Healthcare Nonprofits Report Higher Average Investment Returns in 2009

U.S. nonprofit healthcare organizations reported an average total return on investable assets of 18.8 percent for fiscal year 2009, the highest return in the eight years the study has been conducted, the Commonfund Institute finds.

According to the 2010 Commonfund Benchmarks Study of Healthcare Organizations, the average return on endowment or foundation funds, funded depreciation, working capital, and other separately treated assets increased significantly over the -21.2 percent return for 2008. However, the report also found that average three- and five-year returns came in at -0.2 percent and 3.5 percent, respectively. The eighty-five organizations participating in the study represented $76.8 billion in investable assets and $26.8 billion in defined benefit plan assets as of December 31, 2009.

Relative to some other areas of the nonprofit sector, participating healthcare organizations realized lower returns on their investments in 2009. For example, the 173 independent and community foundations in the Commonfund Benchmarks Study of Foundations posted an average return of 20.9 percent for the same period, while the sixty-six operating charities in the Commonfund Benchmarks Study of Operating Charities reported an average return of 21.5 percent.

For healthcare organizations, international equities provided the strongest return among asset classes, with an average return of 37.3 percent. In descending order, the performance of other asset classes were as follows: domestic equities (31.2 percent), alternative strategies (17.0 percent), fixed income (11.7 percent), and short-term securities or cash (1.0 percent). The only negative returns occurred in subcategories of the alternative strategies allocation such as private equity real estate (-25.8 percent), venture capital (-10.5 percent), and private equity (-7.2 percent). However, returns on other alternative strategies were very strong, such as commodities and managed futures (32 percent), energy and natural resources (28.2 percent), and distressed debt (20.8 percent).

“FY2009’s results represented welcome and much-needed relief after the dismal FY2008,” said John S. Griswold, executive director of Commonfund Institute. “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 healthcare organizations’ spending and investment and costs, plus the added impact of inflation.”

Source: Philanthropy News Digest.