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Adventist Health System’s Mission-Driven Investment Approach | Exclusive Q&A With CIO Rob Roy

by trusted insight posted 4years ago 2059 views

Rob Roy is vice president and chief investment officer for Adventist Health System (AHS), a faith-based hospital system that carries out the health care ministry of the Seventh-day Adventist Church headquartered in Altamonte Springs, Florida. Roy oversees the organization’s investment assets exceeding $5 billion. Under his leadership since 2013, the investment office has grown both in staff size and portfolio value.

Prior to Adventist Health System, Roy held positions including the chief investment officer for Cain Brothers Asset Management, bond trader for Putnam Investments, fixed income specialist on the floors of the Chicago Board of Trade and the Chicago Mercantile Exchange and portfolio risk manager for Ferrell Capital. Roy holds a Bachelor of Science in Business Administration-Finance from Suffolk University, and a M.S. in financial markets and trading from the Illinois Institute of Technology.

Mr. Roy was recently named on Trusted Insight’s 2017 Top 30 Hospital Investment Officers. In this interview, he discusses recent development of Adventist’s investment portfolio and the health care system’s mission-driven investment approach.

(Roy was also named on Trusted Insight’s 2016 Top 30 Hospital Chief Investment Officers. Read his first interview here.)

Trusted Insight: Since we last spoke, what has changed at Adventist Health System?

Rob Roy: In the last year, we have simplified our portfolio mixture and we are continuing to develop and implement an internally managed process that is sensible, robust and efficient. This means we can insure our process fits Adventist Health System more precisely and implement it with great operating and cost efficiency.

Trusted Insight: Are there any particular asset classes where you see the potential for increased efficiency and generating alpha?

Rob Roy: We believe that alpha can be created most persistently through organizational design, portfolio construction process, operating efficiency and governance. We look to these elements to create alpha rather than through the traditional market forecasting or security selection.

The elements we focus on can accrue a form of alpha to us every day.

Trusted Insight: Many institutional investors now follow the “Yale endowment model.” To what extent do you agree that this investment model is applicable to health care investment?

Rob Roy: We do not follow this approach. Our approach is to manage our investment portfolio in direct support of our operating mission, which is “extending the healing ministry of Christ.” To do this effectively, we measure the strength of our balance sheet and adjust the risk of the portfolio in response.  

We know that taking risk is the driver of returns and so we endeavor to take the most risk possible given the strength of our balance sheet, and then to take this risk as efficiently as possible. By taking the right amount of risk each period, and taking it efficiently, we position ourselves to create the maximum level of support for our mission while being able to survive negative market events without disruption to the reason why we exist, which is caring for others.

Trusted Insight: How has the change in the U.S. administration impacted, if at all, your investment strategy?  

Rob Roy: Current events do not drive our strategy. We have, however, continued to work with our trusted partners to develop a more robust methodology for controlling excess losses when they occur in our portfolio.

Trusted Insight: You have previously worked on the sell side. How did you get your first break into institutional investment?

Rob Roy: My entire career has been in institutional asset management. Part of that has been working for a money manager, servicing institutional clients, and part has been working for an asset owner.

I started at Putnam Investments in 1989 as a fund accountant for a few months before I was offered a position as a junior trader, which focused on high yield municipal bonds. I was there until 1995, and that was a great place to learn. From there, I went to Chicago for graduate school and spent a couple of years trading on the floors of the futures exchanges. After that, I spent a year as a risk manager at a global hedge fund in Connecticut, before getting the opportunity to help launch the investment program at Adventist Health System in 1998.

Trusted Insight: How does investing for a health care system differ to an asset management firm?

Rob Roy: Working at an asset management firm, you are competing for capital. Your focus is outperforming a benchmark and differentiating your approach.

Working for an asset owner, these are not the priorities. Our focus is to make sure that we have built a strong organizational process and that our investment approach fits the desires of our firm. We seek to take the right amount of risk given the strength of our balance sheet, then to deploy that risk in the most efficient way possible, and that we have a robust process to manage the details. The final element is to communicate all of the intent, process and results as clearly as possible to our stakeholders.


Trusted Insight: What aspect of your role as chief investment officer do you enjoy the most?

Rob Roy: The best part of my job is knowing that the hard work of our team will positively impact the lives of the patients that our hospitals and facilities care for. We strive to constantly improve ourselves and our process so that we can provide Christian health care to even more people in the communities we serve.

To learn more about health care investing, click here to view the complete list of 2017 Top 30 Hospital Investment Officers. You can view our full catalogue of interviews with institutional investors here.