Customized Investment Options Enhanced Cash and Securities Lending


Our client was a group of three non-profit hospitals located in Louisiana, each affiliated with the same health system. Each hospital had two portfolios – one for their capital reserves and the other for their retirement plan. Aggregate assets were approximately $600 million.


Each hospital managed its own portfolios. Between the three hospitals there were twenty-two (22) different investment managers with assets disbursed among nine (9) different custodian institutions.

Our Solution

Our firm approached each of the hospitals with the same proposal: to consolidate the individual hospitals’ portfolios into a single portfolio at the health system level. Instead of three different capital reserve portfolios, there would be one; instead of three different retirement portfolios, there would be one.

Following a successful search for a single custodian bank, our firm recommended a slate of investment managers not previously available to the hospitals individually because of the manager’s high minimum account requirements. Collectively, however, the hospitals could now have access to this lineup of investment managers. A wide variety of traditional asset classes, capitalization ranges, and investment styles were blended with an equally diverse portfolio of alternative investment managers. We then instituted a unitized accounting program which facilitated the investment of assets by the three hospitals. Finally, we established a securities lending program with the custodian bank.


Based on our recommendations, the client saved over $750,000 in investment management fees. They also saw a $450,000 annual expense for custodial services turn into $350,000 of income from securities lending and an increase of approximately $600,000 (197 basis points) from their enhanced cash management. Total impact to the client: $2.1 million in annual cost savings through the restructure. Additionally, each hospital experienced a more manageable and simplified administrative process.

Enhanced Cash Management
The following graph illustrates the difference between the client’s average total return on the various money market accounts held in their nine different custodians compared to the total return achieved in the newly established enhanced cash management program – a difference of 197 basis points.

Securities Lending
The following graph illustrates the impact made by consolidating custody and implementing a securities lending program: $450,000 in annual custody expenses were eliminated and an additional $350,000 in annual income from securities lending.