offerings, the institute was taking on more faculty members, and plans were being made to update its aging buildings. Renovations to improve the library and provide more performance, rehearsal, and practice space were sorely needed.
The two endowments that backed Curtis had not received any significant new gifts since Mary Louise Curtis Bok founded the institute with $12.5-million. Good investment returns and the occasional donation from Bok or her family for operating support had always kept Curtis in the black.
But the growing cost of doing business, along with the 1987 stock-market crash, which drained a few million dollars from its assets, solidified plans at Curtis to move away from its near-total dependence on its endowment and one donor family.
“People on the board were making scenarios of great worries for the future,” says Mr. Graffman, who retired in May as head of Curtis. “So I did what I was told and had lunch with people, and we started asking for money.”
Since then Curtis has run two fund-raising campaigns, bringing in a total of $42-million, and its annual fund now raises about $2-million a year.
In the process, Curtis has started seeking planned gifts, such as bequests and annuities; created fellowships and endowed professorships; offered donors naming opportunities; and acknowledged their gifts by starting several giving societies. It is also reaching out to its alumni more aggressively than ever before.
Mr. Sterne and other school officials say it was tricky at first to persuade potential donors that, after so many years of self-sufficiency, Curtis needed their money.
But, the officials say, because of the institute’s status in the national and international music arena and its reputation as a local cultural jewel, they were able to make a good case for support. And rather than questioning Curtis’s commitment to covering tuition costs for all students as an unnecessary expense, donors wanted to help continue the tradition because it ensured top-quality talent. (Noted alumni include Leonard Bernstein, Anna Moffo, Gian Carlo Menotti, and Lang Lang.) The caliber of Curtis students, Mr. Sterne and other officials here say, is so high that they would earn full scholarships anywhere they went, including Curtis’s closest music-academy competitors, the Juilliard School, in New York, and the Berklee College of Music, in Boston.
Curtis has been able to attract big new donors, including two of the city’s leading philanthropies, the Annenberg and Lenfest Foundations. The grant makers last year offered an endowment gift of $6-million to Curtis if the institution could raise an additional $9-million by the end of this year. And Harold F. (Gerry) Lenfest — a former cable-television mogul, who, along with his wife, Marguerite, gave $1-million to Curtis in 2002 to endow student fellowships in flute and piano — will become chair of Curtis’s governing board in June.
Edward A. Montgomery Jr., a Curtis trustee who heads the board’s development committee, says he, Mr. Lenfest, and Roberto Díaz, the principal viola of the Philadelphia Orchestra, who will succeed Mr. Graffman in June, are already assessing the institution’s needs in anticipation of its next fund-raising campaign. He estimates that the endowment, now valued at roughly $153-million, needs at least $50-million in new money to secure the school’s finances.
Along with continued plans to add to its endowment, Curtis is also working to increase annual gifts, thus taking the heat off the endowment to cover yearly budgets. The income will also allow it to decrease the percentage of assets it draws from the endowment each year. Last year’s rate was 5.6 percent, down from 6.3 percent in 1999. And in this year’s budget, endowment spending is expected to cover less than three-quarters of the costs, with annual gifts picking up much of the rest of the tab.
The assets that support Curtis come from a combination of two funds, one housed at the Curtis Institute itself and one at the Mary Louise Curtis Bok Foundation, a separately incorporated charity that has designated the music conservatory the sole recipient of its money. The institutions have governing boards independent of each other, but their investments are managed jointly, and for budget and planning purposes they are considered one pot of money.
Curtis’s combined portfolio has about 47 percent of its assets in U.S. stocks; 24 percent in fixed-income investments, like bonds; and 18 percent in equities outside the United States. The rest is in nontraditional assets: 6 percent in real estate and 5 percent in hedge funds.
But the real-estate and hedge-fund holdings are designed for Curtis’s particular situation. Since it relies so heavily on its endowment for annual spending, it invests only in hedge funds with relatively low volatility and only in real estate that produces income. It avoids altogether illiquid holdings, such as timber and oil, since those cannot easily be turned into cash.
Other than those considerations, Scott M. Jenkins, a Curtis trustee who chairs the board’s investment committee, says the school’s portfolio looks similar to other institutions of its size, and performs at about the same level.
According to the latest survey conducted by the National Association of College and University Business Officers in conjunction with the pension funds TIAA-CREF, Curtis’s endowment has posted slightly higher-than-average returns among higher-education institutions. The average 10-year rate of return for all institutions was 9.3 percent through 2005, according to the survey, compared with 10.3 percent for Curtis.
“Our investments are standard for institutions of our size, and we do well, although we may be a bit more modest with risk than others,” says Mr. Jenkins, who runs an investment company in West Conshohocken, Pa. “The biggest difference between us and others is probably that I just worry more because [the endowment] represents 72 to 78 percent of our budget.”
Curtis spends about $10-million a year, with student scholarships accounting for about one-half of its budget. The fastest-rising cost at the school is for financial aid, which has grown an average of 15 percent for each of the last 10 years. The assistance, helping students pay for such things as rent, food, health insurance, and textbooks, now represents 12 percent of the school’s budget.
To honor Mr. Graffman’s retirement, Curtis is raising $3-million for a new fund created within the endowment to help cover financial-aid costs.
Says Mr. Graffman, who will stay on as a piano teacher at Curtis after his retirement: “We don’t miss opportunities to raise money for the endowment anymore.”
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WHERE CURTIS HAS INVESTED ITS ENDOWMENT 
Total: $152.8-millionSOURCE: Curtis Institute of Music |
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ENDOWMENT-SPENDING RATES AT CURTIS
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Section: Endowments
Volume 18, Issue 16, Page B14
