It's relatively rare in the rough and tumble world of stocks and bonds for an investment team to stick with the same recipe for years and years.
At the UPMC health system, however, at least one tried and true method hasn't changed since the late 1990s: its asset allocation strategy. Rest assured its investment recipe, which dedicates 65% to equities, won't change based on a bad stock market day, week or even year, said Tal Heppenstall, UPMC's executive vice president and treasurer.
Indeed, it even held steady through the deep recession that started in 2008.
"We never once got a phone call from any of our investment committee members or any of our senior staff about, 'Oh my goodness, we have to do something different,' " he said.
Such an unwavering equity policy works well for UPMC, which gained more than $300 million on investments last year, but other not-for-profit health systems are taking a more active approach.
As the stock market becomes increasingly volatile and some economists predict the U.S. is once again due for a recession, some experts say it's prudent to step back and re-examine asset allocation strategies and, even if a system's long-term strategy stays the same, make small changes to their investments based on how markets are performing.
The downside risk isn't restricted to the stock market. The 10-year bond yield hit 3% last week, marking the first time interest rates have been that high since 2014. Lisa Schneider, managing director of not-for-profits and healthcare systems with Russell Investments, said for roughly the past year, her firm has helped clients monitor not only their portfolios' equity risk, but the interest-rate risk coming from fixed-income assets as well.
"As interest rates rise, the performance of the fixed-income portfolios falls," she said. "Diversifying or any strategies they can include to minimize some of that risk will benefit them in the long run."
Rising rates have translated to a negative return on the investment-grade U.S. bond market, with the Bloomberg Barclays US Aggregate Bond Index down for the year about 2% as of April 26, after posting a positive return the previous three calendar years.
Meanwhile, stocks in the S&P 500 index were down a collective 7% from their peak value on Jan. 26, after posting a gain in 2017 of 19%. The S&P 500 was down 1% for the year as of April 26.