The New York Times inquires into the losses at the Getty Museum’s endowment. More than most institutions, the Getty is run on a budget primarily generated by its endowment. But the Getty endowment has dropped by 27% since the last fiscal year. Although the endowment has dropped at the same rate as for other institutions’ endowments, the Getty was heavily invested in illiquid instruments:

To some degree the cuts can also be traced to the trust’s longstanding policy of relying on earnings from its endowment, rather than fund-raising, to pay for operations. In recent years the trust adopted an investment policy that like that of many foundations, emphasized investments in illiquid assets like real estate, private equity and hedge funds.

Last June 30, “alternative investments,” which also include things like venture capital and distressed debt, made up 62 percent of the Getty’s holdings, with stocks at 24 percent. A recent prospectus for a Getty bond offering noted that the trust’s investment policy called for about 48 percent of its portfolio to be allocated to alternative investments, raising the question of whether the trust had been pushing the boundaries of its rules.

Getty Fees and Budget Are Reassessed (New York Times)