JONES LIBRARY TRUSTEES ENDOWMENT INVESTMENT STRATEGIES WILL “STAY THE COURSE”

The Jones Library Board of Trustees Investment Committee met virtually on Thursday, April 9th to discuss whether or not to continue their current institutional investment management strategy through the Vanguard Investment Group.   

This meeting was called to address a concern raised by Trustee Alex Levebvre at the Jones Trustees meeting of 3/27/2020 as to whether or not the Trustees should continue their quarterly automatic rebalancing for their endowment, given the current volatile situation with the stock market. 

Online were the committee’s two members – President Austin Sarat and Treasurer Robert Pam as well as Director Sharon Sharry, guest Trustees Alex Levebvre and Lee Edwards and two representatives from Vanguard addressed as Pete and Mike (unfortunately, some audio was disrupted during introductions so last names were not understandable). Minutes from a past Trustees meeting indicate that it was Pete Kokolus, the library’s Vanguard representative.  There were no documents posted on the screen during the meeting.

Levebvre asked Kokolus whether the automatic allocation rebalancing occurred through software or through a “thoughtful” process? Pete began by reporting that as of 12/30/19, the endowment was valued at $8,361,000 and was down 14.05% as of 3/31/2020 to $7,186,400. He said that the rebalancing was a contractual obligation of Vanguard based upon the agreement with the Board to maintain the desired asset allocation of 60 percent in stocks and 40 percent in bonds as the library’s long-term investment strategy.  If at the end of a quarter, there is more than a 4 percent difference in this ratio either up or down, a rebalancing of the index funds would occur by Vanguard which Pete and Mike would approve, and Treasurer Pam would be informed. 

There was then a brief discussion of the possibility of “inter-quarterly” re-balancing. Pete shared that it is allowed in the contract with Vanguard, but it comes with more administrative responsibilities for both Vanguard and the Board.  He does not recommend this because of the volatility in the market right now. Inter-quarterly rebalancing would also require the Trustees to be “predictive” about the markets. Pam added that if the Board wants to consider any changes to Vanguard’s contract or the current 60/40 split, then a discussion should occur “offline.”  

President Sarat concluded that the current policy seems correct, and the library is in a “reasonably good place.”  He thanked Vanguard’s representatives. After Vanguard was offline, Sarat said that the Library will “stay the course” and added that financial advisors give “routinized” answers.  He said the library will “ride out the storm” unless there is a cash flow problem. The meeting was concluded with no mention of the actual budgetary situation of the Jones at this time. 

The library’s goal is to withdraw only 4 percent a year from their endowment to fund part of the library’s portion of the budget (the rest paid by the Town, state aid and local fundraising) as well as to keep the endowment in perpetuity. The draw amount has been raised in recent years to pay for increased health insurance benefits for half of the library staff which is benefitted. Five percent was withdrawn in 2019 and 4.5 percent in 2020.  

As to whether or not the Library currently has a cash flow problem, nothing was discussed at this meeting because the library’s committee structure is compartmentalized.  Each committee, consisting of two Trustees, meets in-between the monthly full Trustee meetings and concentrates only on their charge. Some committees meet each month, others less frequently. https://www.joneslibrary.org/agendacenter   If there is a budget concern, the budget committee meets first and subsequently presents a proposal, concern or suggestion at the monthly full board meeting.

It can also be noted that the Friends of the Jones Library, now the conduit for all donations to the Jones Library System for the annual fund as well as the capital campaign, have sent out their spring fundraising letter to members, and the letter is linked to the library’s home page.  https://mailchi.mp/6efc2586e72e/your-libraries-are-here-for-you?e=4fbf6560fe 

At this time, the entire town’s financial situation is being analyzed. The library system will be included in the restoration of the Town’s Budget Coordinating Committee. The Town Manager has reinstituted this standing group to look at the Town’s 2021 budget including the schools and the Jones library system.  Director Sharry and an unspecified number of Trustees will participate. https://www.gazettenet.com/Amherst-preparing-for-budget-season-with-many-unknowns-33756065  Concurrently, the Town’s Finance Committee will be analyzing the impacts of COVID-19 on the current 2020 fiscal year and beyond.