10. Is there a thing whereof it is said: ‘See, this is new’?
– It hath been already in the ages which were before us.
11. There is no remembrance of them, of former times; neither shall there be any remembrance of them in latter times that are to come, among those that shall come after.
(Ecclesiastes 1:10-11)
The year 2008 was a frightening new experience for most people with fiduciary responsibility for the management of endowments. There was a rapid erosion in value of almost every asset class; for AVI CHAI it was no exception. Over the course of the year, 20% of the Foundation’s endowment was eroded by the markets, thereby taking a toll on our ability to continue our philanthropic activities at the pre-planned levels.
The words of Ecclesiastes ring in my ears, because I had a similar experience in my first year (1972/73) as a partner of the then venerable investment banking firm of Lehman Brothers; it survived back then, only to be devoured by the financial maelstrom in the autumn of 2008. But, as the words of Ecclesiastes indicate, 2008 was new only for those who failed to have any remembrance of them – of former times. Remarkable how the author of this insightful book provided yet another warning that things that go around come around. We all should have more clearly seen the gathering storm clouds which signaled the coming financial crisis, but we had been lulled into thinking that it would not be so bad, a solution would be found, just as solutions to other financial crises were found, several time during the past 25 years. Ecclesiastes goes on to say, “neither shall there be any remembrance of them, in latter times that are to come, among those that shall come after.” I pray that those who come after will remember clearly the lessons to be drawn from 2008, and how its market losses can ravage years of philanthropic planning. Quite frankly, I should have known, the warning signs of tightening credit were being felt even before 2007 came to its close. My experience 35 years earlier, in another time of tight credit, should have prepared me, but I failed to properly apply any remembrance of them.
We at AVI CHAI have adjusted to a new reality, perhaps a little late, but our Trustees and staff came to understand that if we were to ensure our plans for “sunsetting” in 2020, we had to reduce our level of annual spending. When we had done several analyses of spending based on our asset levels in earlier years, it was determined that there was a high probability that if we spent at a rate of $60 million per annum we could be confident that there would still be sufficient remaining assets in 2020 to permanently endow the activities of Beit Avi Chai in Jerusalem. Well, towards the end of 2008, doing that same analysis, a wonderful service of S.C. Bernstein & Co. led us to the unfortunate conclusion that remedial action had to be taken to establish a new spending level of $40 million per annum for the next ten years.
So it was with a heavy heart that I wrote to my colleagues in November, indicating that the results of the asset meltdown required us to reassess our philanthropic priorities and rate all the activities that we were supporting to determine where we could reduce or eliminate financial support. We would have to rank them in order of what Trustees and staff regarded as the Foundation’s highest to lowest priorities.
Such an exercise would be difficult, were it to have been done by a single philanthropist, but in the case of AVI CHAI, where each of its ten active Trustees has an equal vote, it inevitably resulted in different views on the equity and effectiveness of the outcome. There were those who felt we were eliminating grantees whom they considered essential to AVI CHAI’s Mission, but who nevertheless, received low rankings. Ultimately, the group decisions had to be accepted, and the staff began the difficult and dispiriting chore of informing some of our grantees that AVI CHAI’s funding would be either reduced or eliminated.
We have concluded 2008 with a significant reduction in AVI CHAI’s endowment, a fate shared by many foundations, but with a renewed enthusiasm for ensuring the success of the ensuing years towards our sunset in 2020.