Healthcare Investment Governance

A Practical Framework for Effective Oversight 

For healthcare boards, investment committees and CFOs: A practical look at how increasing portfolio complexity and delegation are changing the demands of investment oversight.

After decades of advising institutional asset owners, one lesson stands out: investment programs rarely fail because of markets alone. They fail when governance does not keep pace with increasing financial and regulatory complexity, becomes simply procedural, or gets ignored entirely.

Healthcare systems face a distinctive set of investment challenges. Operating pressures, significant capital needs, changing liquidity requirements, debt covenant and credit rating requirements exist alongside increasingly complex investment programs, with operating reserves, pension plans, foundations, and insurance assets all playing an important role in the financial stability of the broader organization.

Because of this complexity, many healthcare systems have turned to outsourced or delegated investment models (aka “Outsourced Chief Investment Officer” or “OCIO”). Although outsourcing investment management does not outsource the full fiduciary responsibility, it does change the nature of responsibility and places greater importance on disciplined oversight of the OCIO or consultant exercising that authority.

For healthcare fiduciaries, the challenge is not simply deciding what to delegate but knowing what effective oversight should actually look like once that delegation is in place.

The Complexity of Healthcare System Investments

Healthcare systems are not like many other institutional investors. Most oversee several asset pools with different objectives, constraints, stakeholders, and often, time stewards. These can include defined benefit pension plans moving toward de-risking or risk transfer; operating pools and long-term reserves tied to liquidity, debt covenants, and credit ratings; foundations balancing donor intent, spending needs, and mission; and insurance pools requiring both near-term liquidity and long-term protection.

A 2025 J.P. Morgan survey of 57 nonprofit healthcare organizations illustrates how common this complexity is:

• 72% had defined benefit plans; 
• 63% had captive insurance pools; 
• 60% had short-term operating pools; and
• 42% had foundation assets.¹

Each pool can affect the income statement and balance sheet differently. Yet the financial consequences of investment decisions are ultimately felt at the enterprise level, not within any one portfolio.

Compounding this complexity is the nature of decision-making within healthcare organizations. Investment decisions and oversight often involve boards and finance or investment committees, senior management, medical and professional staff, donors, bankers, and other stakeholders. These groups share an interest in the institution’s success, but they bring different perspectives, varying levels of investment expertise and, at times, competing priorities. Familiarity with OCIO models, services, and fee structures can also vary, particularly when responsibilities are spread across volunteer committees and changing leadership.

Healthcare systems operating within a consensus-driven culture can promote alignment and trust within this complexity with clearly defined roles, disciplined processes, and effective fiduciary leadership. 

Investment Portfolio Complexity Has Changed the Governance Burden

Because of portfolio complexity, effective investment governance in healthcare means accounting not only for how each individual investment portfolio is designed and constructed but also for how different pools may interact with one another and with the financial needs of the broader organization.

One area of complexity is Illiquid allocations and changing organizational liquidity needs. Marsh’s 2026 Healthcare Asset Owner Survey, which covered 77 hospitals and health systems and nearly 200 investment portfolios, found that:

• Healthcare systems with more than $2 billion in long-term operating assets allocate an average of 32.2% to less liquid alternatives, including hedge funds, private equity, private debt, and private real assets.
• By comparison, systems with less than $500 million in long-term operating assets have less than one-sixth the exposure to these investments.²

Although these less liquid allocations can bring higher potential returns, they also come with valuation complexity and lags in reporting, greater reliance on cash flow modeling, and operational risk.

Additionally, recent data show how investment assets in healthcare systems can be closely tied to operational needs. Marsh’s 2026 survey found that:

• 52% of respondents drew on investment reserves in 2025; 
• 37% of respondents expected to do so entering the year (evidencing unpredictability); and 
• 43% expected to draw on reserves in 2026.³

That gap between expected and actual use of reserves is important. Liquidity needs can change quickly, and portfolio decisions regarding liquid and illiquid investments can influence operating flexibility, capital planning, and the ability to respond to unforeseen needs.

As programs become more complex with the incorporation of private equity, private debt, real assets, and other nontraditional strategies, oversight requires a deeper understanding of the interaction between risk and liquidity, stronger manager selection and monitoring processes, and a clear connection between portfolio decisions and enterprise objectives.

Increased Delegation Shifts Investment Committee Responsibilities 

When investment programs grow more complex, governance models change in response. In a survey, J.P. Morgan found that:

• Of the 77% of healthcare organizations in its survey using outside investment resources in some capacity, 61% use outside resources to supplement internal capabilities.
• 16% fully outsource investment functions to an advisor, consultant, or OCIO. 
• There was an average of approximately one in-house investment professional for every $1.8 billion in assets among survey respondents.⁴

Marsh’s 2026 survey also recorded a continuing shift in how healthcare organizations divide investment responsibilities:

• For traditional manager selection, management and consultants now collectively account for 50% of decision-making authority, up from 43% in 2021. 
• Boards and Investment Committees remain more directly involved in strategic decisions, such as investment policy and asset allocation. 
• In general, Boards and committees focus more on strategy, while management, consultants, and OCIOs take a larger role in implementation.⁵

Delegating implementation can preserve committee and staff time, improve responsiveness, and place investment decisions with people who have the resources and expertise to make them.

Although delegation changes how fiduciary responsibility is exercised, it does not eliminate it, and the committee’s work does not disappear. Once mandates have been set and implementation has been delegated, the investment committee should remain focused on the following questions:

• Are investment objectives still appropriate? 
• Are risk and liquidity consistent with the needs of the organization? 
• Are responsibilities clearly understood? 
• Does reporting provide enough information to exercise effective oversight? 
• Is the provider itself still competitive in terms of capabilities, service, fees, and results?

The more these functions are delegated, the more important it becomes to know whether the structure supporting that delegation remains appropriate.

The Big Question: Should Investment Committees Appoint Only One Provider? 

Healthcare leaders increasingly confront a practical question: Can a single OCIO effectively oversee several asset pools with distinct mandates?

The answer is not uniform. Some OCIO providers have developed the depth and infrastructure to support several asset pool types, while others remain more specialized. Nor is using one provider inherently better than using two or more where expertise and specialization may be particularly useful. There can be benefits to coordination and scale, but those benefits should not be seen as more important than what is optimal for each pool.

That distinction is particularly relevant to ERISA plans. This is because fiduciaries must be able to demonstrate that the structure and consultant or OCIO—also known as an ERISA § 3(38) investment manager—selected for each plan were evaluated solely based on the needs and interests of that plan’s participants and beneficiaries, rather than simply because the same provider was convenient or appropriate for the broader organization.

Across all of their pools, what matters is whether health system boards and committees can confidently answer four questions:

1. Are the objectives and fiduciary obligations of each asset pool clearly understood?

2. Are the investment provider and portfolio structure appropriate to the reasonable oversight of the various asset pools, and particularly the enhanced prudence standards under ERISA, given the specific needs of each pool and, where applicable, the participants and beneficiaries it serves?

3. Are performance, services, and costs being evaluated in a manner consistent with those objectives and constraints?

4. Would we make the same decisions about our investment structure and providers today, given the organization’s current needs and the alternatives available in the market?

If boards and committees cannot answer those questions confidently, or if the answers have not been prudently tested against the market in several years, that is a signal that a deeper review may be warranted.

Structured OCIO Oversight Frameworks for Investment Committees  

Effective oversight should be continuous, not episodic. Much of that oversight can be incorporated into a relatively simple annual review built into the committee’s regular calendar. Boards and investment committees should periodically test whether the structure, provider and terms of the relationship remain appropriate. 

If an important relationship has not been independently tested against the market in several years, they may have limited context for determining whether it remains competitive. An independent evaluation can provide an unbiased and informed current market context and a structured basis for decision-making.

In addition to the questions above, several triggers may indicate that a deeper review or an independent evaluation is warranted. These triggers include:

• leadership transitions;
• material changes in the size or purpose of an asset pool;
• increasing (or decreasing) liquidity needs;
• persistent service issues;
• provider ownership or personnel turnover; and/or
• unexplained changes in fees and total costs. 

In our experience, a practical oversight framework includes:

• An annual internal assessment of service quality and relationship satisfaction, along with a review of provider-prepared fee and performance summaries. 
• A deeper review every three to five years to test whether the provider, structure, and underlying assumptions still provide the appropriate benefits. 
• Consideration of a market sounding, RFI, or RFP every seven to ten years if there has not been a meaningful market review in that time.

These timelines are not set in stone; circumstances may justify acting sooner, and a deeper review does not always need to begin with an RFP. Independent benchmarking and evaluation can help determine whether a competitive search is necessary.

An independent evaluation should not be mistaken for an indictment of an existing relationship. Far from it. Oftentimes, when facts and circumstances warrant, an evaluation can validate the relationship by giving boards and committees a clearer understanding of the scope and quality of services they are receiving, how the provider compares with available alternatives, and whether the current fee arrangement remains appropriate. That clarity of understanding and communication refresh can help strengthen the healthcare institution for a long, productive partnership with its investment partners.

Diligent Governance Leads to Long-Term Confidence in the Investment Program

In healthcare, governance involves not only procedural requirements but also strategic discipline.

Confidence in an investment program does not come from recent performance alone. It comes from knowing what the portfolios are intended to accomplish, understanding who is responsible for which decisions, and periodically testing whether the structure and providers remain appropriate as the organization changes.

This informed understanding of the investment program matters most when markets are volatile, liquidity is constrained, or leadership teams are balancing competing priorities across the organization.

OCIO and consultant relationships should endure because they are continuously validated, not because they are familiar and comfortable. Effective due diligence is not about changing providers. It is about making sure the governance structure and relationship remain appropriate as the health system, portfolio and marketplace evolve.

For healthcare systems, that discipline protects more than investment outcomes. It supports financial flexibility, institutional confidence, and the ability to advance the organization’s mission and serve their communities over decades rather than quarters.

1.  J.P. Morgan Asset Management, 2025 Nonprofit Healthcare Investment Survey Findings, February 2025. ↩︎
2. Marsh, 2026 Healthcare Asset Owner Survey: Key Investment Themes, 2026. ↩︎
3. Marsh, 2026 Healthcare Asset Owner Survey: Key Investment Themes, 2026. ↩︎
4.  J.P. Morgan Asset Management, 2025 Nonprofit Healthcare Investment Survey Findings, February 2025.
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5.  Marsh, 2026 Healthcare Asset Owner Survey: Key Investment Themes, 2026. ↩︎