Following the release of the Study in August, Commonfund did a deep dive into results from the 23 participating health conversion foundations. Given that 22 out of the 23 participating health conversions are private foundations, the summary below offers a comparative analysis of these foundations and the 154 private foundation respondents from the full CCSF report. Note: Additional analysis of private and community foundation data aggregated by endowment size and region can be found in the full report.
Health conversion foundations accounted for $4.1 billion of the $104.9 billion in assets represented by total foundations. Health conversions reported a median endowment size of $149.3 million compared with $197.5 million for total private foundations.
What is a health conversion foundation? Health conversion foundations, also known as health legacy foundations are philanthropic entities that can be born from the sale or merger of nonprofit hospitals, health systems, or the conversion of health plans to for-profit corporations. Their mission is typically to ensure that the charitable assets of the original nonprofit continue to serve the public good, often through targeted investments in health equity, access to care, and the social determinants of health. Learn more about these foundations.
Performance
Returns for all time horizons reported in the Study were positive across both groups for all institution sizes. The 23 health conversion foundations participating in this year’s Study reported a 10.4 percent average 1-year return vs. 10.3 percent for total private foundations. Three-, five- and 10-year average returns for health conversions were 3.2, 7.4 and 7.2 percent, respectively, vs. 3.1, 7.8 and 7.3 percent for total NCSE respondents over the same time periods. This year, the Study collected 15- and 20- year annualized return data for the first time. Health conversions reported 7.4 percent 15-year returns, compared with 7.5 percent for private foundations, on average. There were not enough responses to report on 20-year data for this cohort.
Asset Allocation
The 23 health conversions participating in 2024 reported an overweight to U.S. equities compared with total private foundations (36 percent vs. 26 percent), and an underweight to alternatives strategies (25 percent vs. 45 percent). Within alternatives strategies, health conversions had the highest allocation to private equity (8 percent) followed by marketable alternatives (7 percent), which includes hedge funds, absolute return, market neutral, long/short, 130/30, event-driven, and derivatives. Health conversions were slightly overweight fixed income and non-U.S. equities when compared with total private foundations.
Spending
Health conversions reported an average stated policy spend rate of 5.1 percent, similar to the 5.2 percent reported by total private foundations. Looking at spending policy, the most frequently reported spending methodology used by health conversions and total private foundations was meeting the IRS minimum of 5 percent (61 percent and 62 percent of these groups did, respectively). The next most frequently used spending methodology followed by 30 percent of health conversions and 36 percent of total private foundations was a percentage of a moving average approach. (Note: multiple responses were allowed.)
Responsible Investing Practices
The adoption of various responsible investment practices has grown in recent years. In 2024, 26 percent of health conversions and private foundations overall reported that they require or permit investments ranking high on ESG criteria as well as those that further the institution’s mission, or impact investing. Further, 22 percent of health conversions implement negative screening and seek to include investments with diverse managers.
We hope these top-line insights will serve as a guidepost for your own analysis into these important topics and we encourage you to read the Study in its entirety to best evaluate your performance compared with your benchmark or peers.