Case Study: Managing a $1 billion portfolio for a prestigious US healthcare system

In 2021, Partners Capital were hired as Outsourced Chief Investment Office (OCIO) for a world-renowned, not-for-profit medical organization. Prior to working with us, the client had a relatively traditional 60% equity / 40% bond-style liquid portfolio, with no exposure to alternative investments, including private markets. The client’s Investment Committee was comprised of sophisticated and seasoned investors who were looking for a better solution.

Our Approach

We worked closely with the Committee to understand their return objectives, as well as their risk and illiquidity tolerance. We codified the investment policy, asset allocation targets, and governance structure that fit the needs of the client’s investment objectives. Finally, we recommended a tailored investment portfolio that was diversified across alternative investments and private markets according to those parameters.

We transitioned to the new investment portfolio specification in Q4 2021, focusing on three main areas for the first year. First, given the macroeconomic backdrop in 2022 and our outlook for interest rates, we quickly rotated capital from traditional fixed income and credit into a diversified set of Absolute Return hedge funds, significantly reducing interest rate duration. This change proved to be powerful downside protection in a volatile 2022 for the traditional 60/40 portfolio, as public equities (-16%, as measured by MSCI AC World NR based LC) and bonds (-12%, as measured by Barclays US Government Bond TR) both sold off on the back of unprecedented monetary tightening by central banks across the globe, while our absolute return strategies outperformed their benchmark.

Second, we were able to gain immediate Private Debt exposure through our evergreen private debt fund which provided the portfolio further ballast through its stable yield and low duration through 2022, also posting positive results in the year. This vehicle continues to provide attractive opportunities given improved terms for lenders.

Third, after robust modeling in Private Equity and Real Estate, we set a target for how much capital to deploy per annum to reach the allocation and immediately started putting capital to work. 

Outcomes

We believe by choosing to move to a diversified multi-asset class portfolio approach, the healthcare system has outperformed its former traditional 60/40 equity bond without taking any additional risk, whilst preserving valuable resources for the institution to dedicate to patient care and the prevention of human illness.