Non-profit health-care organizations’ investments returned an average 18.8% in fiscal year 2009, ended Dec. 31, lagging the 20.9% average return of foundations and 21.5% of operating charities, according to a Commonfund study.
However, non-profit health-care organizations improved on their average -21.2% return in the market crash year of 2008, according to the 2010 Commonfund Benchmarks Study of Healthcare Organizations.
William F. Jarvis, managing director of the Commonfund Institute, said in a telephone interview that non-profit health-care organizations’ returns were lower than those of charities and foundations because of the conservative asset mix health-care organizations are required to maintain to keep up their bond ratings.
Mr. Jarvis said health-care organizations rely on bond issuance for hospital and other facility construction projects, so they typically have higher allocations to fixed income, considered a safer investment by ratings agencies than asset classes such as alternatives.
“This is mainly driven by ratings agency requirements,” Mr. Jarvis said.
For the year ended Dec. 31, 2009, 41% of non-profit health-care organizations’ investible assets were in fixed income; 22%, domestic equities; 15% each for international equities and alternative strategies; and a combined 7% short-term securities, cash and other.
Health-care organizations took riskier positions with their defined benefit plan assets, with 34% in domestic equities, 32% in fixed income, 19% in international equities, 12% in alternative strategies and 3% in short-term securities, cash and other.
International equities had the highest return with an average 37.3%; followed by domestic equities, 31.2%; alternatives, 17%; fixed income, 11.7% and short-term securities and cash, 1%.
The study included 85 health-care organizations, representing a combined $76.8 billion in investible assets and $26.8 billion in defined benefit plan assets.