Tony Waskiewicz is the first chief investment officer of Mercy Health, and he’s been innovative every step of the way.

“I was hired as Mercy’s first chief investment officer and asked to create an in-house investment program,” he said of the task that blossomed into his role over eight years ago.

Since then, Waskiewicz has helped grow Mercy’s short-term, endowment, and pension plan assets to $3 billion, produced substantial returns, and made improvements in the Catholic healthcare system’s search for alpha.

One of those unique moves is the seeding of drawdown funds that invest in credit securities facing forced selling. The strategy was first launched by Waskiewicz in late 2015 and seeks to take advantage of illiquidity in certain segments of the credit markets. Waskiewicz first sought to get out of all comingled vehicles with credit exposure and then collaborated with several credit hedge funds to establish drawdown vehicles that would take advantage of forced sellers.   

“We first played defense and then we determined the best way to play offense,” he said.

The vehicles were not only structured as drawdown funds, but also had a four- to five-year lifecycle, so the fund managers could opportunistically buy, while never having the pressure to sell. “The credit hedge fund managers we worked with liked this idea because it very effectively armed them with liquidity and a fund structure that allowed them to be opportunistic in a space that often faces illiquidity challenges,” he said.  “Funds that offer monthly or quarterly redemptions cannot as effectively execute this strategy.” 

Waskiewicz and his team are currently working on a similar structure to take on the emerging markets debt.

The CIO’s firm has also been innovative and pioneering in its approach to socially responsible and ESG investing. Last year, Mercy became the first healthcare signatory of the United Nations’ Principles for Responsible Investing. That was the culmination of Waskiewicz’s team forging a new socially responsible investment approach for Mercy.

“The UN PRI was a great platform of likeminded allocators,” said Waskiewicz. “UN PRI shared with us that they had no other healthcare signatories and we were honored to become the first.”

Mercy was also profiled in Dr. Matthew Sherwood’s book on socially responsible investing. 

Mercy also has an innovative investment policy. Rather than establishing an investment policy targeting a specific return, Mercy’s policy targets a volatility range driven by the organization’s tolerance for downside risk. “This unique approach is prudent for Mercy given that most of the assets we manage represent a significant portion of the organization’s balance sheet. Mercy recognizes that a large drawdown on the investment fund would materially affect its financial position and balance sheet metrics,” explains Waskiewicz. “The unique approach we use ensures that Mercy does not extend risk to achieve a target rate of return, but rather maximize return within a specific range of risk.”

Waskiewicz acknowledges that most institutions focus their investment policy on return, not risk, but credits Mercy’s spirit of innovation for pioneering an approach that is ideal given its financial profile and objectives.   

Mercy also has the “innovation fund,” which is a designated pool of capital used for unique investments and new vehicles that advance Mercy’s mission. Through this fund, Mercy has “created joint ventures and equity partnerships designed to help Mercy achieve its mission of advancing quality healthcare and improving patient outcomes,” Waskiewicz said.

Mercy’s innovative initiatives have also been instrumental in increasing its engagement with the private equity GPs in Mercy’s portfolio. “Innovation leaders at Mercy have made themselves available for collaboration with GPs in the healthcare space,” explains Waskiewicz. “The close relationships have added value to both Mercy and the private equity firms and venture capital firms with healthcare tracks.”

“I am blessed to be in this situation and look forward to coming to work every day. The Mercy investment program has strong executive leadership support and excellent guidance from a great investment committee,” he said. “The members of my team are very talented, entrepreneurial, and mission-focused. They bring to life the pioneering spirit and culture of Mercy and deserve the credit for the success of the program.”

By Chris Butera