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Returns rebound at nonprofit health-care groups

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PJ staff report

Following their steepest decline on record, investment returns for 85 U.S. nonprofit health-care organizations jumped an average of 18.8 percent in fiscal 2009, a new report says.

That strong showing follows a 2008 average loss of 21.2 percent, but was not enough to return to the black the average three-year annual return, which stands at a loss of 0.2 percent, says the report from the Commonfund Institute.

Combined investable assets for the 85 organizations totaled $76.8 billion in 2009, while defined-benefit plan assets totaled $26.8 billion.

The average return for defined-benefit plan assets was 21.5 percent last year, a sharp turnaround from the 26.3 percent loss posted in 2008.

“Fiscal year 2009’s results represented welcome and much-needed relief after the dismal fiscal year 2008,” John Griswold, executive director of the institute, says in a statement.

“Still, the fact remains that the average return of 18.8 percent was not enough to move trailing three-year returns into positive territory and the average 3.5 percent return for the five-year period is well short of covering health-care organizations’ spending and investment and costs, plus the added impact of inflation,” he says.

International equities posted the highest return of 37.3 percent, followed by domestic equities, with 31.2 percent, and alternative strategies, with 17 percent.

Within alternative strategies, however, private-equity real estate lost 25.8 percent, venture capital was down 10.5 percent and private equity fell 7.2 percent.

Commodities and managed futures earned 32 percent, more than any other class within alternative strategies.

As of the end of 2009, about 41 percent of health-care organizations’ investable assets were in fixed income, with 22 percent in domestic equities, 15 percent in both international equities and alternative strategies, and 7 percent in short-term securities or cash.

For defined-benefit plan assets, 34 percent was invested in domestic equities, 32 percent in fixed income, 19 percent in international equities, 12 percent in alternative strategies and 3 percent in short-term securities or cash.

The average operating budget for health-care organizations in 2009 was $946 million, down from $990 million, while capital budgets grew slightly to an average of $116 million from $109 million in 2008.

Debt levels grew for the fifth year in a row, climbing to an average of $903 million from $681 million in 2008.

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