Even as most organizations have moved away from defined benefit plans in favor of defined contribution plans, not so health and hospital systems.
Instead, according to research from Cerulli Associates, some within the health care industry that are having a rough time attracting and hanging onto talent are looking to leverage pensions as a recruitment tool.
“While corporations are generally moving toward defined contribution plan offerings, health and hospital systems frequently use defined benefit plans as a recruiting tool, allowing for them to attract talent to more rural areas,” James Tamposi, analyst at Cerulli, says in the report.
But when considering the broader corporate DB landscape, the report continues, health and hospital system DB plans’ funded statuses are generally lower, resulting in less de-risking and liability-driven investing — something managers in search of corporate DB assets need to consider with regard to sales and marketing in approaching these systems.
Generally, among the largest health and hospital system investment pools are board-designated/long-term unrestricted pools, DC plans and DB plans. In Cerulli’s report North American Institutional Markets 2018: Asset Owners and the New Regulatory Environment, it finds that the health and hospital organizations it surveyed frequently use consultants for their DB and DC plans, but 77% report overseeing their short-term investment pools themselves.
Hospitals that oversee multiple investment pools, however, run up against obstacles in trying to view investment portfolios in aggregate. This is an area in which consultants can help — not only by assisting them to see their investment pools holistically, but also in managing risk at the enterprise level.
“Asset managers looking to go directly to health and hospital institutions should target investment pools for which their products can add value,” Tamposi advised in the report.
He added, “If an institution only maintains short-term investments and DC pools, an index manager may be a better fit to market its strategies to this clientele. For institutions that have endowment and foundation pools, or DB pools, active managers may have a better chance of attracting attention.”
— Check out Why Your Client’s 401(k) Stinks on ThinkAdvisor.