NEW YORK (HedgeWorld.com)–A survey of almost 200 U.S. nonprofit healthcare organizations indicates that multi-strategy vehicles are the most common hedge fund investment for this group of institutions.

Participants in the study, conducted by Commonfund, had US$91 billion in operating funds and US$37 billion in defined-benefit pension assets for the period ended December 2004. Alternative investments accounted for 9% to 10% of total assets.

Within alternatives, hedge funds had grown at the expense of private equity from fiscal year 2003 to fiscal year 2004. Hedge funds represented 73% of operating assets in alternatives and 68% of defined-benefit assets in alternatives.

Among hedge fund sectors, multi-strategy was used by 72% of organizations, absolute return by 51%, and long/short equity by 49%. Slightly less than one-third invested via funds of funds.

Larger organizations used all strategies, particularly distressed debt, more often than smaller institutions. The latter most often used multi-strategy.

Healthcare institutions were concerned about the risk of hedge funds relative to the benchmark used. Bigger organizations were particularly worried about volatility. That’s not stopping them from adding to their hedge fund portfolios, however.

In 2005 the larger institutions expect to employ 27 investment firms on average, up from 23 in 2004, primarily because of additional direct investments in hedge funds.

Commonfund, based in Wilton, Conn., manages about US$34 billion for more than 1,600 educational institutions, foundations, healthcare and other nonprofits.

Multi-strategy managers have recently moved into a variety of asset classes, including real estate.

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.