In this Business Profile, Lisa Schneider, CFA, managing director, non-profits & healthcare systems at Russell Investments, offers insights on today’s asset management environment and what to look for when working with a solutions provider to optimize a healthcare organization’s portfolio strategy and manage risk.
Tell me a little bit about your organization.
Russell Investments is a leading provider of multi-asset investment solutions, managing more than $250 billion worldwide. The healthcare industry represents 15 percent of the assets Russell manages for U.S. institutions. In fact, we have more than 30 years of experience advising and implementing investment programs for hospitals and health systems that range from small community hospitals to those that rank among the nation’s 50 largest not-for-profit health systems. Although we do advise and consult, the core of our business is actively managing assets as a co-fiduciary for outsourced pools of capital.
What are some of the biggest challenges you see affecting hospitals and health systems?
Managing complexity! Increasingly, clients tell us they are facing serious time and resource constraints due to the Affordable Care Act, as well as other regulatory and legislative challenges. As organizations evolve to make a successful transition from volume- to value-based care, CFOs are highly focused on managing the impact of changing reimbursement rates, revenue cycle management, and related IT challenges.
In addition, just as financial managers are finding that they have less time and fewer resources available to focus on investment portfolios, the market environment has grown increasingly complex and their investment portfolios need more attention than ever in order to maximize returns and manage risk.
A decade ago, when the landscape was more stable, a “set-it-and-forget-it” strategy may have been enough for asset allocation. But now, market volatility demands real-time portfolio management—the ability to react to changing market conditions. Making portfolio management decisions at quarterly committee meetings leaves too much on the table in terms of missed market opportunities and less than optimally managed risk.
How do your services address these needs?
Our outsourced management solution affords the CFO and treasury staff the breathing room they need to focus on larger organizational issues while Russell manages the details. In our experience, it’s possible to not only delegate many current duties to a trusted provider, but also to dramatically enhance the operation and oversight of the investment program at the same time.
We act as an extension of our clients’ staff, not only advising, but actually implementing the investment program and helping clients fulfill their fiduciary duties. Russell can take on responsibility for decisions all along the value chain of the investment process, from selecting investment managers, designing strategy, implementing that strategy, and even assuming discretion over asset allocation, if desired. This enhances the oversight of the program and ensure a robust governance structure is in place.
By accepting fiduciary responsibility for decisions that are delegated to us, Russell accepts increased accountability (versus a consultant, who may make recommendations only). We start by listening so we understand your goals, and then we customize a program to meet your needs.
In your experience working with many healthcare organizations, what do you find is most critical to successful portfolio management?
Best practice in managing portfolios requires multiple areas of expertise. You need rich capital markets insights, a really deep program of manager research, strategic asset allocation skills that will let you identify the exposures that will help deliver the portfolio outcomes you need, and the ability to bring these all together effectively and efficiently.
Portfolio managers must be experienced in building and then managing multi-asset portfolios—which is very different than just recommending a manager. It’s important to have the implementation expertise of multiple managers as well as index expertise to design specific market exposures in a portfolio.
What advice would you offer to healthcare leaders when choosing among vendors?
When selecting a solutions provider, we think there are some key questions you should ask to ensure that their capabilities align with your needs. For example, if you’re looking for someone to take on accountability for investment decisions, does the organization draw the line at offering advice only? If they do offer investment implementation and asset management, how long have they been in that business?
||Healthcare CFOs have a tremendous amount on their plates right now.
As a co-fiduciary, Russell can help by managing the day-to-day details
of the investment program as well as providing strategic guidance.
Click the exhibit to learn more.
Other important questions: Will they limit your investment options through the use of captive programs that limit choices? Will they dedicate portfolio managers to actively manage your assets? Are they focused on beating asset class benchmarks at the expense of outcomes that matter most to your organization? Performance is good, but progress toward your financial goals is better! You can exceed your return benchmarks in every asset class and still lose ground in funded status, days of cash on hand, and other goals that matter most to your organization.
Find out how strong they are in manager research and portfolio implementation. You deserve industry-leading research and award-winning implementation. Your committee deserves thought leadership and access to innovative, results-oriented strategies. And last, how customized is their customized approach? Can they tailor the level of outsourcing discretion to suit your committee’s appetite? Will they incorporate only those program elements that you want, without charging you for those you don’t need? These types of questions are key, and can help you identify an outsourcing provider whose capabilities are a good match for the needs of your organization.
Are there any educational materials you would like to share to help healthcare leaders in these efforts?
Our website has three excellent case studies featuring a health system, regional hospital, and healthcare facility that detail a specific challenge each type of organization was facing, the strategic solution that was implemented, and the results achieved. I think these really demonstrate the Russell difference.
Readers may also be interested in a reprint of my recent interview in Becker’s Hospital Review (“How Should Health Systems Manage Their Investments Today?”), which appears on the website, as well as the article “Fiduciary Solutions for Hospitals and Healthcare Systems: Outsourcing Options for Your Investment Program.”
HFMA is the nation’s leading membership organization for more than 40,000 healthcare financial management professionals. This Business Profile is funded through advertising with leading solution providers.
This published piece is provided for advertisement purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions of those profiled are those of the individual and not those of HFMA. References to commercial manufacturers, vendors, products, or services that appear do not constitute endorsement by HFMA.
Publication Date: Tuesday, July 01, 2014