Nonprofit Hospitals Shifting Investment Portfolios
John Commins, for HealthLeaders Media, September 10, 2012
A Commonfund review of FY2011 also found that:
- After two years of double-digit gains, the 86 nonprofit healthcare organizations it tracks reported investment returns of zero in FY2011. The flat returns followed net gains of 10.9% in FY2010 and 18.8% in FY2009.
- From FY2009-2011 the average annual net return on investable assets was 9.6%, while for the trailing five years annual net returns averaged 1.8 percent – thanks to the -21.2% loss recorded in FY2008 in the midst of the recession.
- A further breakdown for FY2011 shows that net returns on nonprofit healthcare organizations' defined benefit plan assets averaged 1.3% compared with FY2010 net averaged return of 12.3%. Three-year defined benefits plan returns averaged 11% and five-year returns averaged 2.2%.
- By asset class fixed income provided the highest return in FY2011 with an average of 5.4%, followed by a 3.9% return for alternative strategies, 0.2% for short-term securities/cash, -0.2% for domestic equities and -10.9% for international equities.
- Within alternative strategies the highest returns came from private equity real estate at 14.1%; venture capital at 11.1%; and private equity at 10.7%. Marketable alternatives, which include hedge funds, were the largest single alternative allocation for many healthcare organizations and lost -1.8%.
- For FY2011, investment returns were correlated to size; the larger the organization, the better the return. Organizations with investable assets over $1 billion realized an average return of 0.6% while the smaller organizations at the opposite end of the size spectrum lagged with a return of -1.9%.
John Commins is a senior editor with HealthLeaders Media.
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