(July 11, 2001) – Nonprofit healthcare providers averaged 10.9% return on their investable assets during the 2010 fiscal year, according to the Commonfund Benchmarks Study of Healthcare Organizations Report.
The survey of 90 providers, who have a combined $102.6 billion in investable assets, continues a positive trend in the wake of the financial crisis. In spite of an 18.8% return in FY2009 and this year’s positive returns, the three-year average for the survey participants is merely 0.4% due to losses of over 20% in FY2008; the five-year average return is a modest 4.1%.
Though returns in the past two years have been positive, the current three- and five-year averages will not be enough to sustain providers’ spending. For the equivalent study conducted after FY2007, three-year average returns were 9.0% and five-year average returns were 11.1% on investable assets. In a news release, Commonfund Executive Director John Griswold said that “returns at levels such as these are essential to support the missions of the nonprofit healthcare organizations over the long term.”
Two other Commonfund Benchmarks Studies of independent foundations and charities reported returns of 12.5% and 11.6% on investable assets, respectively. According to Griswold, “Historically, healthcare organizations have higher allocations to fixed income securities than do foundations and operating charities, and in a good environment for equities that allocation likely served as a drag on relative return.” FY2010 saw an especially good year for equities, with domestic and international equities garnering the two highest returns of any asset class at 17.8% and 12.8%, respectively. Fixed-income, meanwhile, turned in 7.8% returns – good, but not on par with the equity returns.
The Commonfund Benchmarks Study also provided asset allocation information, which revealed that 37% of investable assets of nonprofit healthcare providers are invested in fixed-income. According to Griswold, other organizations, such as foundations and charities, invest somewhere between 10-20% of their investable assets in fixed-income.
The defined benefit pension plans included in the investable assets, which represent $42.3 billion, performed slightly better than the investable assets as a whole by registering 12.3% return. Still, the DB plans have averaged just 0.2% return over the past 3 years and 4.3% over the past 5 years.
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