What’s next for the Boston Symphony Orchestra? The new season opens on Thursday, September 17; Andris Nelsons’ final season as Music Director will provoke discussion about the BSO’s artistic future. I’m going to stay in my lane and focus on fiscal affairs and governance.

Fiscal Year 2026. On Monday, August 31, the BSO closed the books on fiscal year 2026. CEO Chad Smith already knows whether the orchestra ran a surplus or a deficit; he will hide the details until July 15, 2027, the latest legal filing date.

Smith knows the key topline measures. Box office is predictable; if all went well in fiscal 2026, it should be around $55 million. If the BSO records another $60 million fundraising year, it will show that donors aren’t too upset about the Andris Nelsons firing.

Anything less will convey a different message.

Global equity markets performed well. Based on that, I believe the BSO will record investment returns of about $80-$90 million, the best return since 2021.

Grant Thornton, the BSO auditors, will deliver financial statements in February. The BSO will keep them secret until July.

BSO Board Chair. Sometime soon, the Board will decide whether Barbara Hostetter deserves another term as Chair. If the Board cares about job performance, they will elect someone else. Hostetter’s tenure in office has been a series of disasters: hiring Gail Samuel; hiring Chad Smith; firing Andris Nelsons.

All that would be forgivable if Hostetter had raked in fundraising dollars. Regardless of her personal generosity, she has not mobilized donors the way a Board Chair must do. Measured by real average annual fundraising, Hostetter trails five of the Big Seven Chairs:

• Peter May and Oscar Tang in New York

• Mary Louise Gorno and Helen Zell in Chicago

• Thomas Beckmen in Los Angeles

• Richard Smucker in Cleveland

• Ralph Muller and Michael Zisman in Philadelphia

That’s a sad track record.

It takes vision to be an effective leader. There’s a reason we still haven’t heard what “vision” Nelsons wasn’t aligned with: Hostetter has none.

Chad’s Next Media Tour. If the past is prologue, Smith will tour the media in Spring. He will grant an interview to Malcolm Gay from The Boston Globe, and leak some clues about fiscal 2026:

• If the fundraising numbers were good, Smith will say so; otherwise, he will zip it.

• If Smith complains about Symphony attendance, box office revenue fell short.

• Smith will spin his programming ideas as successes, without evidence.

Smith will stop making verifiable claims about BSO “deficits”. With the labor contract settled, he has no incentive to do so. Anyway, finance isn’t in Smith’s wheelhouse; if there’s some heavy lifting to do, he will send CFO Sok Cheng Soh or Treasurer Brad Lutzker.

What I’m Writing. Here are some of the projects in my queue:

• “Our surpluses are really deficits”: unpacking the BSO’s fake “operating results”

• Deep dive on how the BSO invests the endowment

• Benchmarking: how the BSO compares to the Big Seven

• Prospects for the Music Director search

There will be a few garden posts.

I’m open to suggestions and requests. Leave a comment or DM me here on Substack.

Talking Points

Shortly after the Boston Symphony Orchestra fired Andris Nelsons, CEO Chad Smith launched a media tour, giving interviews to The Boston Globe, Boston Magazine, The Berkshire Eagle, and The New York Times. He had three key talking points:

• The BSO had “consistently” run deficits for 20 years

• Owing to those deficits, the BSO had “drained” the endowment

• BSO facilities suffered from “significant” accumulated deferred maintenance

Smith had refined his talking points over 18 months. He tested them with BSO employees and the BSO Board. They were polished and well-rehearsed.

There was only one problem: his talking points were untrue.

In June, I started to publish “fact checks” on Smith’s claims. In this post, I consolidate the fact checks, organized around Smith’s main talking points. Where appropriate, I include updated information to reflect the fiscal 2025 Form 990 and audited financial statements filed by the BSO in July.

“Persistent Deficits”

Chad Smith wanted you to believe the BSO bleeds red ink:

“Our business has been running deficits consistently for nearly two decades” – The Boston Globe, March 13

“The BSO has consistently operated with deficits”– Trustee statement, Berkshire Eagle, March 23

“…the BSO has often run operating deficits” – BSO “leaders” - The Boston Globe, June 13

“Smith also cited 20 years of expenses exceeding revenue” – The Berkshire Eagle, June 18

“(The BSO) had begun running annual deficits” – Boston Magazine, July 16

All of these statements are false.

The BSO recorded seven deficits in the past 20 years. That’s a typical track record for a large nonprofit. Every Big Seven symphony orchestra recorded deficits in the same period; so did every major Boston area nonprofit. The Museum of Fine Arts recorded four deficits; BSO Board Chair Barbara Hostetter sits on the MFA Board. (Notes 1,2)

BSO surpluses outweigh deficits over 20 years. In fiscal years 2006 through 2025, the orchestra produced a cumulative surplus of $391 million. That’s not a picture of poverty. (Note 3)

“Draining the Endowment”

Chad Smith wanted you to believe the BSO raided the endowment to keep the lights on:

“We’ve de-capitalized our endowment by over $100 million” – The Boston Globe, March 13

“The BSO … has drawn more than $100 million from its reserves” – Berkshire Eagle, March 23

The BSO has taken an additional $110 million in endowment returns over the past 20 years – The Boston Globe, June 13

The orchestra’s significant endowment is being drained at an alarming rate — in 20 years, leaders have drawn an additional $100 million – The Boston Globe, July 16

All of these claims are false.

The BSO endowment balance at the end of fiscal 2025 was $603 million, its highest ever. The balance increased 83% since 2009; by 22% when adjusted for inflation. If the BSO is “draining” the endowment, it’s not doing a very good job. (Notes 4,5)

“Decapitalization” is jargon, with no settled meaning in law or accounting. Smith used the word because it sounds bad. To an arts journalist, “decapitalization” is that thing Herod did to John the Baptist.

The endowment does not spend itself; the BSO Board appropriates expenditures. When the Board chooses to spend or accumulate endowment funds, it must adhere to a legal standard of prudence. Smith’s suggestion that past appropriations were improper implies that the Board violated its fiduciary duty. (Note 6)

In later interviews, Smith shifted his focus to the unrestricted endowment and invented a pending crisis:

“We have been spending down the unrestricted portion of our endowment in very significant ways. We now probably have about five years of unrestricted endowment left before we get to a real crisis.” – The Berkshire Eagle, June 18

Simply to maintain operations, (Smith) says, the BSO has been decapitalizing its unrestricted endowment, something that’s only sustainable for another four or five years. – Boston Magazine, July 16

The first part of Smith’s statement is false; the second is fiction.

The BSO added $6.6 million to the unrestricted endowment in 2024, and $6.2 million in 2025. The unrestricted endowment balance is $66 million, $3 million less than its highest ever. (Note 7)

Since the BSO is not draining its unrestricted endowment, his “crisis” prediction is baloney.

“Deferred Maintenance”

Chad Smith wanted you to believe that BSO facilities are falling apart:

The cost of deferred maintenance mounts at Symphony Hall and Tanglewood … (BSO) facilities have about $90 million in deferred maintenance. – The Boston Globe, March 13

The BSO faces some $100 million in deferred maintenance costs at Symphony Hall and Tanglewood – The Boston Globe, April 29

Smith painted a dire portrait of the BSO’s finances, pointing out the need to spend at least $145 million over the next 10 years to cover deferred maintenance. – Berkshire Eagle, June 18

The BSO faced “daunting capital expenses”, including $150 million to maintain Symphony Hall and Tanglewood. – The New York Times, June 11

Expensive upkeep costs for the orchestra’s treasured venues continue to mount. – The Boston Globe, July 16

(The BSO was) deferring maintenance at its two glorious but aging assets, Symphony Hall and Tanglewood. – Boston Magazine, July 16

What’s more, (Smith) notes that a report from an outside consultant says that doing deferred maintenance on the BSO’s properties, including Symphony Hall and Tanglewood, will cost $145 million. – Boston Magazine, July 16

Collectively, these claims are misleading.

Every building has some deferred maintenance. Building components have lifecycles; every facilities manager has a “wish list” of potential upgrades and replacements. Buildings with extensive maintenance needs have issues evident to employees, such as broken plumbing, heating and cooling issues, and visible signs of decay.

Members of the orchestra surveyed last year welcomed Symphony Hall renovation. They cited a need for expanded practice and storage areas, restrooms, dressing rooms, the tuning room, and locker rooms. Only two mentioned maintenance issues.

In December 2025, Smith proposed capital planning for BSO facilities. The Board approved the proposal; Smith hired Gordian, a facilities consultant, to assist with cost estimates.

In April, Gordian presented a plan calling for $145 million in capital spending over 10 years. Of that, Gordian estimated $37 million for Phase One, which included the maintenance backlog. The remaining $108 million is a capital spending plan to address future needs.

BSO facilities need maintenance; nobody questions that. The BSO deferred some maintenance tasks from previous years; nobody questions that, either. Characterizing the entire ten-year capital spending plan as “deferred maintenance” is misleading.

The Verdict

At a tactical level, the BSO campaign “worked”. In July, the Globe and Boston Magazine published deep dives about the BSO crisis; both articles repeated the BSO talking points about deficits, the endowment, and maintenance as fact, without attribution. Four writers had time to scribble 13,000 words, but no time to check facts.

Smith’s talking points weren’t simply false and misleading; they stank as corporate messaging. Nonprofit leaders rarely plead poverty in public. Donors want to hear about an organization’s vision for the future; they don’t support losers who cannot balance budgets, protect the endowment, or maintain buildings.

The campaign accomplished nothing positive for the BSO. Instead, it exposed the organization’s serious problem with truth and transparency. The BSO is a public charity; it cannot survive without public trust. Chad Smith’s campaign compromised his personal credibility, and the Board must consider whether he can continue speaking for the BSO.

Notes

1. Surpluses and deficits: BSO Form 990 for Fiscal Years 2006-2025, Part I, Line 19; Schedule D, Parts XI and XII, Line 1.

2. Nonprofit deficits: Surveys typically find that 30–40% of organizations end with an operating deficit (expenses exceeding revenues). Nonprofit Finance Fund’s 2025 survey put the 2024 figure at 36%, the highest in a decade of their data. The Center for Effective Philanthropy’s panel showed the share rising from 22% in 2022 to 39% in 2025. Older studies often landed in a similar 30–40% range.

3. Cumulative surplus: BSO Form 990 for Fiscal Years 2006-2025, Schedule D, Parts XI and XII, Line 1.

4. Endowment balance: BSO Form 990 filings, Fiscal Years 2012-2025, Schedule D, Part V, Line 1g

5. Inflation rate: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], retrieved from FRED, Federal Reserve Bank of St. Louis

6. Endowment spending policy: BSO Consolidated Financial Statements, fiscal year 2025, Note J.

7. Unrestricted endowment: BSO Consolidated Financial Statements, fiscal years 2024 and 2025, Note J.

The Brain Dump

In his first year as CEO of the Boston Symphony Orchestra, Chad Smith toured the media. He spoke of many things: his love for Andris Nelsons; his desire to make the BSO more inclusive; his plan to make Symphony Hall into a “cultural hub”, with an improved lobby, multimedia capabilities, and co-working space. At Tanglewood, he wanted to renovate Seranak and restore “Peter Grimes Hall”, his moniker for what everyone else calls the Theater-Concert Hall. (Note 1)

Things he did not talk about: deficits, the endowment, or deferred maintenance at Symphony Hall.

In April 2024, Smith hired Parthenon, a strategy consultant. Consulting is a relationship business; Parthenon had no experience in performing arts, but it had connections: former BSO Board Chair Bill Achtmeyer founded and led the firm for 29 years.

Smith and Parthenon commenced work on a strategic plan. For an organization the size of the BSO, a strategic plan should take about six months. Parthenon assigned three consultants to the team; they were intelligent, polished, diplomatic, and completely ignorant of the symphony orchestra business.

The strategy team collected data over the summer of 2024. Parthenon conducted a few interviews with BSO employees and fielded an audience survey.

In September, Smith presented his plan to an all-staff meeting. The plan lacked a clear statement of purpose and a strong analytics foundation. Smith treated strategic “pillars” as vague categories and dumping grounds for his ideas.

Smith spoke of “challenges”. He claimed, accurately, that costs had grown faster than revenue. The BSO had an “operating deficit” leading to “reliance on the unrestricted endowment”. That was misleading; the BSO recorded a positive cash flow of $29 million and added $6.6 million to the unrestricted endowment in fiscal 2024. (Notes 2,3)

Smith read a sprawling list of “strategic opportunities.” These included:

• Expanded Pops and Popular Artists

• Jazz, theatre, and comedy

• Food and wine festivals

• Reconfigured concert schedule

• Humanities programs

• Expanded regional, national, and international touring

• Major investments in Symphony Hall and the Tanglewood campus

• Renovation of Seranak, the Theater-Concert Hall, and Meadow Court

• Focused social impact programs

• Professional development and training

• Investments in martech, analytics, a mobile app, and software for dynamic pricing

So far, BSO musicians had provided minimal input to the plan. Andris Nelsons had provided no input at all.

It does not matter whether Smith’s ideas made sense. In a strategic planning process, when employees hear the CEO say “these are my ideas”, many will hear “this is what we’re going to do”. By floating his ideas this early in the process, Smith conveyed a message to BSO musicians and staff: your ideas don’t matter.

After the presentation, the strategy project went dark. Parthenon rolled off the project and disappeared. Smith did not present his plan to the Board; there was no chance they would approve his brain dump.

In fiscal 2024, the BSO expended more than $3 million on consulting fees. (Note 4)

The Do-Over

Smith spent the next ten months revising his strategic plan. In early August 2025, he shared a new draft. Smith had a new story to tell: the BSO had been in a long-term decline, but then, in a “pivotal moment,” the Board hired Chad Smith, and now things were looking up.

He refined his talking points. Concerns about diversity, inclusion, perceptions of value, recognition for innovation, and attracting talented people all disappeared; now, he focused on fiscal challenges.

The top problem on Smith’s list of concerns: “twenty years of persistent deficits”. It’s unclear what he meant: the BSO did not record “twenty years of persistent deficits”, according to public records. Presumably, Smith had some other definition of “deficit” in mind, but he did not spell it out. (Note 5)

For the record, the BSO recorded surpluses in most of the past 20 years. Like every other Big Seven symphony orchestra, the BSO also recorded some deficits. The Los Angeles Philharmonic recorded two deficits during Smith’s four-year tenure as CEO, including the largest deficit in its history. (Note 6)

The point requires a brief digression. No symphony orchestra covers expenses from concert revenue; the BSO has never done so. If Smith defined “deficit” as “failing to cover all expenses from concert revenue,” he understated the problem; the orchestra suffered from 145 years of persistent deficits.

Symphony orchestras depend on charitable contributions. That is why BSO founders organized the corporation as a public charity and not as a business. In any year, when fundraising meets or exceeds targets, the BSO records a surplus; when fundraising falls short, the BSO records a deficit.

Smith claimed that “deficits” (as he defined them) led to excessive spending from the endowment. He argued that deficits led to lost investment value, referring to the opportunity cost of spending rather than saving. It’s like saying that since you paid for your kids’ college, you put less money in the bank, where it could have earned interest.

He was wrong about endowment spending. Figure 1 below shows BSO endowment spending since 2009. The BSO spent modestly from the endowment in most years; the main exception was from 2016 through 2019, when the Board appropriated funds from the temporary endowment to build the Linde Center.

The BSO’s target payout rate is 5.25%. The average payout from the endowment for 2012 through 2024 was 5.16% when you control for the Linde Center spending. In brief, the BSO did not overspend the endowment. (Note 7)

Smith also claimed that BSO expenses exceeded revenue from 2016 through 2024. That claim was accurate but misleading. Why choose those nine years? Extending the window by one year in either direction would have flipped the result to a surplus.

Revenue fell in 2016, 2017, and 2019 because fundraising fell short of targets. A competent strategic planning effort would ask why that happened. There are many possible explanations for that failure, but Smith wasn’t interested in understanding root causes.

Smith blamed Symphony programming. He pointed to reduced classical ticket sales, down 35% since 2005, and a decline in subscriptions from 28% to 11% of “major performance revenue”. Both claims were misleading; BSO filings show stable attendance through 2019, a sharp drop in 2020 owing to the truncated season, then slow recovery from the shutdown. Regardless of unit ticket and subscription sales, concert revenue steadily increased. (Notes 8,9)

Smith claimed that BSO fundraising was “flat”. He supported this claim by calculating the compound annual growth rate (CAGR) in contributions from 2005 to 2019. Why those two years? Contributions surged in 2005 and fell short in 2019; as a result, Smith badly underestimated the true growth rate in contributions, as shown in Figure 3 below.

The first version of Smith’s strategic plan did not mention maintenance needs. In this version, he spotlighted “significant accumulated deferred maintenance” at Symphony Hall and Tanglewood. Whether that claim is true or not is unclear; the interesting question is why it was suddenly a priority.

Overall, Smith’s financial analysis lacked depth and curiosity. He noted industry issues known for years, and not unique to the BSO. To the musicians, it seemed he just wanted to prove that classical music was a dying business.

The “Vision”

Smith discarded most of the ideas from version one of his strategy. Instead, he proposed “artistic reimagination”, a “flagship” education program, and capital planning for Symphony Hall and the Tanglewood campus.

Smith detailed six “reimagined” programming initiatives:

• Festivals

• Symphonic cycles

• Affinity programming

• Artists-in-Residence

• Institute for Orchestral Artistry

• Artist-led curation

Festivals predate the BSO. In March 1856, Charles Callahan Perkins organized a Grand Beethoven Festival at the Music Hall in Boston. Gustav Mahler programmed a Historical Cycle with the New York Philharmonic over six concerts in 1910. Koussevitsky organized multiple BSO Beethoven festivals. Leonard Bernstein made festivals a staple during his tenure in New York; he organized a concerto festival, a Mahler festival, and Keys to the Twentieth Century.

Smith cited his E Pluribus Unum festival, claiming it a “success”. Most of the planned events for this festival had not yet taken place, so it seems premature to call it a winner. In most lines of business, we measure results before taking a victory lap.

For symphonic cycles, Smith listed Beethoven, Tchaikovsky and Stravinsky. He did not mention Nelsons’ award-winning Shostakovich cycle, the Strauss cycle, and the planned Mahler cycle. Smith highlighted strong business metrics for the recently completed Beethoven cycle.

Boston Pops affinity programming dates back to the Fiedler era. On July 29, 1934, Fiedler led the Pops in Irish Night at the Hatch Shell on the Esplanade. Longtime patrons remember Gospel Night, Celtic Night, Armenian Night, Old-Timer’s Night and Latin Night.

Smith cited Pride Night as an exemplar for affinity programming. Pride Night, launched in 2024, nearly sold out in 2025; that’s good news. Smith also named Day of the Dead as a win; ticket sales for that event declined 22% in 2025; that’s not good news.

Affinity programming works well for Pops, but not for symphony. The core appeal of classical music is its universality, not its niche appeal. Symphony orchestras do not program Beethoven because they want to appeal to German-Americans. Boston lacks a critical mass of Finnish-Americans; should the BSO stop programming Sibelius?

Some years ago, I performed in a work by Amy Beach. The audience included men.

Andris Nelsons launched the Artists-in-Residence program in 2017. The Institute for Orchestral Artistry is an umbrella brand for the Boston Symphony Chamber Players and Tanglewood Prelude Concerts, which Erich Leinsdorf introduced in 1964.

“Artist-led curation” enables outside artists to build BSO programs. Smith cited a Yo-Yo Ma recital as a win, which makes perfect sense; Yo-Yo is a great cellist, and he draws crowds. Smith listed other examples as “wins” but provided no business metrics.

Smith did not define his “flagship” education program. In 2025, education programs cost $4.4 million and contributed $488,000 in revenue; Smith presented no evidence that investing in education would address BSO fiscal concerns. (Note 10)

In the Fall of 2025, CEO Smith delivered two lectures about the plan to BSO players. Some musicians approached Smith with proposals and suggestions, with no success. There was some discussion about a new mission statement; Smith agreed to add the word “excellence”.

Finally, in December, Smith presented his new “strategic plan” to the BSO Board of Trustees. He asked the Board to approve a revised mission statement, to “affirm” strategic priorities, and more planning:

• Symphony Hall Master Planning

• Tanglewood Campus Planning

• Education & External Engagement Strategic Planning

He also requested approval for a “Strategic Planning Task Force”. He misspelled “Planning”.

Smith’s plan had no substance. His plan for programming was a hash of things the BSO had done for years. He kicked plans for facilities and partnering down the road, and dropped the “people” initiatives entirely.

When Smith defined “early success,” he inverted BSO values. Beethoven succeeded because it made money, while Pops and events in other genres succeeded because they happened. To the musicians, his plan appeared to be fiscal responsibility for thee, but not for me.

This was the BSO “vision” in December 2025. Did Andris Nelsons embrace it? Was he clearly aligned on a collective path forward?

How do you embrace an empty vision?

Notes

1. Interviews with the Berkshire Eagle, the Boston Globe, WCRB, The Tufts Daily and others

2. Cash flow: BSO Consolidated Statement of Cash Flows, Fiscal Year 2024.

3. Unrestricted endowment: Note J, BSO Consolidated Financial Statements, Fiscal Year 2024.

4. Consulting fees: BSO Form 990 for Fiscal Year 2024, Part IX, Line 11g, and Schedule O, Note 8.

5. Contributions: BSO Form 990 for Fiscal Years 2016-2024, Part I, Line 8.

6. Surpluses and deficits: BSO Form 990 for Fiscal Years 2005-2024, Part I, Line 19; Schedule D, Parts XI and XII, Line 1.

7. LA Philharmonic surplus/deficit: Form 990 filings, Fiscal Years 2001-2024.

8. Payout: average payout rate of 5.16% is the average of the yearly payout rate for each year from 2012 through 2024, excluding 2016 through 2019. The annual payout rate is endowment spending divided by the trailing three-year average ending endowment balance, which simulates the operation of the BSO’s Yale Rule. BSO Form 990 filings, Fiscal Years 2012-2024, Schedule D, Part III.

9. Attendance: BSO Form 990 for Fiscal Years 2001-2025, Part III.

10. Concert revenue: BSO Form 990 for Fiscal Years 2001-2025, Part VIII, Line 2a.

11. Education: BSO Form 990 for Fiscal Year 2025, Part III, Line 4b.

Sheela Clary will host a Substack Live next Tuesday at noon EDT; I will be her guest. We will talk about the Boston Symphony Orchestra and its current crisis:

– Why we write about the BSO

– What we’re writing now

– New developments in the crisis

Click here to join next Tuesday’s live stream.

Sheela edits The Village Green News, an experiment in local journalism covering South Berkshire County.

My eponymous Substack covers whatever I want. Recently, I’ve written about the Boston Symphony Orchestra and my garden.

Boston is a great town for public broadcasting. One of the best shows is Boston Public Radio, co-hosted by Jim Braude and Margery Eagan. Jim and Margery are smart and serious journalists; they are well-informed and ask serious questions.

Yesterday, I appeared on their show; if you like, you can watch the segment here, beginning at 1:32:00. Jim, like me, comes from Philadelphia; we did not discuss the merits of scrapple. Another show, perhaps.

For balance, Jim and Margery invited BSO Board Chair Barbara Hostetter and CEO Chad Smith to appear on the show; they declined by email. Let’s parse their message.

Chad and Barbara are not available to be guests at this time in light of the ongoing contract negotiations with our musicians.

General Manager Tyler Reed is the chief negotiator for the BSO. Henry B. Cabot, who served as BSO Board Chair from 1952 through 1966, was the last Chair to be personally involved in union negotiations.

Chad is far too busy to negotiate with the musicians. Like Max Bialystok in The Producers, his biggest problem right now is hiding the surplus.

The Boston Symphony Orchestra is committed to ensuring that we have the financial resources to support our mission now and into the future.

That’s great news. I hope that means the Board will get to work and raise money like its peers in New York, Chicago, and Los Angeles.

A substantial endowment does not eliminate the need to address persistent operating deficits and decades of deferred maintenance.

That’s funny coming from an organization that just told the IRS under pain of perjury that it booked a surplus of revenue less expenses of $27,497,276 last year. It’s right there, in the Form 990, Part I, Line 19: that eight-figure number in the “Current Year” column. As the TV trial lawyers like to ask: were you lying then, or are you lying now?

We remain committed to sound accounting practices and responsible financial stewardship.

That’s great. The only person who suggests otherwise is CEO Chad Smith, who tells journalists that the BSO Board drained the endowment. You should talk to him about his comms.

Here’s a challenge, BSO: show us the line item for “operating deficit” in the audited financial statements or the Form 990 for Fiscal Year 2025.

Do it, Chad. Go on Boston Public Radio with Jim and Margery, and show them where it says “operating deficit”. If they agree that’s what the public documents say, I will publish a comprehensive correction on my Substack.

And that’s not all. I will stand on the steps of Symphony Hall with a sign that says “I Was Wrong About Deficits.”

Chad Smith, CEO of the Boston Symphony Orchestra, likes to make public statements. For a facts-and-data person like me, everything he says is grist for the mill.

In this multi-part series, I assemble fact-checks from several posts and organize them thematically. Where I have new information, I update them from the original and add context.

As always, I welcome corrections. Post questions or comments, or DM me.

“We’re Draining the Endowment”

“Our operating deficits are draining the endowment!” That’s the message from BSO CEO Chad Smith and his minions, amplified by credulous journalists. Part One of this series focused on the first part of that claim, that the BSO runs persistent and continual deficits. In this installment, we focus on the endowment.

The BSO is clearly not “draining” its endowment. You can’t drain a bathtub and end up with more water. At the close of fiscal 2025, the endowment reached its highest ending balance ever, as shown in the chart below.

Endowment spending has grown modestly over time. Spending was above the trend line from 2016 through 2020; the Board approved spending from the temporary endowment to build the Linde Center. Ed Linde donated the money for that purpose.

Endowment earnings are quite volatile, as shown in the chart below.

In 2020, the BSO churned half of the endowment investments and placed bets on marketable and illiquid equity limited partnerships. Markets giveth, and markets taketh away; the 2021 bull market lifted the endowment, and the 2022 bear market crushed it.

The BSO is not a bank or a hedge fund. The purpose of the endowment is to support the orchestra, and not vice versa.

That’s enough endowment background. Let’s do the fact checks.

The Fact Checks

While the BSO’s total endowment is approximately $600 million … 90% is donor-restricted – the principal is permanently restricted. (BSO Form 990 Cover Letter)

False. The BSO CFO confuses two different parts of the endowment and gets the math wrong. Endowment assets fall into three categories:

Permanent endowment: The BSO must preserve the original value of the principal, and may spend investment earnings according to donor instructions. At the close of fiscal 2025, the value of the permanent endowment was $265 million, or 45% of the total, not 90%.

Temporary endowment: The BSO must spend the funds according to donor instructions, but need not preserve the principal. The temporary endowment also includes accumulated unspent gains on permanently restricted net assets that have not been appropriated for expenditure by the Board of Trustees. At the close of fiscal 2025, the value of the temporary endowment was $271 million, or 44% of the total.

Board-designated endowment: The BSO Board can appropriate these funds at any time and for any purpose consistent with the BSO’s charitable mission. At the close of fiscal 2025, the value of the board-designated endowment was $66 million, or 11% of the total.

Combined, the permanent and temporary endowment add up to 89% of the endowment, not 90%. It may seem like nitpicking, but one expects a CFO to know the numbers in her own Form 990 filing. (Source: BSO Form 990 filing, Fiscal Year 2025, Schedule D, Part V, lines 2a-c)

“Over the course of two decades, we’ve de-capitalized our endowment by over $100 million.”(Boston Globe, March 13)

False. “Decapitalization” is an expenditure of principal from an endowment. BSO audited financial statements for the fourteen years available to the public show no expenditures of principal from the permanent endowment. (Sources: Harvard University Faculty of Arts and Sciences, Office of Finance Financial Accounting Glossary; BSO Consolidated Financial Statements, Fiscal Years 2011-2025).

Gains on (endowment) investments are not available beyond the 5.25% annual draw. (BSO Form 990 Cover Letter)

False. The 5.25% figure has no legal foundation. Instead, the Board of Trustees follows a legal standard of prudence; the Board must consider seven factors when it determines whether to appropriate or accumulate donor-restricted endowment funds:

• Duration and preservation of the endowment fund

• Purposes of the institution and the fund

• General economic conditions

• Possible effect of inflation or deflation

• Expected total return from income and capital appreciation

• Resources of the institution

• Investment policy of the institution

The BSO uses a “Yale Rule” with a 5.25% core spending policy to determine the baseline appropriation for the year. However, the Board can make supplemental appropriations from the temporary endowment as long as it respects the seven prudential factors and donor intent. (Source: Uniform Prudent Management of Institutional Funds Act (UPMIFA), codified in Massachusetts General Laws as M.G.L. c. 180A, Sections 1–11.)

The BSO has taken an additional $110 million in endowment returns over the past 20 years. (Boston Globe, April 29)

Misleading. The Board of Trustees approved supplemental appropriations from the endowment, in addition to the core allocation based on the Yale Rule. It is impossible to verify the amount reported by the Globe. The Board made most of these appropriations before 2021; since then, the Board increased the core spending percentage for the Yale Rule and reduced supplemental appropriations. (Source: BSO Consolidated Financial Statements, Fiscal Years 2011-2025).

In any case, all appropriations by the Board are subject to UPMIFA prudential factors. The designation of some appropriations as “core” and others as “additional” is irrelevant. If the Board appropriated the spending, one should presume fiduciary compliance unless there is firm evidence to the contrary.

(The BSO is) drawing more heavily on its endowment returns than leaders say is sustainable. (Boston Globe, April 29 )

Misleading. “Sustainability” is one of the seven factors the Board must consider when it appropriates funds from the endowment. If the Board makes a good faith decision that it must reduce the endowment draw, it will do so. However, there is no evidence that the Board has drawn such a conclusion; endowment spending has increased in each of the past four fiscal years.

Spending has averaged about 5.25% of the trailing three-year balance. It’s hard to argue that BSO endowment spending is “unsustainable” when it aligns with established policy.

(Smith cited) dependence on withdrawals from the endowment. As he put it, “We had been spending down the unrestricted portion of our endowment in very significant ways.” (Berkshire Eagle, June 18)

“We now probably have about five years of unrestricted endowment left before we get to a real crisis.” (Berkshire Eagle, June 18)

Simply to maintain operations, Smith says, the BSO has been decapitalizing its unrestricted endowment, something that’s only sustainable for another four or five years. (Boston Magazine, July 16)

False. Investment losses, not spending, gutted the unrestricted endowment in 2022. The balance was $63 million at the end of fiscal 2021, but declined to $48 million by the end of fiscal 2022. Since then, the balance has increased every year, to $66 million at the end of fiscal 2025. (Source: BSO Form 990 filings, Fiscal Years 2021-2025)

There is no basis for Smith’s doommaxxing. The BSO holds liquid assets outside of the unrestricted endowment. According to the audited financial statements, the BSO currently has more than $120 million in reserve liquidity, an amount that has increased by $10 million since 2020. The orchestra has recorded positive cash flow over the past fifteen years.

Everything peaks at once in midsummer. Seen above: Agastache, Joe Pye Weed, and Shasta Daisies compete for your attention. At the far right, a few spikes of Russian Sage photobomb the picture.

The Agastache ‘Blue Fortune’ is alive with bees. ‘Blue Fortune’ is a hybrid of Agastache foeniculum x Agastache rugosa. I chose the plant a few years ago, when visiting the local garden center in midsummer, and noticed that bees were all over it.

We must be kind to bees.

Joe Pye Weed, or Joe Shauquethqueat Weed, as I wrote last month. Joe Pye lived in Stockbridge, Massachusetts. If he were alive today, he’d be the guy behind the counter at the cannabis dispensary.

This will sound pretentious coming from a guy who takes pictures with his phone, but I like to create abstractions from the real. Here, we have Salvia farinacea.

The lady Zara rebloometh.

Rudbeckia hirta ‘Sahara’ grown from seed.

Here, we have Dwarf Crested French Marigold ‘Fireball’.

Nearby, we have Salvia ‘Red Hot Sally II’ and Zinnia ‘Zowie Yellow Flame’.

A male tiger swallowtail drops in to dine. Butterflies are spirits of the departed.

A very pregnant Dahlia bud: Café au Lait Royale.

Harvesting Aquilegia seeds to sow in the Fall.

That is all for now.

David Allen has a doctorate in History from Columbia University. He served as a lecturer at Yale’s Jackson Institute for Global Affairs and held fellowships at Harvard Kennedy School’s Belfer Center for Science and International Affairs and the Eisenhower Institute at Gettysburg College. He published one book that hardly anyone reads. He is not a musician. He lives in Cambridge, Massachusetts, and attends concerts of the Boston Symphony Orchestra frequently (or so he says).

In other words, his assessment of Andris Nelsons is worth about as much as any other BSO patron’s assessment.

Allen is entitled to his own opinion, but he is not entitled to his own facts. Let’s take a look at some of the claims in his recent hit piece on Andris.

Living in the Boston area, I long ago lost count of how many times I have seen Nelsons conduct over his 12 seasons in charge. I found his evolution exasperating, as did fellow local critics.

False. Allen may have felt exasperated, but his “fellow local critics” were not.

During his tenure as Globe music critic, Jeremy Eichler consistently praised Nelsons for producing performances of remarkable emotional intensity. Eichler occasionally found some interpretations less persuasive; his criticism generally focused on interpretive choices rather than technical shortcomings.

Also in the Globe, David Weininger characterized Andris Nelsons as an intuitive, high-energy leader whose interpretations featured vivid orchestral colors and grand, cinematic scope.

Most of the recent Andris Nelsons reviews in the Boston Musical Intelligencer are positive, a few neutral, none negative. Reviews in Boston Classical Review are also mostly positive.

Reporting by The Boston Globe has confirmed that Nelsons was not doing core parts of his job properly: arriving unprepared for rehearsals, dismissing new scores as “funny pieces” and refusing to do much of the fundraising and other work expected of serious music directors in the United States.

False. Allen mischaracterizes the Globe story. Nothing in the Globe story “confirms” that Nelsons was “unprepared” for rehearsals; the story cited a negative review written by…David Allen. Allen uses a Globe summary of his own review to prove his own premise.

Academics have a vulgar expression for Allen’s circular sourcing. I would never stoop to that level.

Allen’s Vanessa review was an outlier. Out of nine published reviews of the performance, Allen’s was the only negative. His review of the BSO’s Tanglewood concerts this summer was also an outlier.

That’s okay. In America, we allow people to voice fringe opinions, even when they have no expertise.

The “funny pieces” comment is a harmless joke. Most members of the orchestra and the audience agree with that characterization of new music. BSO leaders recently paid consultants to tell them that audiences prefer mainstream symphonic repertoire.

The Globe story did not “confirm” that Nelsons refuses to do fundraising. It claimed, without evidence, that Nelsons “rarely showed up at charity galas or other gatherings where prospective donors could be charmed into writing fat checks”. Neither the Globe nor Allen provides evidence that Nelsons refused requests from the front office. The BSO’s own biography of Nelsons cites his enthusiasm for community outreach.

As ticket sales fall, donors become more influential … where should power lie? Rather than debate such matters calmly, the richest orchestra in the world has devolved into a morass of anonymous quotations, destructive leaks and social media bile.

True. Allen claims to be an expert in symphony governance. He should know that donors have always kept the lights on.

Allen’s work depends on unsourced quotes and leaks. An honest critic would ask why the BSO is unable to engage in “calm debate.” What characteristics of BSO governance make discussion impossible?

Before February, Salonen had led (the BSO) once since 1988. Semyon Bychkov last appeared in 2000. Iván Fischer, 2003. Gianandrea Noseda, 2004. Marin Alsop, a Tanglewood alum, has conducted one Boston Symphony program ever; Daniel Harding, likewise. Manfred Honeck has not returned since 2014; Vladimir Jurowski, 2016. Dudamel came for two weeks in 2019, canceled the second, and has not come back. The list goes on, and it makes for a pattern. I’ve heard thrilling Boston concerts from Karina Canellakis, Joana Mallwitz and Antonio Pappano. But subscription weeks that were filled a decade ago by titans like Bernard Haitink and Christoph von Dohnanyi are nowadays handed to assistant conductors.

Omits important context. Allen lists distinguished conductors who have not appeared recently with the BSO, but omits those who have: Alan Gilbert, David Robertson, Fabio Luisi, Giancarlo Guerrero, Herbert Blomstedt, Jakub Hrusa, Michael Tilson Thomas, and Dima Slobodeniouk. Mallwitz will return next season; so will Yamada and Hrusa.

Many factors influence the choice of guest conductors. Allen has no evidence that any of the conductors on his list turn down engagements with the BSO. Dudamel canceled his second BSO appearance for illness; he is extremely busy and schedules few guest appearances. Jurowski and Fischer avoid travel to the United States. A well-informed critic would know this.

It would be great to schedule Bernard Haitink and Christoph von Dohnanyi. Unfortunately, they died.

In April, Susanna Mälkki visited … to premiere Andrew Norman’s complicated two-piano rewrite of “Split,” a Boston Symphony commission. Mälkki is one of the world’s leading conductors, someone undoubtedly deserving of respect. But musicians told The Globe that this spring, she instead received “outright hostility.” One player reportedly performed his part wrongly — not in rehearsal, but in concert.

False. Mälkki is an accomplished guest conductor who specializes in contemporary music. She is hardly “one of the world’s leading conductors.” Respect is a two-way street; autocratic guest conductors with limited skills don’t fare well guesting a world-class symphony orchestra. Fritz Reiner could dictate tempi, but Mälkki is not Fritz Reiner.

The concert mentioned in the Globe story included Ravel’s Ma Mère l’Oye Suite, a work the BSO has performed 122 times since 1913. One of the BSO’s distinguished principal musicians played a prominent solo at a tempo Mälkki did not like. Supposedly, she frowned.

Allen did not attend the concert. Neither Allen nor the Globe offers evidence that the BSO principal intentionally disrupted the performance, or that anyone in the audience noticed the disconnect. Globe critic A. Z. Madonna, who reviewed the Thursday concert, reported nothing amiss in the Mother Goose Suite.

The BSO musician has performed that solo numerous times. Conductors generally allow soloists some slack; great conductors expect a principal player to lead. Maurice Ravel himself, if he returned from the dead and stood on the podium, would expect nothing less.

(Lee Eiseman of Boston Musical Intelligencer contributed to this post.)

Chad Smith, CEO of the Boston Symphony Orchestra, likes to make public statements. For a facts-and-data person like me, everything he says is grist for the mill.

In this multi-part series, I assemble fact-checks from several previous posts and organize them thematically with a fresh introduction. Where I have new information, I update them from the original and add context.

As always, I welcome corrections. Post questions or comments, or DM me.

Deficits, Deficits, Deficits

Chad Smith can’t stop talking about deficits. That’s odd; most nonprofit execs treat deficit news like flatulence at a formal dinner: you want to sneak it out when nobody will notice.

In the past 20 years, the BSO booked 13 surpluses and 7 deficits. Every other Big Seven symphony orchestra booked deficits too, including the Los Angeles Philharmonic, “America’s most innovative orchestra”. The LA Phils booked the two largest deficits in the orchestra’s history under the brief tenure of CEO Chad Smith. Maybe that’s why he’s obsessed.

Symphony orchestras sell tickets and collect money; let’s call that concert revenue. Concert revenue doesn’t come close to covering all costs, as you can see in the table below. For the Big Seven orchestras as a whole, concert revenue only covered 35% of costs in fiscal 2024, down from 44% in fiscal 2005. Expenses grew faster than concert revenue for every orchestra in the category, including the “very innovative” LA Phils.

The gap between expenses and concert revenue is not unique to the BSO. It’s also not new; BSO founder Henry Higginson covered the deficit every year from his own pocket. In 1918, he incorporated the BSO as a public charity because even then, nobody expected to cover costs from concert revenue.

The gap is also completely predictable. In 1966, Princeton economist William Baumol wrote that performing arts organizations faced an inevitable crisis. Productivity growth drives salary growth, he argued. Symphony orchestras can’t improve productivity; they need as much labor to perform Ein Heldenleben today as they did when Strauss composed the work in 1898.

Other service industries, like education and healthcare, have the same problem. However, those industries pass higher costs to the consumer or third-party payers. Symphony orchestras can’t do that.

Baumol argued that government funding for the arts would solve the problem. That has never materialized in the USA; to survive, the BSO and every other symphony orchestra depend on charitable giving. The amount they must collect from donors increases every year. Anyone who says otherwise is a charlatan.

When fundraising falls short, the BSO books a deficit. With solid fundraising, the BSO books a surplus. It’s that simple.

The BSO Board of Trustees has one main job: raising money. Sure, there’s a fundraising staff, and others play a role, but the buck stops in the boardroom.

Henry Higginson hired and fired principal conductors at will. Nobody objected to his autocratic style because everyone knew he covered the deficit out of his own pocket. Today’s Board wants to govern like Higginson, but when bills come due they blame Andris Nelsons.

The Fact Checks

“Our business has been running deficits consistently for nearly two decades.” (Boston Globe, March 13)

Smith also cited 20 years of expenses exceeding revenue. (Berkshire Eagle, June 18)

False. BSO revenue exceeded expenses in 13 of the past 20 years. Over this period, the orchestra recorded a cumulative tax accounting surplus of $117 million, and a GAAP accounting surplus of $391 million. (Source: BSO Form 990 filings, Fiscal Years 2006-2025).

As expenses have risen, the BSO has often run operating deficits. (Boston Globe, April 29)

False. There’s no standard definition of “operating deficit” in nonprofit accounting. The BSO does not say how they compute it, or show how it reconciles with GAAP accounting. (Source: Accounting Standards Codification (ASC) Topic 958, a publication of the Financial Accounting Standards Board).

The closest GAAP measure is operating cash flow. The BSO booked a surplus on this measure in 11 of the past 15 fiscal years. (Source: Consolidated Financial Statements, Supplemental Information and Report of Independent Certified Public Accountants).

“I came here knowing full well that the BSO had been in decline for a long time…the business that supports (the musicians) has been so undercapitalized and so compromised over the past 20 years that there is a real concern on the board about viability going forward.” (Berkshire Eagle, June 18)

This paragraph has multiple false claims:

• The BSO is not “in decline”. In the past 20 years, BSO revenue increased by $50 million. (Source: BSO Form 990 filings, Fiscal Years 2006-2025 ).

• The BSO is not undercapitalized; it has net assets of $702 million, more capital than any symphony orchestra. (Source: BSO Form 990 filing, Fiscal Year 2025 ).

• The BSO is under no threat to its viability. Grant Thornton, the BSO’s outside audit firm, issued a “clean” opinion four months before Smith said this. (Source: Consolidated Financial Statements, Supplemental Information and Report of Independent Certified Public Accountants).

• The BSO has earned a substantial surplus over the past twenty years; the unrestricted endowment currently stands at just under $66 million; and it has ample liquidity, with $40 million in net current assets. (Source: BSO Form 990 filings, fiscal years 2006-2025 ).

The Board of Trustees does not publish meeting minutes. In confidence, members of the Board may sometimes discuss worst-case scenarios, because it is their job to do so. Considering the objective circumstances of the BSO, characterizing such discussions as “real concern” is a stretch.

A Brief Recap

The Boston Symphony Orchestra filed its tax return for fiscal year 2025 on July 15. I published a short post that evening, with the topline news:

• Record revenue of $155 million

• Surplus of $27 million

• Endowment valued at $603 million, $66 million unrestricted

In this post, I’ll provide a little more detail. Don’t worry: you won’t need an Accounting degree.

There’s a downloadable copy of the return at the bottom of this post. Post questions in the comments, or DM me.

Why This Matters

Why should we care about the BSO’s tax filing? If you do your own tax return, you know that the IRS has clear rules about reporting income. With minor changes, the rules are consistent and stable over time, so we can compare results from year to year; we can also compare results between symphony orchestras to see how well the BSO performs compared to its peers.

The BSO files its Form 990 under penalties of perjury. There are serious legal and financial consequences for any organization that doesn’t follow the IRS rules. Unscrupulous executives cannot manipulate the numbers on the return to support a particular narrative.

The most important takeaway: BSO leaders knew that fiscal 2025 was a record year before they sent Chad out to cry poverty.

Mining the Return

Part I of the return is a summary, and it’s self-explanatory.

Part III, the Statement of Program Service Accomplishments, starts on Page 2. It begins with the BSO’s new mission statement:

The mission of the Boston Symphony Orchestra (BSO) is to foster and maintain an organization dedicated to making music consonant with the highest aspirations of the musical art, creating performances and providing educational and training programs at the highest level of excellence.

The front office needed 18 months to produce that word salad.

Here’s the mission statement from the BSO’s 2001 990:

The principal mission of the Boston Symphony Orchestra is to perform music written for symphony and chamber orchestras and other music generally described as “classical music” at the highest level. Our mission also includes presenting this music to the greatest number of people.

The wordy narratives that follow describe things the BSO says it did last year. The person who wrote this devoted 481 words to Orchestral Music Programs that produce $84 million in revenue, and 988 words to Education programs that produced $488,120 in revenue. Banging the drum for foundation grants, I suspect.

The next four pages are BSO responses to IRS compliance questions. This may seem uninteresting until we get to line 28:

Was the organization a party to a business transaction with one of the following parties?

• A current or former officer, director, trustee, key employee, creator or founder, or substantial contributor?

• A family member of any individual described (above)?

The BSO responded “no” to both. We know that’s a wee bit of a fib, don’t we? Trustee Caroline “Kim” Taylor is the spouse of James Taylor, who most definitely engaged in a business transaction with the BSO. I mean, it’s right there in Part VII, Section B, Independent Contractors.

It seems that the BSO owes the IRS a Schedule L to disclose a related party transaction. I’m sure they just forgot about the transaction. But one wonders: how many other related party transactions did they forget?

Pages 7-10 list officers, trustees, and key employees. The definition of “key employee” is complex, and it includes some members of the orchestra. Schedule J (pages 39-41) shows more detail about compensation, if you want to see what the BSO pays Chad Smith. All of the comp figures are for calendar year 2024; the BSO awarded Chad a bonus for fiscal 2024 results, when the BSO recorded a deficit.

You won’t see Andris Nelsons listed among the employees. He’s an independent contractor, listed at the bottom of page 10. Other top independent contractors include a media strategist, a caterer, James Taylor (“Tisbury Tours”), and a security service.

The BSO hired mall cops the year before the Andris Nelsons snafu. They also paid media strategists $3 million in fiscal 2025. That’s a lot to pay for media strategy.

The Statement of Revenue is on page 11; page 12 shows the Statement of Functional Expenses. I’ll boil these down for you:

• Fundraising, concert revenue, and capital gains drove revenue to a new high

• The BSO kept a lid on expenses, which increased just 3%

There’s one interesting item in the Statement of Functional Expenses, but you must hunt for it. On line 11g, the BSO reports $19,982,868 in “Other fees for service.” Now skip to Schedule O, page 44, and read the eighth note from the top. Here, the BSO discloses in tiny type that it spent $2.5 million on consulting services in fiscal 2025. Add that to the $3.4 million the BSO spent for consultants in fiscal 2024, also disclosed in a footnote in tiny type, and you get $5.9 million. That is a lot to pay for a mission statement.

Page 13 is the balance sheet. Nothing obvious here, but skip to Schedule D, Part VI on page 27. Line 1b, column (b) tells you that the original cost of BSO buildings is $128,708,312. Now check the same schedule from fiscal 2024. Here, the original cost is $124,694,515. That tells you the BSO spent a little more than $4 million on building improvements in fiscal 2025.

I hope they fixed some of that deferred maintenance.

The balance sheet does not show the endowment. For that, skip to Schedule D, Part V, on page 27. The numbers here don’t line up exactly with the balance sheet because the BSO holds some assets outside of the endowment.

Schedules A and C (pages 15-25) are mostly blank. Same with Schedule F and G (pages 30-38), Schedule M (pages 42-43), and Schedule R (pages 49-53). There are a few entries here, if you are a glutton for detail.

Get Your Copy Here

The BSO’s 2025 Form 990 is 53 pages long. I’m not going to snapshot all that, but it’s a public record. Here are several ways to get a copy for yourself:

• Contact the BSO and request a copy

• Download a copy from the Massachusetts Attorney General’s Public Charities Filing Search

• Download a copy from ProPublica’s Nonprofit Explorer

ProPublica takes forever to upload materials, and the AG website is clunky, so here is a copy you can download:

FY2025 BSO Form 990 Public Inspection Copy Signed

1.08MB ∙ PDF file

Download

BSO nonprofit Federal tax return, filed July 15, 2026.

Download

It took the Massachusetts Attorney General two weeks to upload the BSO filings. I filed a public records request.

Today I heard about a whispering campaign. Behind closed doors, according to my source, Boston Symphony Orchestra leaders tell members of the Board of Advisors that my work is inaccurate, uninformed, and incorrect.

Since early March, I’ve written 15 evidence-based stories about the BSO. In the interest of transparency, I will now publish all of the corrections that the BSO has requested:

Oh. They haven’t asked me to correct anything.

I work with facts and data. My posts cite sources, most of which are public and readily accessible. Everything I write is extensively researched, and I run multiple independent fact checks.

Still, anyone can make mistakes. My comments and DMs are all open, and anyone who spots an error can call it to my attention. If it’s a major error, I will publish a correction; minor errors I will simply fix online.

In my first story of the series, I erroneously listed an artist as supporting Andris Nelsons. A reader called me on the mistake, and I fixed it. I don’t recall any other errors, but I welcome that kind of feedback. That’s part of the power of Substack.

BSO Board Chair Barbara Hostetter subscribes to this newsletter. She’s more than welcome to contact me to point out mistakes and errors.

My inbox is open. Unless I hear otherwise, my work speaks for itself.

The Boston Symphony Orchestra filed a Form 990 with the IRS on July 15. At 4:55 p.m. that day, BSO Public Relations sent me a copy. I published a post about it that same evening. Here are the key points from that post:

• In the fiscal year ending last August 31, the BSO booked record revenue and recorded the largest surplus since fiscal 2006 in the James Levine era.

• The endowment, at $603 million, hit a new high; the unrestricted endowment reached $66 million.

• When the BSO cited a deficit of $6.6 million in its statement of March 23, it already knew that it had booked a large surplus in its most recent fiscal year.

On Saturday, July 18, BSO PR sent me a “cover letter” for the 990. The letter, from the BSO’s Chief Financial Officer Sok Cheng Soh, aims to “explain” how the BSO wants the public to read and interpret its financial reports. Soh wrote the letter on Friday, July 17. I had already left for vacation when the BSO letter arrived, so I put off reading it until today.

Understanding BSO Financials

193KB ∙ PDF file

Download

Cover letter for the BSO Form 990 filing, from CFO Sok Cheng Soh.

Download

Two things stand out in Soh’s letter. First, it contains numerous small inaccuracies. I don’t wish to nitpick every single one of these, but accuracy and attention to detail are essential qualities for a Chief Financial Officer. BSO musicians strive for perfection in musical performance; the BSO front office should hold itself to the same standard.

Additionally, I note that Soh’s letter does not debunk or even respond to the points covered in my July 15 post.

Soh devotes a third of the letter to what she calls “Operating Results”. This is an unaudited measure which she says BSO management uses to assess financial “sustainability”. Her claims about this measure are unverifiable and misleading.

The BSO has repeatedly changed how it defines “operating results” over the years. In 2017, it defined the measure as program services revenue minus marketing and overhead expenses. In 2021, it dropped the measure from its financial reports. In 2022, the BSO added Federal grants and endowment earnings to revenue, and added fundraising costs to operating expenses.

“Operating surplus/loss” is not a defined concept in nonprofit accounting. Accounting standards, or Generally Accepted Accounting Principles (GAAP), provide a framework for accurate reporting of an organization’s true financial position. The Financial Accounting Standards Board (FASB) published Accounting Standards Codification (ASC) Topic 958 to define the standard for nonprofit organizations.

Nonprofits like the BSO are free to define non-GAAP measures for internal use. They are only appropriate for public disclosure when the nonprofit provides sufficient detail to reconcile the measure with GAAP accounting. As you will see in the next section, Soh does not do this.

Soh writes an extended section under the header How They All Tie Together. This section, which includes two tables, aims to reconcile the BSO’s internal “Management Operating Results” with the audited GAAP financial statements and the Form 990 tax filing. The section includes numerous errors and false entries, which render the section as a whole false and misleading.

In the first table, Soh asserts that “Operating Revenue” is $117.6 million in all three reports. This is false. The GAAP Statement of Activities (shown below) does not include an entry for “Operating Revenue”; total GAAP unrestricted revenue for fiscal 2025 was $131.5 million. The Form 990 includes no entry for “Operating Revenue”; the BSO reported total revenue of $155.4 million.

In the same table, Soh further asserts that “Operating Expenses” are $123.2 million in all three reports. Once again, this is false. There is no such entry in the GAAP Statement of Activities; total GAAP unrestricted expenses were $132.2 million. The Form 990 includes no entry for Operating Expenses; the BSO reported total expenses of $127.9 million.

Soh’s second table shows the net surplus/deficit for the three frameworks over the past three fiscal years. The three entries for the Form 990 accurately show the surplus/deficit reported in Part I, line 19. However, Soh’s figures shown for audited financials (without donor restrictions) do not match the corresponding entries in the financial statements.

Since the individual entries are false, the overall claim that the three frameworks tie together is also false.

Let’s move on to the next claim.

The Boston Symphony Orchestra is committed to providing accurate and timely information about its financial results.

This claim is mostly false. Let’s start with “timely”. Releasing financial statements for the year ended August 31, 2025, ten and a half months later is hardly “timely”.

The BSO’s auditors, Grant Thornton, delivered audited financial statements on February 3. The BSO held the audited financial statements until the legal deadline of July 15, 2026. (Source: BSO Consolidated Financial Statements, Fiscal Years 2025 and 2024, Report of Independent Certified Public Accountants).

Nonprofits prepare the Form 990 after the audited financial statements are complete. With modern accounting software (such as CCH Axcess Tax) and some preparation, it takes three to five business days to prepare and reconcile the IRS Form 990. However, Grant Thornton did not complete the 990 until July 14, more than four months after delivering the financials, which makes it appear that the BSO deliberately delayed filing until the last minute.

Under Federal law, the BSO must provide copies of its 990 to the public. Massachusetts law does not compel the BSO to share its audited financial statements directly with the public, but many Boston area non-profits do so anyway:

• Barr Foundation

• Boston Ballet

• Boston Children’s Museum

• Boston Lyric Opera

• Boston University

• The Boston Foundation

• Handel and Haydn Society

• Harvard University

• Museum of Fine Arts Boston

• New England Conservatory

The BSO has not responded to multiple requests for its audited financial statements. Rather than committing to transparency, the BSO discloses financial information only when it is legally compelled to do so.

While the BSO’s total endowment is approximately $600 million, it is not a bank account that the BSO can access to fund operations or capital needs. 90% is donor-restricted – the principal is permanently restricted.

This claim is partly true and partly false. Soh is correct that the BSO cannot spend the entire endowment at will; that is a “straw man” argument, since nobody claims they can spend it all at once. 89% of the endowment is donor-restricted, not 90%; only 45% is permanently restricted. (Source: BSO Form 990, Fiscal Year 2025, Schedule D, Part V, Lines 2a-2c)

The balance of the permanent endowment is currently $265 million. The BSO draws from these funds according to a payout rule (currently 5.25% of the trailing twelve-quarter average balance computed as of the end of the calendar year preceding the current fiscal year). The donor deed of gift controls the disposition of excess earnings.

The temporary endowment is currently $271 million. These funds are restricted as to purpose, but the BSO is not required to maintain the principal in perpetuity. For example, the BSO Board appropriated funds from the temporary endowment to finance the Linde Center in fiscal years 2016-2019.

The Board-designated or quasi-endowment is currently $66 million. The BSO Board can appropriate these funds at any time and for any purpose consistent with the BSO’s charitable mission. For example, the Board can spend the funds to address “deferred maintenance.”

Any gains on (endowment) investments are not available beyond the 5.25% annual draw, which is included in operating results.

The realized portion of gains on endowment investments… cannot be used to fund operations beyond the endowment spending policy.

The claims are false. The BSO pools investments across all 600 of its endowment funds; it allocates realized and unrealized gains to the permanent, temporary, and unrestricted endowments according to an accounting policy.

In fiscal 2025, the BSO allocated $9.8 million in realized and unrealized gains to the unrestricted endowment. These funds were immediately available to the Board for any use consistent with the BSO’s charitable purpose. (Source: BSO Consolidated Financial Statements, Fiscal Year 2025, Note J).

(The BSO must) address $145 million of accumulated deferred maintenance across its properties, representing costs to repair and maintain existing properties for current use, not including improvements or expansion. Of this $145 million, approximately $37.5 million of deferred maintenance represents critical needs requiring immediate attention.

This claim is false. Soh’s source is a report from Gordian, a facilities consultant. The figure of $145 million is Gordian’s cost estimate for a series of investments over the next ten years. It’s a capital spending plan, not a proposal to fix “deferred maintenance.”

Gordian makes money on job costing and project management. They have an incentive to find problems and overestimate costs; when a project finishes under budget, they get a performance bonus.

The figure of $37.5 million is Gordian’s estimate for an initial phase. The BSO has shared no evidence that this work will resolve “critical needs”, such as code violations or a leaking roof.

Donors love bricks and mortar. Ordinarily, when a nonprofit wants to launch a capital spending plan, it focuses on the exciting new things they will build and not on the broken toilets. The BSO’s “oh, shit, our buildings are falling down” message seems like a poor way to build public confidence.

Quick, call Brian McGrory. His fact-checker needs a wellness check.

Malcolm Gay’s recent paywalled Globe story about the Boston Symphony Orchestra includes this whopper:

The orchestra’s significant endowment is being drained at an alarming rate — in 20 years, leaders have drawn an additional $100 million.

That’s not a quote; Gay presents it as a fact. It’s one of BSO CEO Chad Smith’s favorite talking points, and it’s flat false.

1. The endowment isn’t being “drained”: it’s at its highest value ever. (Source: IRS Form 990 Schedule D, Part V, Line 1g, FY 2009-2025)

2. In the past 20 years, the BSO reported 13 surpluses under tax accounting and the same number under GAAP accounting. The orchestra recorded a cumulative GAAP surplus of $391 million over that period. (Source: IRS Form 990, Part I, Line 19; Schedule D, Part XI, Line 1; Schedule D, Part XII, Line 1, FY 2006-2025)

3. Endowment spending peaked in 2018. The BSO Board of Trustees appropriated funds from the endowment to build the Linde Center. (Source: IRS Form 990 Schedule D, Part V, Line 1e, FY 2009-2025)

4. Bad investments, not withdrawals, devastated the endowment in 2022. (Source: IRS Form 990 Schedule D, Part V, Line 1c, FY 2022)

   

The BSO Board of Trustees approves all spending on operations and all spending from the endowment. There is no “additional” spending beyond what the Board approves. All of the Board’s appropriations from the endowment over the past 20 years respect donor intent and the Board’s fiduciary duty under Massachusetts law (M.G.L. 180A). Smith’s assertion that the Board’s appropriations “drained the endowment” is a claim without evidence.

You don’t need rocket science to catch a whopper.

Notes:

1. Before 2009, the BSO did not disclose endowment information.

2. The BSO 990 for fiscal 2025 is not yet available in public databases. Request a copy from the BSO.

July 15, 2026. The Boston Symphony Orchestra filed its Form 990 with the IRS today. At 4:55 p.m., BSO Public Relations sent me a copy. As I expected, in the fiscal year ending last August 31, the BSO booked $155 million in revenue, a new record, and a surplus of $27 million, the largest since the James Levine era. The endowment, at $603 million, hit a new high despite the dead weight of $120 million in illiquid VC and PE investments.

The unrestricted endowment hit $66 million. The Board can spend that money at any time and for any purpose, so I don’t want to hear any more pearl-clutching about “deferred maintenance.”

In short, last September the BSO Board sat on the largest pile of wealth in the history of the organization. You can discard any notion that they fired Andris Nelsons because they were concerned about the fiscal health of the orchestra.

Remember: on March 23, the BSO said this:

According to tax documents … the orchestra lost $6.6 million during the fiscal year ending in August 2024…Addressing these existential issues requires clear alignment and shared responsibility among all institutional leaders on a collective path forward.

The BSO wrote that letter six months after closing the books on fiscal 2025. They knew it was bullshit when they wrote it.

The 990 includes information about highly compensated individuals. Some people might indulge in cheap shots over Chad Smith’s salary of $1,097,476, his bonus of $210,000, and his other compensation, which adds up to $1,371,354, but I would never stoop to that level.

The BSO also filed a Form PC and audited financial statements with the Massachusetts Attorney General. However, they did not respond to multiple requests to share the audited financials, and instead referred me to the Attorney General’s office. The AG takes forever to post the financials, which is why ethical nonprofits share the reports directly with the public.

It’s ironic that the BSO won’t share the audited financials. In an internal memo, the BSO CFO complained that since I used data from the 990s, I was misleading people with an overly rosy picture of the BSO’s financial position. She’s mistaken about that; tax accounting is more conservative than GAAP accounting.

The accounting details aren’t the point. It’s disingenuous for the BSO to claim that tax records paint an incomplete picture while refusing to share the GAAP financials. I will be more than happy to share information from the audited financials when I get my hands on them.

We begin with a view of Shasta Daisies (Leucanthemum x superbum ‘Becky’) viewed through the blurry blue panicles of Russian Sage (Salvia Yangii, formerly known as Perovskia atriplicifolia). The horticulturists keep changing the botanical names; I can’t keep up.

Joe Pye Weed (Eutrochium purpureum Euphoria™ Ruby) living its best life. I’ve moved this plant three times, and it likes this hot, sunny, and dry spot best.

Who was Joe Pye? His real name was Joseph Shauquethqueat, and he was a Mohican sachem who lived near Stockbridge, Massachusetts.

So I guess we should call this plant Joe Shauquethqueat Weed.

Nearby, the Hummingbird Mint (Agastache ‘Blue Fortune’) stands ready to serve the local bees.

Salvia farinacea, in all its glory. I love this annual.

Brown-eyed Susans (Rudbeckia hirta ‘Sahara’), grown from seed. I started 144 Rudbeckia plants last Spring; three survived to maturity. Retrospectively, I know what I did wrong, and will try again next year. These have long stems and make great cutting flowers.

A rabbit’s eye view of French marigolds (Tagetes patula ‘Fireball’). A very small rabbit likes to lurk in the foliage; he does no damage.

Annuals in a raised bed: Salvia splendens ‘Red Hot Sally II’ and Zinnia elegans ‘Zowie Yellow Flame’.

New this year: Clematis 'Jackmanii'.

An angel gazes over a bowl of Torenia. People who know me understand the significance.

That is all.

Longtime readers may wonder who hijacked my Substack. Most of my previous posts are about analytics, data science, and the software business, so I should explain why my recent stories are about the Boston Symphony Orchestra.

I’m not a paid agitator. Someone told members of the BSO Board of Trustees that the Red Flower Campaign is an astroturfed effort funded by dark forces. You don’t need to be a genius to figure out who’s spreading that calumny and why.

For the record, I have no personal or business connection with Andris Nelsons. In fact, I’ve never met him. I have no financial connection to any member of the Boston Symphony Orchestra or to the Boston Musicians’ Union, or to any former BSO Executive Director, or to anyone who has a financial interest in the current crisis.

I do not monetize my Substack. I neither solicit nor accept fees of any kind from anyone, for any reason. I have independent means and publish for the sheer joy of doing so.

So much for why I don’t write about the BSO. Now, a few words on why I do.

It’s all because of Pablo Casals.

In 1961, JFK invited Pablo Casals to perform at the White House. I saw this on a news clip and immediately wanted to play the cello. Mom checked with Mr. Totzauer at the Ridgewood School of Music, who said I was too small to play the cello, but I could start on the violin.

When I was eight, I played in my first symphony concert, at the tail end of the second violins. The program included Beethoven’s Fifth, a work I have subsequently performed numerous times. It never gets old.

At fourteen, I switched to the viola. Over the next few years, I made the rounds of city, regional, state, and national youth orchestras, culminating in a summer at Tanglewood in the Young Artists orchestra. In college, I continued to study the viola with Walter Trampler, but decided against a career as a professional musician.

Although I chose a different path, I never lost a sense of solidarity with professional musicians everywhere. Careers in music are exceptionally difficult, and those who make it to the highest level deserve enormous respect.

After completing undergraduate work, I secured an MBA at Wharton. Majoring in Accounting, I specialized in analytics for nonprofits and government. Wharton training stresses business ethics and the duty of stewardship: leaders of successful organizations balance the interests of all stakeholders, not just themselves.

I went to work for a strategy consultant, then worked as an analyst. In my forty-year career, I worked steadily through mergers, reorganizations, restructurings, layoffs, acquisitions, and IPOs. Through that constant change and flux, most of the business leaders I served practiced good stewardship, even under challenging circumstances.

A few did not. I’ve written previously about DataRobot executives lining their pockets, MD Anderson’s ethically failed AI project, and Olive AI’s Potemkin village.

After attending Wharton, I returned to Boston and have lived here ever since. From the sidelines, the BSO seemed like a stable and well-managed organization. A few years ago, though, the front office started to unravel. Friends whispered that the new CEO was in over her head. She resigned within the year, and so did the Director of Tanglewood, amid charges of a “toxic” workplace.

Amidst the chaos, Music Director Andris Nelsons was an anchor. His calm musicianship served the orchestra well, and he took the BSO in new directions. Nelsons has a vision of music that connects people across borders and continents, a vision he made real through partnership with the Leipzig Gewandhaus Orchestra.

The BSO has no interest in artistic vision, so they fired him.

Nobody questions that the BSO has a right to fire the Music Director. He’s not an employee; he’s an independent contractor, so technically they just declined to renew his contract.

However, even if BSO leaders believed, in good faith, that the orchestra needed a new Music Director, they had a duty to work through that issue with Nelsons and the musicians. Not a legal duty or a fiduciary duty, but an ethical duty: the duty of stewardship.

Instead, they dismissed him without a succession plan. They failed to anticipate the uproar from musicians, patrons, and the public; it took the BSO more than two weeks to mount a feeble response. CEO Chad Smith’s subsequent public comments have been defensive, incoherent, and ill-informed.

The BSO Board of Trustees lives in a bubble of self-deception. They believe that because they are wealthy, credentialed, and connected, their decisions must be wise, prudent, and ethical, even when they clearly are not.

My interest is simple: I care about the future of the Boston Symphony Orchestra. The Board of Trustees breached its duty of stewardship. This story has legs.

Here’s a break from BSO financial analysis.

This little patch of ground used to be the Cranesbill Patch, named for its denizens. Perennial geraniums, or Cranesbill, are very satisfying plants; they need neither fertilizer nor water, and rabbits don’t eat them. Rabbit tolerance is a hard requirement for everything I plant.

We have an ample supply of rabbits.

The Blue Garden sits athwart the shadow of a tree; one side is full sun, the other is part sun, and a trellis sits right on the line between the two zones. The soil is heavily enhanced with my homemade compost and with composted cow manure.

We do not have cows. I buy composted manure in bags.

Every plant in the Blue Garden is drought-tolerant, rabbit-tolerant, and, as you might guess, blooms in blue or purple.

Let me introduce you to the residents.

Zara takes center stage. Introducing Boulevard Zara, our most distinguished citizen.

Zara is a Type 3 vine, cut to the ground every year. She had a wooden trellis last year, but a Northeast storm wrecked it. So I installed this taller metal trellis, and she filled it out nicely. It’s great to see perennials like this emerge from slumber and take command.

Here we have Nepeta ‘Six Hills Giant’, spreading her inflorescences. Follow me for botanical porn.

There’s a very small bunny who likes to lurk beneath the Nepeta during the day. He does no harm.

Meet Veronica, of the Plantaginaceae family. She has more than a thousand siblings and half-siblings. Commonly called Speedwell, her family offers an astonishing variety of forms.

When I was a kid, my parents would drag us down to Speedwell, New Jersey, so we could canoe on the Wading River. Miserable place. Nothing but mosquitoes and cranberry bogs. I wanted to keep driving to the shore.

Some Plantaginaceae are tall and vertical. Some are creepers, like this one, marketed as Waterperry Blue. This Veronica blooms briefly in May and June, but makes a great green mulch and creeps like a champ!

Speaking of creepers, meet Campanula poscharskyana, the Serbian bellflower. Unlike the creeping Veronica, this plant will bloom all summer. The blooms are about the size of a dime, but there are millions of them.

Meet Rozanne, one of the original cranesbills. Geranium gerwat ‘Rozanne’ to be exact. She’s not exactly blue, is she? I asked Grok what color acrylic an artist would use to paint this flower; no mixing allowed. “Dioxazine Purple,” said Grok. It’s not blue; it’s purple, but I will allow it.

Here we have Salvia farinacea, in blues and whites. I tried growing Salvia from seed, but it was a nuisance, and the bedding plants are dirt cheap at the Garden Center.

We close our tour of the Blue Garden with this watering can. The bottom rusted out, but I didn’t want to part with it, so here it is. You know you’re a gardener when you are emotionally attached to your tools.

First, I want to thank everyone who read my previous fact check. Several readers pushed back on some points. I appreciate criticism. It shows that you read my posts.

“IRS Form 990 filings do not paint an accurate picture of an organization’s financial position.”

The BSO thinks they do. In its first public comment on the controversy, the BSO cited the $6.6 million loss reported on its 2024 Form 990. You can’t cite a source, then turn around and say it’s a bad source.

I studied accounting for nonprofits at Wharton. The most important thing Wharton teaches is that no single accounting framework perfectly portrays a business. Form 990s are useful when you know how to work with them.

“You used Form 990 surplus/deficit info to paint a rosy picture of the BSO.”

Not true. I’ve painted a sober picture of the symphony orchestra business and the specific challenges facing the BSO. My fact check used Form 990 surplus and deficit information to debunk a specific claim that Chad Smith made about deficits.

“The BSO hired an independent facilities consultant to estimate maintenance costs.”

Great! I rated Smith’s claim “unsubstantiated” because he hasn’t released supporting documents. He still hasn’t released any documents, so his claim remains unsubstantiated.

Facilities consultants make money on job costing and project management. The consultant’s report may or may not be accurate, but it is not independent. When you ask a consultant to make a list of needs for the next ten years, they never come back with nothing. And they always find something “urgent”.

Competent executives treat assessments as inputs to consider. They don’t run around crying like Chicken Little.

Let’s move on to the endowment fact check. On March 13, the Boston Globe published a story about the “fall” of Andris Nelsons. The story includes this quote from CEO Chad Smith:

“Our business has been running deficits consistently for nearly two decades. Over the course of those two decades, we’ve de-capitalized our endowment by over $100 million.”

On April 29, the Globe published a story with this passage attributed to “BSO leaders”:

As expenses have risen, the BSO has often run operating deficits, drawing more heavily on its endowment returns than leaders say is sustainable. All told, they say, the BSO has taken an additional $110 million in endowment returns over the past 20 years.

These two statements appear to be about the same thing. Let’s unpack them.

1. The claims about deficits are misleading.

“Operating deficit” has no place in nonprofit accounting. Neither the AICPA nor FASB recognizes the term in nonprofit accounting standards; there is no line item for “operating deficit” in the BSO’s GAAP financials or Form 990 filings. Since the measure has no standard definition, BSO leaders can cherry-pick what it includes. That is inherently misleading.

The BSO has not consistently run deficits by any accounting standard or method. Under GAAP accounting and IRS accounting, the orchestra ran surpluses in 13 of the past 20 years. Under cash accounting, the BSO recorded an operating cash surplus in 11 of the past 14 years, and a cumulative cash surplus of $15 million. (Sources: BSO GAAP financials; BSO Form 990 filings.)

2. The claims about endowment withdrawals are misleading and omit important context.

The BSO discloses detailed information about its endowment for the past 16 years. Withdrawals before 2009 are unverifiable. It’s true that the BSO Board approved large expenditures from the endowment. It’s also true that the Board approved some expenditures in excess of the core payout rate.

The statement implies that this spending is a chronic, recurring, and ongoing problem. That’s not true: the Board approved most of the extra spending from 2016 through 2020. The Board appropriated the funds in full compliance with its fiduciary duty under Massachusetts law, which allows some flexibility in endowment distributions. (Sources: BSO GAAP financials, BSO Form 990 filings.)

3. Smith’s claim about decapitalization is false.

The BSO Board appropriated additional funds to Operations from endowment earnings and profits, and not from restricted principal. “Decapitalization” refers to expenditures of principal only.

The only true decapitalization was the appropriation to build the Linde Center. That was dictated by the terms of the Linde gift, which was expressly for that purpose.

4. The implication that the Board overspent because of “operating deficits” is false.

See the first point, above, about the ambiguity of “operating deficits.”

The BSO Board’s endowment payout policy is remarkably consistent. Before 2020, the core payout rate was 5% of the 12-quarter moving average endowment balance; a small supplemental payout from earnings lifted the overall effective rate to 5.5%.

In 2020, the Board raised the core payout to 5.25%. At the same time, the Board eliminated the supplemental payout. There is no evidence of any sudden ad hoc change to the payout policy in any year.

The Board also approved supplemental payouts for capital spending. These account for at least $30 million.

In short, some of the extra spending was for operations, and some was for capital spending. If you say that all of it went to operations, your nose will grow. (Source: BSO GAAP financials)

5. The claim about the “sustainability” of endowment payouts is mostly true, but not for the stated reasons.

The BSO’s endowment payout rate of 5.25% is aggressive. The average endowment payout rate for US nonprofits is closer to 4.5%. That may seem like a very small difference, but for large investment portfolios, it adds up to real money.

An above-average payout rate is reasonable when endowment investments produce above-average returns. However, the BSO endowment has not delivered above-average returns. It has not even delivered average returns.

Audited financials disclose the BSO’s investment portfolio in the notes. We can infer investment strategy from measurable characteristics of the portfolio:

• High turnover (as much as 50% in some years)

• Very low yield of interest and dividends (below 1% in most years)

• High volatility (deep losses in down market years)

• Extensive reliance on hedge funds, private equity, and venture capital funds

These characteristics imply an absolute return strategy. About 46% of the portfolio is in equities (stocks) with a significant over-weighting in global equities. Hedge funds and illiquid funds make up 42%, and the balance is in real assets, cash, and the low-rise building on Huntington next to Symphony Hall.

Illiquid limited partnerships now account for 21% of the endowment, up from 6% in 2019. These funds legally trap the orchestra’s money for years, while binding the BSO to mandatory capital calls. They invest in private equity and venture capital deals. That’s great if they own a piece of Databricks, but not great if they own a piece of DataRobot or any of a thousand other stranded unicorns.

A high-risk investing strategy makes sense if it produces exceptional returns. Unfortunately, the BSO has the worst of both worlds: high volatility, low yield, and low returns. Since 2009, the BSO endowment has underperformed the S&P 500 index in all but three years, as shown below.

From 2009 through 2024, the BSO paid investment managers $25.8 million. It paid for a Ferrari and got a used Toyota Yaris.

Is the S&P 500 index the best benchmark for the BSO portfolio? Yes and no. BSO defenders could argue that since the BSO deploys a widely diversified investment strategy, we should use a widely diversified benchmark. That’s a reasonable discussion to have. But the benefits of a simple, low-cost index investing approach are settled; the burden of proof lies with those who advocate for high-cost, high-risk investments. (Sources: BSO GAAP financials, BSO Form 990 filings, S&P 500 Dataset)

Chad Smith is not responsible for the BSO’s sorry investment returns. The Investment Committee of the Board of Trustees controls the choice of investment manager and investment strategy. The Board sets the payout ratio as well and has a duty to align it with investment returns. If the payout rate is unsustainable now, it was unsustainable years ago.

Smith is responsible for spinning a narrative that deflects attention from the Board’s investment track record.

That’s all for now. My next post will be in July, when the BSO releases its GAAP financials and Form 990s.