CHICAGO, The Art Institute of Chicago has announced that Moody's Investors Service has affirmed the Art Institute's long-term A1 rating, as well as a rating outlook change to stable from negative.

James Cuno, the Art Institute's Director and President, said, "This is positive affirmation that the changes in financial management and oversight initiated by the trustees three years ago have put our investments and budget on the right track. We are grateful to our many employees who have contributed to our success."

The following is based on the Moody's announcement: The change in rating outlook to stable reflects significant improvement in operating performance, diversification of investments, implementation of clearer investment and debt management policies and strategies, and improved oversight of these areas. Also noted was strong fundraising, which is anticipated to enable the museum to construct its new museum wing without additional long-term borrowing.

The Art Institute of Chicago's museum and school are both internationally renowned. The museum remains one of the city's major cultural attractions, drawing 1.6 million visitors in FY2004 to its extensive permanent collection and ongoing changing exhibitions. In addition, the School of the Art Institute enrolled more than 2,400 full-time equivalent students for fall 2004, reflecting a 13% increase over the past five years. The Institute's prominence and importance to the city has enabled it to attract a high-profile Board of Trustees -- as well as the School's Board of Governors -- and significant philanthropic support, averaging $58 million in gifts annually over the past three years.

The Institute has completed the restructuring of its investment holdings, moving to a highly diversified portfolio with multiple managers from one that had an 87% concentration in hedge funds in 2001. Current targeted allocation includes 32.5% in U.S. equity, across a variety of strategies, 15% in international equity, 25% in fixed income, 10% in hedge funds, 6% in inflation hedges, 5% in non-marketable alternatives, and 6.5% in opportunistic investments. In addition to expanding internal staff to monitor investments, the Institute has hired an investment consultant, Cambridge Associates LLC, and improved Board oversight of investments. In FY2004, the Institute achieved a 17.8% investment return, exceeding its benchmarks.

The precipitating factors in the Art Institute's temporary downgrade were difficulties with one hedge-fund investment (a case brought by the Art Institute against the firm involved is still in litigation) and a significant deficit in 2001. These have been aggressively addressed in the past three years and with the good track record over that period, the Art Institute is now on the way to a balanced operating budget.