Andover
The Annual Report of Phillips Academy
Fiscal Year 2024
July 1, 2023–June 30, 2024
Welcome from the President of the Board of Trustees and
the Head of School
After many years, we are pleased to share a renewed financial and state of the academy report for the fiscal year ending June 2024. This report includes programming highlights and an overview of the operating budget and endowment performance for Phillips Academy. We invite you to delve into this narrative to come to know the school more deeply.
While Andover has published a report on the endowment annually, it has been nearly three decades since it presented a comprehensive review of its budget and finances to the broader community. The Board of Trustees and school leadership believe strongly that this approach will provide greater transparency around the fiscal health of the school and will be especially important to those who invest in Phillips Academy’s extraordinary people and programs. What you will see is a dynamic, complex school that is incredibly well run and expensive to operate.
Evolution is not new to Andover.
Renewal of the annual report also comes at a crucial time for the school. We are in the final year of a long-range planning effort to reimagine how we meet our mission to educate students in the 21st century. At the same time, we must also secure Andover’s financial foundation for the next generation. This year, campus-based working groups are developing proposals in three areas: strengthening support for the teaching profession, reimagining the student experience, and running the school more efficiently and effectively. The board will review and begin to act upon a series of recommendations in fall 2025.
Evolution is not new to Andover. It is essential to sustaining our highest standards of excellence. Our school is profoundly different than it was generations ago. What has not changed are the enduring values and principles that have served it so well for nearly 250 years.
Sincerely,
Amy C. Falls ’82, P’19, ’21 President, Board of Trustees
Raynard S. Kington, MD, PhD, P’24, ’27 Head of School
State of the Academy 2024
Over the past year, Phillips Academy remained committed to its founding principles and continues to connect transformational learning with holistic growth and a community built on the ideal of non sibi. The following overview highlights this pursuit in action.
Long-Range Planning
In fiscal year 2024, Andover began a process of reaffirming excellence for the next generation. The leadership of the school began exploring questions surrounding a number of challenges posed by factors that include growing knowledge and evolving technology, societal divisions, and geopolitical conflict. This two-year strategic process, called road mapping, will help the community reimagine how best to educate students to thrive in the 21st century. Faculty, staff, and trustees spent much of the first year in committees, developing visionary goals tied to Andover’s mission and aligned with its values.
The Learning Steering Committee—led by faculty— will ensure exceptional quality in academics and student life by responding to and foreseeing changes in teaching and learning. This committee analyzed research and survey data, drafted planning papers, and considered “big ideas” that will be workshopped by the faculty. Its charge is to examine the full student experience and how to more effectively balance academic rigor with mental health and wellness in a Phillips Academy education.
The Fiscal Sustainability Group includes trustees and senior administrators who are focused on protecting intergenerational equity. This means securing the surest financial foundation for the next 30-plus years.
The Operations Group—comprising members of the Senior Administrative Council—will develop the policies and systems to underpin and implement new initiatives born from this road-mapping process.
All
efforts in FY24 benefited from
a year of gathering data, visiting other schools, brainstorming ideas, and engaging with the campus community.
Academic Excellence
Faculty devoted to students and inspired by lifelong learning are at the heart of Andover’s broad and challenging academic program. To ensure that faculty have the resources and skills needed to thrive in their careers, Andover introduced a new professional development system that emerged from a schoolcommissioned study by the RAND Corporation. Informed by the results of that study, a group of Andover faculty then worked with the Klingenstein Center for Independent School Leadership at Teachers College, Columbia University to create a new system to ensure that teaching excellence is deliberately supported.
The new system launched in FY24—four years faster than RAND had anticipated—and provides opportunities for faculty development with annual feedback at the departmental level and with professional cohorts that will engage across disciplines and experience levels.
In addition to bolstering individual growth, the faculty also introduced Departmental Reviews. These reviews are designed to align each discipline’s understanding of the student competencies that should be achieved. This is done through self-study and input from visiting committees comprising representatives from peer schools and colleges.
Leadership Appointments
In summer 2023, Andover welcomed three new professional colleagues to campus—Merrilee Mardon became the school’s first permanent Deputy Head of School, Aquita Winslow was appointed Dean of Community and Multicultural Development, and Jennifer Vasquez was appointed Director of the newly established Office of Family Engagement. This position and office came as a result of recommendations for improved programs, resources, and family outreach in Andover’s Anti-Racism Task Force report.
Academy Advancement
Total cash gifts, including pledged payments received, in fiscal year 2024 stood at $39.6 million. This marked a 12.6% increase from fiscal year 2023, spurred by payments on Knowledge & Goodness campaign commitments and new donations that touched every aspect of the Academy.
Overall, 7,535 donors contributed gifts of all sizes during FY24.
In particular, more than 1,200 PA families showed their support, while over 1,300 reunion class members participated as well. Alumni, families, and friends designated $10.7 million to the Andover Fund, which covers nearly 10% of the Academy’s operating budget annually and offers the school fiscal flexibility to address its most urgent needs.
Notably, philanthropic investments enabled Andover to progress on the Falls Music Center, which will debut in 2025, and fund the Gendler Peace Circle, named in honor of the late Rabbi Everett Gendler P’83, ’86, the school’s first Jewish chaplain and beloved instructor. Other priorities that were strengthened included scholarship aid to bolster the Academy’s need-blind admission policy, the ongoing renovation of the Peabody Institute of Archaeology, and the endowment of the Addison Gallery of American Art.
In addition, Andover celebrated the 50th anniversary of coeducation with events and initiatives marking the 1973 merger that united Abbot and Phillips academies. Students, alumnae, faculty, and staff all joined in this commemorative endeavor while also promoting the school’s ongoing commitment to its mission. Moreover, the Academy launched a new Women’s Initiative in winter 2024 to further elevate the crucial role women philanthropists are playing in the school’s future.
Admission and Financial Aid 2023–2024
The incoming class was the 17th to be admitted under Andover’s need-blind policy, which removes financial need as an obstacle to admission. The Academy continues to rely on the generosity of alumni and parents to sustain its commitment to our need-blind admission process. In addition to tuition and room and board, the school’s financial aid program also includes support for other essential items, depending on a student’s level of need. These items may include laptops, books, athletic equipment, warm winter clothing, and travel expenses—as well as ensuring participation in our signature Learning in the World programs on a fully need-blind basis.
Financial Aid
Students receiving financial aid 45%
Average grant for returning students $47,200
Students receiving full scholarships 13%
For entrance in September 2023, Andover received 3,364 applications from 48 states and 101 countries, a 7% decrease from 2022. Of those applicants, 693 were underrepresented students of color. There are 375 new students enrolled at Andover this year, representing 33 states and 26 foreign countries.
Admission and Matriculation
Admit rate 13%
Matriculation rate for underrepresented students of color 80%
Overall matriculation rate 84%
Percentage of newly enrolled underrepresented students of color 26%
Andover Welcomed 17 New Global Scholars in 2023–24
Five Davis International Scholars (Brazil, Egypt, Hungary, Jamaica, and Kenya) for a total of 13 scholars in the school year.
Six Caroline D. Bradley Scholars for a total of 19 domestic CDB Scholars in the academic year.
Three Kemper Scholars (Austria, Finland, and France), one Crown Prince’s International Scholar (Bahrain), one Thai Scholar, and one ASSIST Scholar (Republic of Georgia).
Each one of these students helps to enrich the geographic diversity of Andover’s population.
Academy Financials
The Academy meets its mission and reflects its values by investing in its students, faculty, and staff—and in the program. This section highlights PA’s financial health in fiscal year 2024 and includes reports on the operating budget and the endowment. Last year’s positive endowment returns and generous support from alumni and parents contributed to a strong year at the Academy.
Operating Revenue and Expenses
The Academy’s main source of revenue continues to be philanthropy. Annual giving and the endowment support more than half of the Academy’s costs. The draw from the endowment of $59M, plus current-use gifts of $10.7M, contributed 52% of the operating budget in FY24. Andover also received $15M in new gifts into the endowment, which adds to the endowment’s level of support in future years. Combined with the endowment’s performance, this led to an effective endowment draw rate of 4.6%.
The remainder of the Academy’s revenue came from net tuition, Summer Session programs, and other smaller sources such as Learning in the World programs.
Net tuition revenue increased by 4.7% and other sources of income increased by 6.3%.
On the expense side, 54% of costs are employee compensation and benefits. Compensation increased by 5.9% over FY23 mostly due to increased benefits costs and previously open positions being filled. Reducing the number of vacant positions has been a critical focus in support of all employees. The cost of goods and services also went up due to continued inflationary pressures on travel, food, technology software, and service contracts. The Academy incurred an unexpected expense of about $1M after a micro-burst hit Andover in September 2023, causing widespread damage across campus.
FY24 Revenue in millions
FY24 Expenses in millions
Balance Sheet
The Academy finished FY24 in a strong financial position, with total asset values of $2B. The return on the endowment for FY24 was 10.4%, which increased its value to over $1.4B. Additional information can be found in the endowment section of this report.
The Academy’s debt totals $141M, and payments on the principal will begin in FY25. The entire debt is scheduled to be paid off by 2052.
Endowment Budget Impact
Fiscal Year Ending June 30
Following the endowment, the physical plant is the Academy’s second largest asset and, given the age of many of our buildings, it needs continual maintenance.
Supported by the Knowledge & Goodness campaign, the Academy has invested nearly $200M in new construction and other projects to modernize academic and athletic facilities.
The last of these large projects, the Falls Music Center, is scheduled to open in January 2025. In addition to new construction, the Academy continues to increase its investment in facilities renewal to help address a deferred maintenance backlog of over $140M. In FY24, facilities renewal budget support increased by 13.5% to $14M and is scheduled to increase to $16M in FY25 and $18M in FY26. This increased investment will help continue to improve the facilities in support of our students and the program.
Endowment by Donor Designation in millions
Endowment Performance
Andover Endowment at a Glance at Fiscal Year End June 30, 2024
$1.4 Billion Market Value of the Andover Endowment
Performance Review
10.4% FY24 Portfolio Return on Endowment Fund
The Andover Endowment returned +10.4% for fiscal year 2024, outperforming the +9.5% median return for our peer group of $1B+ endowments and foundations.
Long-Term Endowment Performance vs. Benchmarks
as of June 30, 2024
Source: Phillips Academy Investment Office, Bloomberg, and Cambridge Associates.
The Academy continues to materially outperform traditional liquid benchmarks (MSCI ACWI/Barclays Aggregate portfolio) over the long term at lower volatility. However, because Private Equity and Venture Capital (PE/VC) meaningfully lagged strong public equity markets for the last two fiscal years, Andover and most larger endowments have recently underperformed those traditional benchmarks.
During this period, the endowment portfolio was well served by our secondary sale that closed in March
2022 and divested 25 non-core PE and VC funds. The reduction of PE/VC exposure subsequently benefitted Andover’s relative performance as sale proceeds were reinvested into public equities to maintain the endowment’s target allocation to Total Equity. The endowment’s improved liquidity position also enabled the Academy to maintain consistent participation in what may prove to be very attractive vintage years for PE/VC capital deployment, laying the foundation for the next decade of endowment returns.
Endowment
Performance by Strategy vs. Benchmarks
Source: Phillips Academy Investment Office, Bloomberg, and Cambridge Associates.
For the 10-year period shown, the endowment has outperformed both the blended policy benchmark6 and the traditional liquid 60/404 MSCI ACWI/Barclays Aggregate. PE has been the strongest category over the long term, despite more recent lackluster performance. Most asset class categories, including PE, Absolute Return, and Real Assets, have outperformed their benchmarks, while Marketable Equity is in line and Fixed Income & Cash has underperformed.
The Marketable Equity portfolio was hurt by an under-allocation to strong-performing U.S. markets during much of the last 10-year period, as well as poor performance of growth-focused U.S. long-only managers in FY22 following abrupt rate hikes that year. Our Public Equity allocation was restructured in recent years to have a better underlying geographic and factor balance.
The Fixed Income & Cash portfolio deliberately avoided fixed income for much of the last decade, given asymmetric risk from extremely low interest rates. However, fixed income is once again a relevant investment option, now that yield curves have steepened and normalized.
Long-Term Performance Objectives
The long-term goal to preserve or grow the endowment’s real purchasing power into the future requires achieving nominal returns that meet or exceed the Academy’s annual draw rate plus inflation. The challenge of this compounding high nominal return hurdle is reflected in the chart below.
Growth of $100: Andover Endowment vs. Benchmarks and Key Hurdles
20 Years through June 30, 2024
Sustainable Draw
Source: Phillips Academy Investment Office, Bloomberg, and Commonfund for HEPI (Higher Education Price Index).
The dark blue line in the chart above shows the cumulative value of $100 as if it were invested beginning 20 years ago, based on actual nominal returns of the Andover Endowment, compared to the nominal return required to meet the draw range (gray lines) plus the actual inflation impact (the aggregate inflation-adjusted hurdle represented by green lines). The Andover Endowment has met this hurdle over the longer term, but for periods of time may lead or lag this objective. Thoughtful portfolio construction is key, particularly for endowments that distribute a draw each year.
Asset Allocation
Andover’s portfolio strives to effectively balance the need for growth with the importance of mitigating losses, enabling the endowment to sustainably provide the annual budget funds on which the Academy so heavily relies. Allocation to various forms of equity exposure, including liquid U.S. and International Equity and Hedged Equity, as well as illiquid Private Equity and Venture Capital, helps the Andover Endowment achieve strong long-term returns.
Asset Allocation History
Additionally, diversifying strategies, including Cash and Fixed Income, Real Assets, Absolute Return, and Tail Hedge, all help to mitigate the impact of equity market downdrafts and provide balance throughout different market environments. Having increased the total equity target since 2021, the Academy’s endowment asset allocation looks similar to many larger endowments at a high level, though with currently less illiquid PE/VC exposure than many of our largest peers.
Source: Phillips Academy Investment Office.
Endnotes
1. The Endowment Value represents the value as of the audited financial statement cutoff date, August 31. It may not include all final valuations for the fiscal year ending June 30.
2. Represents additional draws from the endowment beyond the operating draw, in accordance with endowment fund terms. The 2022 value includes a board-approved extraordinary draw of $42M.
3. As of October 11, 2024, median of the Cambridge Associates $1B+ Endowment & Foundations peer group (sample set 119–126 reported, depending on the time period) and Endowment Composite peer group (sample set 358 reported).
4. Andover switched at the end of FY21 from a 60/40 to 65/35 benchmark comparison, along with the target asset allocation shift to 65% equity.
5. Market benchmarks: MSCI ACWI for Total Equity, Barclays Aggregate for Diversifying, and 60/40 ACWI/Aggregate for Total Endowment.
6. Policy benchmarks have evolved for marketable equity over the years. Current policy benchmarks shown are as follows:
• Marketable Equity: 0.8x MSCI ACWI
• PE/VC: blended Cambridge Associates benchmarks based on actual PA PE/VC allocations
• Absolute Return: HFRI RV: Multi-Strategy Index
• Real Assets: blended NCREIF Property Index (for Real Estate) and Bloomberg Commodities Index (for Natural Resources)
• Fixed Income & Cash: Barclays Aggregate and 3 Month T Bills respectively Subtotal and total blended benchmarks are aggregated based on PA target weights. PA’s Total Diversifying and Total Endowment returns include the cost of Tail Hedge since program began in April 2021, but benchmarks shown conservatively exclude such cost.
7. A secondary sale of legacy private equity fund positions, with a reference date as of September 30, 2021, was closed March 31, 2022.
Phillips Academy Board of Trustees
2023–24
Amy Falls ’82, P’19, ’21 Charter Trustee, President
Jennifer Amstutz ’86 Alumni Trustee
Chris Auguste ’76, P’09, ’12 Charter Trustee
Gil Caffray ’71, P’20 Charter Trustee
Amy Christodoulo ’98 Charter Trustee
David Corkins ’84 Charter Trustee
Sanjiv Desai ’89, P’24 Alumni Trustee
Anna Durham ’78 Charter Trustee
Keith Flaherty, MD, ’89, P’23 Charter Trustee
Drew Guff ’79 Charter Trustee
Raynard Kington, MD, PhD, P’24, ’27 Head of School
Chris Leggett, MD, ’78 Alumni Trustee
Tristin Batchelder Mannion ’82, P’19 Charter Trustee
Aisha Jorge Massengill ’88 Alumni Trustee
Carlos Montemayor ’92 Charter Trustee
Loyce LaShawndra Pace ’95 Alumni Trustee
Allison Picott ’88 Charter Trustee
Tamara Elliott Rogers AA’70 Charter Trustee
Stacy Schiff ’78 Charter Trustee
Michael Schmertzler ’70, P’05, ’07 Charter Trustee
William Tong ’91, P’24, ’26 Alumni Trustee
Yichen Zhang ’82, P’18, ’20 Charter Trustee
Eric Zinterhofer ’89, P’18, ’19 Charter Trustee
andover.edu/annualreport