A new study conducted by Wilton, CT-based money manager Commonfund suggests that while last year was a good one for not-for-profit healthcare investors, they're more exposed than they've been in the past due to a greater reliance on riskier investments. The firm recently polled 179 non-profit hospitals and health systems that had invested assets of at least $50 million in 2007 to find out what they'd done with their money and how the investments performed. The firm found that the hospitals and health systems had substantial investments in stocks, real estate and hedge funds, which may offer a greater rate of return, but can be unpredictable and may be less liquid than the hospitals' traditional mix of treasuries, CDs and other conservative, low-return vehicles.
During fiscal 2007, these riskier portfolios generated an 8 percent return for hospitals and health systems, though it's unlikely the hospitals will enjoy such performance during this very troubled year for the financial markets. Even last year, stocks averaged a 6.3 percent return, while international equities had an average return of 12.1 percent. While the numbers may not be directly comparable, given that survey respondents vary from year to year, the 2006 poll of 184 healthcare non-profits had an average domestic equity return of 13.9 percent, and a 24.7 percent return for international stocks. (Obviously, that's a huge swing.)
Domestic equities made up 31 percent of assets for survey respondents, while international equities constituted 15 percent, fixed income investments made up 32 percent and short-term securities and cash 5 percent. Alternative investments, including hedge funds, real estate and venture capital, distressed debt, private equity and energy, represented 17 percent. Interestingly, alternative investments were higher (20 percent) among those with investment portfolios topping $1 billion, as compared with 9 percent of investments for the group as a whole.
To learn more about this study:
- read this Modern Healthcare article (reg. req.)
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