Nonprofit Healthcare Providers Average 10.9% Return on Assets, Study Shows

The Commonfund Benchmarks Study of Healthcare Organizations Report revealed that nonprofit healthcare providers averaged 10.9% return on investable assets in FY2010, continuing a positive trend from 2009.

(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.

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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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U.S. and European private equity, venture capital, and buyout funds showed strong levels of fund-raising in the first half of 2011, says Dow Jones LP Source.

(July 11, 2011) – In a positive sign for an otherwise gloomy economic outlook, U.S. and European private equity, venture capital, and buyout funds all enjoyed healthy fund-raising levels in the first half of 2011, says Dow Jones LP Source.

The private equity industry’s strong fund-raising puts it on pace to eclipse last year’s levels, with U.S. and European funds respectively collecting 35% and 48% more in capital committed over what was raised in the first half of 2010.

“After three consecutive years of declining fund-raising, the industry has finally begun to dig its way out of the crater created by the U.S. financial crisis in late 2008,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst, in a release. “There’s an abundance of fund managers with strong track records that are back in marketing mode and investors appear to have regained some level of confidence in the asset class.”

U.S. private equity funds raised $64.7 billion for 201 funds in the first half of 2011, compared with the $47.8 billion raised by 225 funds during the first half of 2010. European funds collected $24 billion for 62 funds during the period, well over the $16.2 billion raised for 76 funds a year earlier. Although the fund-raising remains below that seen before the 2008 market collapse, the first half of 2011 marked the strongest period of fund-raising since the downturn.

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Buyout funds prospered remarkably in the first half of 2011, showing fund-raising levels almost double that of the previous half-year’s. The capital influx was due in part to a greater number of firms looking to raise funds of more than $1 billion. Blackstone Group provided a prominent example of this trend recently when it announced that its buyout fund BCP V had exceeded expectations by raising as much as $1.5 billion over its predicted size of $15 billion.

“In 2009 and 2010, the multi-billion fund was like the California Condor in the 1980s,” said Kreutzer. “You knew it once existed, but who ever really saw one? This year, while they aren’t exactly plentiful, the multi-billion funds have finally come off of the endangered species list.”

Venture capital fund-raising was healthy in the U.S. but floundered in Europe. American venture funds rose 19% over the first half of 2010, hitting $8.1 billion, although the number of funds that held closings dropped 38% to 50 funds. The impressive figure was driven by a few prominent firms, seven of whom alone raised $6.3 billion. European venture funds had the worst first half of fund-raising since 2004. They raised $1.1 billion for 16 funds, a decline of 45% from the first half of 2010.

U.S. and European funds focused on mezzanine and secondary strategies showed flagging levels of fund-raising, a sign indicating the bullishness of investors. Investors prefer funds with mezzanine and secondary strategies during market downturns, Kreutzer explained.

<p>To contact the <em>aiCIO</em> editor of this story: Benjamin Ruffel at <a href='mailto:bruffel@assetinternational.com'>bruffel@assetinternational.com</a></p>