In a crisis, all correlations go to one. In the minds of some, this environment calls into question the value of long-held practices and policies, one of the chief ones being asset allocation. Any discussion of asset allocation should address the issue of liquidity first, because it's on everyone's mind these days, especially in the healthcare industry. It may well be that to effectively meet their charge of securing the future financial well-being of their institutions, healthcare financial officers and trustees should consider a relatively high level of illiquidity in their long-term portfolios. As more normalized markets return, alternative strategies will once again offer good opportunities to diversify portfolios. Instead of thinking about one master asset allocation that covers everything from cash to private equity and venture capital, perhaps you should think about multiple allocations associated with evaluating your portfolios and make independent decisions relative to four layers: assets, liquidity, currency, and risk.
somewhere to hide Dennis Doody Healthcare Financial Management; May 2009; 63, 5; Docstoc pg. 88 Reproduced with permission of th
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