Philadelphoa Story

Chalk up another victim of the recession.

On Saturday the Board of the Philadelphia Orchestra voted to file for bankruptcy. The Orchestra said that their operating balances are dwindling and that without relief they will run out of cash by the middle of May.

The Orchestra has no long-term debt and has an endowment valued at over $110 million, but the endowment is restricted to paying for musician salaries and educational outreach. This is not uncommon among nonprofits, where endowed chairs are funded, in part, by income generated by donated funds. If expenditures are restricted to income and the endowment’s various sub-accounts are invested according to rigid strictures, the Fed’s zero interest rate policy may have claimed an unforeseen victim.

Management claims that it needs bankruptcy protection in order to renegotiate its pension obligations, musician and administrative salaries, and occupancy costs. The musicians union has opposed the filing, noting that they are willing to have the Orchestra use the endowment for operating expenses. That may not be their prerogative, however, if the funds donated with court-approved restrictions.

In any case, it’s very sad that one of the world’s finest symphony orchestras has been reduced to bankruptcy. The “Fabulous Philadelphians” have a storied history and have been a key inspiration for many aspiring musicians. It’s hardly conceivable that they would dissolve, but it’s possible. Honolulu’s orchestra did just that a few months ago. A society has the culture that it can afford. Let’s hope that this isn’t their final song.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350 • •
By | 2014-09-11T12:28:42+00:00 April 20th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment