Linking financing and investment decisions to improve the health of the enterprise

For a non-profit hospital or health system seeking to design effective investment portfolios for its various asset pools, understanding the role of each of these asset pools is a crucial first step. The organization’s goals and exposures can impact all parts of its portfolio construction process, from initial broad decisions on risk tolerance to more targeted decisions on asset class exposures and investment vehicle preferences.

Given that each non-profit hospital and health system has its own unique situation, this paper does not prescribe a specific method of portfolio construction, but instead offers a framework for evaluating asset allocation decisions. We highlight the need to consider and discuss the following:

  1. Multiple roles of each asset pool within the enterprise, with a focus on the long-term pool
  2. Market environments in which the stability of the individual pools would become most important
  3. Any income statement implications of portfolio decisions

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