October 1, 2009 | Read Time: 2 minutes
Nonprofit hospitals and other health-care groups suffered an average drop of more than 20 percent in the value of their investments last year, a new study has found. The study was based on data from 143 endowed health-care charities; the 21.2 percent drop they reported was by far the worst result since the study began in 2002.
By comparison, the average investment gains in previous studies were 8 percent in 2007, 10.6 percent in 2006, and 6.3 percent in 2005. The only other negative return, of 4.9 percent, was reported in 2002.
The studies are done by Commonfund Institute, the research arm of Commonfund, a group in Wilton, Conn., that manages investments for nonprofit groups and educational institutions.
Capital Spending Falls
The health-care groups fared slightly better than other parts of the nonprofit world. Foundations suffered investment losses of 26 percent, and cultural, religious, and social-service groups of 25.8 percent, in 2008, according to Commonfund studies.
Other findings of the health-care study:
- The participants’ average budgets were $990-million, up from $921-million in 2007. But capital spending fell from $149-million to $109-million.
- For the fourth consecutive year, participants reported higher debt levels — $681-million, up from $580-million in 2007. Debt rose to almost 123 percent of investable assets — up from 92.1 percent in 2007.
- The organizations that saw the best returns were those that allocated a large percentage of their assets to fixed-income investments. But John S. Griswold, executive director of Commonfund Institute, said that putting so much money into one kind of investment, and with so few stocks, was a bad strategy.
“While this type of allocation worked well in FY 2008, that year was an outlier,” he said in a statement. “Over the longer term, it is almost assured to preserve neither asset values nor spending in real terms.”
“The 2009 Commonfund Benchmarks Study of Healthcare Organizations” is available free to Commonfund clients and nonprofit groups. Others may purchase copies for $500. To order a copy, send a message to cf_orders@cfund.org.
