While the outlook for the rest of the year remains positive, global economic uncertainty is causing a conservative investment approach.

Healthcare Finance News published an article on the top findings of the 2019 Healthcare Operating Funds Survey with commentary from NEPC’s Gary Wyniemko and Kevin Novak. Read the article on their site here. 

Despite the U.S. economy being in the late stage of the market cycle, healthcare investors are remaining optimistic, and expect that equity markets will increase by about 6% by the end of the calendar year.

That data comes courtesy of consultant NEPC’s 2019 Healthcare Operating Funds Survey, which found optimism extending to the U.S. economy generally, with only one in four saying the economy is in worse shape than it was last year at this time. Most say their healthcare organization is in a better position than it was in 2018.

With the optimism comes caution, however. The chief financial officers, treasurers and other investment-related healthcare staff who responded to the survey have largely increased their holdings of fixed income assets while reducing exposure to alternative investments. Volatility shook the markets in the fourth quarter of 2018, so a conservative strategy appears to be winning the day.

Kevin Novak, a consultant in NEPC’s Philanthropic Practice Group, said the optimism found in the survey may be due in part to timing, as responses were gathered over April and May.

“If you think about where equity markets were at that point, we were coming off an extremely strong first quarter,” Novak said. “Equity was up double digits. When you see a question of how high equity markets will be at the end of the year, 6% or higher doesn’t seem like much of a stretch.”

Referencing the S&P 500, the survey found a more positive outlook for U.S. equities as opposed to non-U.S. equities.

“There was just more positive economic data in terms of consumer spending and growth expectations,” Novak said. “There was certainly uncertainty going forward, but outside of the U.S. there were more concerns about emerging markets and growth, particularly in Europe.”


The equity market is important to investors because it’s where they inject their money. Equity markets focused on healthcare can be a bellwether for how CFOs and others view the economy and the future trend of the industry.


A full 84% of respondents expect U.S. equities to gain at least 6% this year, but investors are still playing it safe, with 72% saying they’re unlikely to change their investment strategies. By and large, investors have increased their holdings of fixed income assets, so while they’re still optimistic, they’re also playing it safe.

Partly that’s due to a difficult 2018, in which investors saw negative returns on the whole. They already had taken steps to reduce risks on the margins, and what NEPC observed was an uptick in fixed income and a downturn in fixed exposure.

That’s based on two things: A turbulent first quarter in 2018, and an outlook that expects little to no change in fixed income based on global economic uncertainty.

“General uncertainty has been a constant, and I think that’s here for the foreseeable future,” said Novak. “It does tend to be more of a long-term focus, so we don’t see a lot of short-term reactions to these types of markets. Our approach is that we’re still in the late stage of the economic cycle, so our advice to clients are still things like, given the uncertainty and the run-up in equity markets this year, perhaps rebalancing some of that equity exposure.”

Gary Wyniemko, CFA, a principal and senior consultant at NEPC, said he expects investors to maintain diversified portfolios. They’ll likely keep some amount of assets in return-seeking assets, and some in more defensive assets like fixed income — with the goal of crafting a portfolio that should perform well on a relative basis in a variety of markets.

“Really what we’ve been beating the drum on is making sure you’re comfortable with the risk level in your portfolio,” said Wyniemko. “Making sure you harvest gains and you’re diligent about rebalancing is prudent. You want to make sure you stay in line with what your objectives are.”