The Ontario Arts Foundation is committed to the contributing to the success and financial stability of the arts in Ontario. We do this by connecting private donors and the arts through endowments largely established in response to government matching programs. The OAF has invested significant time in the past year to raising the profile of matching programs at the provincial and federal level. We have met with Artistic Directors and Arts Managers to provide information about long term funds and discuss whether the timing is right for their arts organization to raise endowment capital and apply for matching grants.
At the moment, the only active matching program is federally throught the Department of Canadian Heritage, Canada Cultural Investment Fund, Endowment Incentives Matching Program. We are in regular contact with senior staff at Ontario’s Ministry of Tourism, Culture and Sport to reminding government of the benefits of matching, the value over time of the provincial Arts Endowment Fund program (1998-2008) and encourage a new investment.
Ontario's Culture Strategy It is an opportune time to elevate the profile of endowment and matching with the Province of Ontario's Culture Strategy currently underway.
We met in September with Deputy Minister Drew Fagan and Assistant Deputy Minister Kevin Finnerty to share information about the compelling economic results of the Arts Endowment Fund program and to encourage the Ministry to invest in renewing the AEF program as an outcome of the Culture Strategy.
In October, we met Canadian Heritage Deputy Minister Graham Flack to express appreciation for the Federal government’s continued investment in endowment matching. Now that the election is over, we asked the Ministry to consider alternate ways to support arts organizations, specifically art galleries and museums currently ineligible for the Endowment Incentives program. We look forward to meeting Canadian Heritage Minister Joly and to learning more about the new government’s priorities as part of the 2016 Federal Budget.
Ontario Arts Foundation's Submission We are participating in the town hall Culture Talks sessions this November and December hosted by the Ministry of Tourism, Culture and Sport. We encourage all arts organizations, their leaders and board members to attend one of the remaining sessions if you haven't already, and to share your vision for arts and culture in Ontario. If your organization holds an endowment under the Arts Endowment Fund program, it is an opportunity to express in your own words, the stream of secure income you receive.
We are sometimes asked by an arts organization why the 2015 income paid from their endowment was 4.5%, when the Foundation earned investment returns of almost 14% for the year. There are two answers to the question:
Our investment policy goal is to earn returns ( interest, dividends, capital gains ) that allow for consistency in income payments year over year. In years where portfolio returns are particularly strong, we ‘bank’ some of that return so as to be able to keep income distributions stable against years where returns are lower/more volatile. The Board takes a long term view and considers long term results as well as short term returns making the annual payout decision. In 2014, one year returns were almost 14%, but looking at 10 year Foundation investment returns, the average is closer to 7%. An income return of 4.5% is in our view, reasonable and allows for a reserve (“cushion”) to cover future inflation and periods where markets are volatile or returns are lower.
The second reason is that the Board and our investment managers believe that the double digit investment returns of the past 3 to 5 years are not likely to continue.
Lower Investment Returns
Opinions will always vary, but there is a common view that suggests the world is moving, over the next 3 to 5 years to an environment of lower investment returns. Slower global economic growth, appears to be the new norm. This results from continued high levels of government and household debt, aging demographics as boomers retire (they save more and spend less which impacts government tax revenues), and slower transitioning of emerging economies. After a period of years where interest rates have been at low to near zero levels, it is anticipated the US Federal Reserve will begin to slowly increase interest rates in 2015. The increases are expected to be small and Canada will likely lag moves in the US. Canada’s economic growth is more mixed than the US, due to challenges faced by an energy and commodity led economy.
The US economy remains a global driver and is slowly improving, but at a slow pace. As it strengthens, US interest rates are expected to rise. High equity returns of the past 3 to 5 years have resulted in high asset valuations. Our managers don’t see this as sustainable. The likely outcome, in the near term are positive equity returns, but at lower levels closer to a 10 year average of 5 to 7%. Our expectation is that the managers the Foundation employs will achieve, and exceed those returns.
We believe that equity and fixed income markets will deliver positive, but lower total returns in 2015 and for the next 3 to 5 years. Our strategy and asset allocation policy continues to be biased towards equities, and is focused on high quality companies, well managed, holding conservative balance sheets and a history of generating positive returns.
We believe the beneficiaries of endowments want their capital to be protected, to grow and to deliver a sustained level of income. In times where other sources of income to an arts organization are more variable, this stability is important and a comfort as an organization builds its future arts programming.
Arts and Aging
June 30, 2015
I’ve observed a rise in published materials and articles on the intersection between the arts and the areas of aging, healthcare and wellness. The driver may be the “Boomer” generation, who as they retire seek to keep active, learning and finding a place for the arts in their lives.
Pre-War Generation When you consider that one of the most active participants and financial supporters of the arts are the ‘pre-war’ generation, this is important for arts organizations to incorporate into arts programs. It seems clear there is a general recognition that the arts ( in all disciplines ) benefit older adults emotionally, cognitively and socially. A number of research initiatives indicate that participating in the arts is good for the body, psyche and brain and warrants investments to enable participation.
Arts Integration Integrating the arts with this age group is increasingly moving beyond a ‘nice to have’. Providing culturally enriched programming enhances quality of life, engages this sector and sustains deeper relationships with arts and culture organizations. We know this manifests through volunteerism by retirees who have time, energy and experience to bring to an organization. It also reflects in current and legacy financial support.
This is a great opportunity for arts organizations to review programs, community engagement and education activities to more broadly include and appeal to this age group. It is an opportunity to be more intentional in providing culturally enriched programming for this age cohort.
Blog Posts & Video Two recent posts I read provide interesting background on the topic – a series of conversations organized by Barry Hennius and a Huffington Post commentary on a US conference organized by Aroha Philanthropies. There is a particularly charming short video clip titled ‘The Wall’ on the Aroha Philanthropies website.
This intersection between aging and the arts can be a a great opportunity for arts organizations and the patrons who participate, attend and support. As one of the posts concluded –..”Happily, growing older is looking a lot more promising, interesting and even exciting.