October 16, 2003 | Read Time: 2 minutes
Investments made by nonprofit health-care organizations outperformed two major stock-market indices last year, while the endowments of colleges and universities earned money as those indices fell, according to two studies released in September.
The studies, conducted by the Commonfund Institute, the nonprofit research arm of Commonfund, a company in Wilton, Conn., that manages money for nonprofit groups, found that:
- Although their investments lost value over all, the portfolios of hospitals and other nonprofit health organizations in the United States declined by less than the Standard & Poor’s index, which fell 22 percent, and the Nasdaq composite index, which decreased by 32 percent.
The study of 152 health-care organizations, about one-third of which are Commonfund clients, found that investments made in insurance reserves, stocks, bonds, and pension funds lost from 1 to 6 percent from December 2001 to December 2002, depending on the category of investment. Money put into operating funds that included stocks and bonds lost nearly 5 percent.
- Endowments of private colleges and universities increased by nearly 3 percent in fiscal 2003, which ended June 30. The poll of 122 institutions by the Commonfund Institute found that colleges with endowments of less than $10-million gained the most — 4.7 percent. Colleges with endowments that top $1-billion reported an average return of about half that.
Nearly three-quarters of the health organizations that participated in the study, the first of what the Commonfund Institute hopes will be an annual look at health organizations’ finances, said they had rebalanced their investment portfolios to counteract downward trends in the stock market. Ninety percent of groups with $1-billion or more in assets reconfigured their investments last year.
By diversifying their financial mix and investing in so-called alternative funds — such as hedge funds, venture capital, and real-estate investment trusts — organizations may have spared themselves the pain of losing more money, says John S. Griswold, executive director of the Commonfund Institute.
“The executives at these organizations clearly were reading the papers and seeing that those investors who stuck with stocks had been badly hurt,” says Mr. Griswold. “The lesson here is that diversification pays, and there are numerous reports that back this up.”
But alternative funds carry risk as well.
Both Commonfund and Columbia University were allegedly bilked by Viktor Kozeny, an investor from the Czech Republic who sold options on securities he owned on a state-run oil company in Azerbaijan. Columbia lost $15-million; Commonfund lost $4.5-million.
Mr. Kozeny, who has been indicted in New York on charges of grand larceny, denies any wrongdoing.
Reports on the two studies, which are not available online, can be sent at no cost to nonprofit groups that contact Mr. Griswold at jgriswol@cfund.org.
