U.S. nonprofit healthcare organizations reported an average return on investible assets of 10.9 percent for fiscal year 2010, a decline from the average return of 18.8 percent registered in FY2009 but a significant improvement over the average of -21.2 percent recorded in 2008, the Commonfund Institute reports.
According to the 2011 Commonfund Benchmarks Study of Healthcare Organizations, the average returns on "investible assets" (i.e., endowment/foundation funds, funded depreciation, working capital, and other separately treated assets) for 2009 and 2010 represent the best back-to-back annual performance in the nine years the study has been conducted. The report also found that average returns for the trailing three- and five-year periods were 0.4 percent and 4.1 percent, respectively. The ninety organizations participating in the study represented $102.6 billion in investible assets and $42.3 billion in defined benefit plan assets as of December 31, 2010.
Relative to other segments of the nonprofit sector, participating healthcare organizations realized moderately lower returns on their investments in FY2010. For example, the 175 independent and community foundations participating in the Commonfund Benchmarks Study of Foundations posted an average return of 12.5 percent for 2010, while the sixty-nine operating charities in the Commonfund Benchmarks Study of Operating Charities report recorded an average return of 11.6 percent.
For healthcare organizations, domestic equities provided the best return among all asset classes, with an average of 17.8 percent, followed in descending order by international equities (12.8 percent), alternative strategies (9.9 percent), fixed income (7.8 percent), and short-term securities/cash (1.1 percent). The report also found that for the sixth consecutive year, participating healthcare organizations reported a higher average debt level, with debt topping an average $1 billion in 2010, compared to $903 million in 2009 and $681 million in 2008.
According to Commonfund Institute executive director John Griswold, two years of strong returns are a positive development for nonprofit healthcare organizations, which will need continued strong returns to cover their future spending from endowment, investment management costs, and inflation. "If we go back to the study for FY2007 — before the losses of FY 2008 — trailing returns for three- and five-year periods were 9.0 percent and 11.1 percent, respectively," said Griswold. "Returns at levels such as these are essential to support the missions of the nonprofit healthcare organizations over the long term."