Museums are wising up to the benefits of endowment funds - Museums Association

Museums are wising up to the benefits of endowment funds

Ongoing cuts in state funding are leading museums to investigate alternative long-term revenue streams. Gareth Harris reports
As cuts in state funding continue, some are questioning whether UK museums should follow their US counterparts and consider building endowments as long-term revenue streams.

This follows the announcement that an anonymous UK benefactor has pledged to match all donations to the Ashmolean Museum’s newly established endowment fund for the foreseeable future.

The University of Oxford museum set up the Ashmolean Fund to raise a £50m endowment. The seven-figure sum pledged by the anonymous benefactor has been offered on the condition that it is used to match other gifts to the fund, which is expected to provide at least 20%, or £2m, of the museum’s annual operating costs.

Private practice

Endowments depend mainly on the largesse of private donors, which could prove challenging for national and regional UK museums.

In 2010, Neil MacGregor, the director of the British Museum, wrote a report for the Department for Culture, Media and Sport (DCMS) focusing on the role that endowments could play in supporting DCMS-funded museums.

He stressed that in the US, “social prestige is intimately bound up with public philanthropy, which has rarely been the case in the UK since the late 19th century”.

Tax incentives also boost partnerships between US museums and donors. In 2012, 34 organisations were awarded Catalyst Endowment funding, which is jointly supported by the DCMS, the Heritage Lottery Fund (HLF) and Arts Council England (ACE). The scheme offers match funding to arts organisations to help them build endowments that provide an annual income.

A further 13 heritage organisations, including the Tank Museum in Dorset, received Catalyst Endowment funding in June 2013, which was provided by the HLF alone. This includes £1m earmarked for the Ashmolean Museum, which will go towards the Ashmolean Fund.

Safety net

The Mary Rose Trust in Portsmouth, which receives no state subsidy, secured Catalyst Endowment funding in 2012. The trust’s chief executive, John Lippiett, says its endowment adds a “much needed safety net”.

“I hope this will get us through emergencies and allow us to make improvements to our exhibitions in the years ahead,” he adds.

Each Catalyst Endowment organisation must raise a set amount that will subsequently be match funded. The Mary Rose Trust endowment took 18 months to set up and has so far raised £200,000.

“To secure the entire amount, we must raise £1m by 2016, which we are struggling with at the moment,” Lippiett says. “The initiative has not opened that many doors on the philanthropy front.”

The Watts Gallery in Guildford, Surrey, also secured Catalyst Endowment funding.
“With every capital appeal we launch, there is an endowment attached,” says Perdita Hunt, the gallery’s director.

Integral part

She stresses that fundraising for an endowment should be an integral part of any capital campaign. Also, many donors are able to understand how endowments can benefit museums in the long-term, according to Hunt.

Rachel Cockett, the director of development at Birmingham Museums Trust, says the trust is planning to set up a collections acquisitions fund as part of a legacy giving strategy, and will consider establishing an endowment in the next three years.

“Birmingham’s museums were established in the 19th century,” she says. “It would have been wonderful if an endowment had been set up and built on over the past 130 years.”

But there are pitfalls to setting up endowments today. “Current low interest rates and subsequent poor returns do not improve confidence in the potential revenue benefits of endowments,” Cockett says.

However, Hunt thinks endowments are a risk worth taking. “The benefit of building an endowment is huge,” she says. “When small museums or galleries struggle to secure unrestricted income, the year-on-year returns on an endowment are life-saving.”

Following the lead of the US

Ford Bell, the president of the American Alliance of Museums (AAM), says: “The largest US museums have endowments. For art museums, these are largely committed to acquiring new works for the collection. The standard for our museums is that 5% of the endowment is available for spending each year, with the remaining 95% invested in a range of securities, bonds and other financial instruments that are selected to (directors hope) ensure the continued growth of the endowment.”

A spokeswoman for the AAM adds that there is not a national standard regarding the rate of spending on an endowment, or distribution of investment portfolios. Bell’s advice reflects best practice, she says.

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