Alex Wiggins is the chief investment officer at Rush University Medical Center. He has served at Rush University Medical Center for over 19 years and held the roles of associate vice president of investments and director of investments. In this interview, he discussed how the health system has moved away from a consultant-led model as their investment efforts continue to grow; why they've chosen a more modest approach to alternative investments; and why diversity and inclusion in the investment process is essential for sustained improvement.
Alex Wiggins was named to Trusted Insight's previous Top Health System Chief Investment Officers.
Trusted Insight: Tell us about Rush University Medical Center, and the main mission and focus at the organization. What is Rush University Medical Center’s AUM and investment team size?
Alex Wiggins: Rush University Medical Center is the flagship hospital of the Rush University System for Health (RUSH), a non-profit academic health system in Chicago. It is rooted in excellence in quality, patient care, research and academics; driven by discovery, innovation and a deep responsibility for the health of our communities. The medical center is one of five academic medical centers in Chicago, which is a highly competitive and fragmented market. RUSH has a long history in the Chicago area. In fact, the medical college was founded more than 180 years ago in 1837, two days before the city of Chicago was incorporated. RUSH’s mission is to improve health. Our clinical teams and all staff are committed to providing the highest quality of care, and that's been reflected in us being consistently ranked among the top AMCs, including #1 in 2019 and #2 this past year. When you're a physician-led organization like Rush, patient care will always be at the center of what we do.
Trusted Insight: You were named Chief Investment Officer in 2019, but you have always held leadership responsibility within the investment team. How has the team dynamic changed over the years?
Alex Wiggins: When I first joined the organization, investments under management were less than $1 billion and they were managed by our treasurer with the help of investment consultant. Though my joining brought more internal resources to the equation, we were still very much operating under a consultant-led model. As our investments grew over time, both in size and complexity, it became apparent we were outgrowing that model. That doesn't mean our performance was bad. Our results were in-line with expectations given our asset allocation and manager decisions but there was always the feeling we could be doing better.
What tends to happen in consultant-led models, from my experience, is consultants can fall in and out of favor with boards for one reason or another. The result can be a revolving door of consultants and money managers. That, in turn, can lead to potential changes in investment approach, increased trading, and higher switching costs in general. And that, in my opinion, is not a blueprint for long-term success. So we gradually started to take more ownership of the portfolios, migrating to a model where our consultant became a more true extension of staff. In 2019, we formally separated the investment team from treasury and started building out an investment office. We're currently at four FTEs and have a sightline to 5-6 within the next year or two. We have an investment philosophy we believe we can do well with over time. It is on us to execute with consistency and with discipline.
Trusted Insight: How do you see the strategic asset allocation strategy evolving in the next 5-10 years? Many health system peers say they are increasingly allocated to alternatives assets, is this the case also with Rush University Medical Center?
Alex Wiggins: I hope our strategic asset allocation strategy doesn't change much, as it's built with a long term orientation in mind. We're pretty straightforward in our approach to portfolio construction. We use equities for capital appreciation, bonds for income, and treasuries for liquidity and to hedge equity and credit risks. We have private equity and private debt, but we don't invest in hedge funds.
In terms of our alternative investments, our current allocation across the portfolios is 10% in aggregate. That modest allocation, in part, reflects our current resources. Investing in alternatives requires a lot of work. Though it only represents 10% of our allocation, it probably takes 30 to 40% of our time. Investing in alternatives and having a chance at doing it well, which to me means outperforming the public markets consistently, requires resources with the right expertise. Warren Buffett, arguably the greatest investor of our lifetime, has been successful because he understands his circle of competence. Until we've developed that competence with the right resources and expertise, I don't see our allocation to alternatives growing materially.
Trusted Insight: I’m sure it was overwhelming managing a health system during the pandemic, but how do you position yourselves for another potential downturn/recession?
Alex Wiggins: Downturns or recessions are inevitable and they're part of the market cycle. We know there are going to be periods where our portfolios are down. The question for us is whether the drawdown is within our expectations. We've invested in portfolio risk systems to manage and monitor our portfolio risk factors. As an example, for our unrestricted funds, we translate that investment risk to its impact on our hospital liquidity measures, such as days cash on hand and cash to debt. For pension assets, we monitor surplus volatility to changes in interest rates and/or equity market declines for impact on minimum required contributions. I think the key is to look at the best and worst case scenarios and to plan for outcomes accordingly.
With respect to the pandemic related sell off, it's different than the 2008 financial crisis, which was housing induced and really squeezed banks. For COVID-19, hospitals were on the front line and many still haven't recovered financially. One of the things that we were reminded of during that event was the importance of liquidity. Like many other hospitals, we did have to liquidate some funds to support hospital operations. However, we found that some of our bond managers were overweight credit at the time, and we would've taken realized losses had we redeemed from them. That's one of the reasons we have dedicated treasuries in our portfolios today. Howard Marks said, "Liquidity isn't defined if you can sell it, it's can you sell it at a price equal to or close to the last price," which is something worth remembering.
Trusted Insight: Is Rush University Medical Center open to the idea of more collaboration between traditional health systems and innovation/tech startups?
Alex Wiggins: The short answer is yes. We have investments in healthcare focused funds and we discuss with them common areas of interest. As a result of those relationships, we've made a few direct investments, but we do not have a corporate venture fund by any means. That said, the need for business model innovation for hospitals is real. If there's anything we can do to facilitate partnerships with portfolio companies in our investment program, we need to do our part.
Trusted Insight: Are there any final thoughts you’d like to add?
Alex Wiggins: The Knight Foundation recently published updated research indicating minimal progress in U.S.-based AUM managed by diverse-owned firms. I believe the number was 1.4% as of 2021 compared to 1.0% in 2016 despite no statistically difference in performance between diverse- and non-diverse-owned firms. A couple of years ago, we looked at our own progress and suffice to say, we were not satisfied with the results. With the support of our board, we recommitted and set goals, not limits, for improvement. Since then, we’ve increased our assets with minority or women-owned firms from 4% in 2020 to 20% presently. We accomplished this using both actively managed and passive strategies and across asset classes without excessive manager proliferation. We also looked to address a lack of diversity on our people side, including the composition of our investment committee, consulting team and investment office. From my perspective, having diverse representatives within the key stakeholder groups involved in the investment process is essential for sustained improvement.
Lastly, I’d like to close with highlighting some of the investments we’re doing in support of the organization’s commitment to health equity. RUSH is a member of the Healthcare Anchor Network and has committed to allocate at least one percent of our unrestricted, long-term reserves to place-based investments. The intent of the investments is to get capital into the underinvested and underserved communities of the west side of Chicago, where there is a life expectancy gap of as much as 14 years. To date, we have invested over $6 million with Community Development Financial Institution (CDFI) loan funds, who in turn have provided debt capital to small businesses and not-for-profit organizations in our communities. We are also part of an investment collaborative with other like-minded investors in Chicago to bring more capital to these communities in a coordinated approach. It has been rewarding to see the partnerships we have developed in pursuit of a common good – improving people’s lives – and I am fortunate to work for such an organization.
View our full catalog of interviews here.
The full list of Top Health System Chief Investment Officers can be found here.
Alex Wiggins was named to Trusted Insight's previous Top Health System Chief Investment Officers.
Trusted Insight: Tell us about Rush University Medical Center, and the main mission and focus at the organization. What is Rush University Medical Center’s AUM and investment team size?
Alex Wiggins: Rush University Medical Center is the flagship hospital of the Rush University System for Health (RUSH), a non-profit academic health system in Chicago. It is rooted in excellence in quality, patient care, research and academics; driven by discovery, innovation and a deep responsibility for the health of our communities. The medical center is one of five academic medical centers in Chicago, which is a highly competitive and fragmented market. RUSH has a long history in the Chicago area. In fact, the medical college was founded more than 180 years ago in 1837, two days before the city of Chicago was incorporated. RUSH’s mission is to improve health. Our clinical teams and all staff are committed to providing the highest quality of care, and that's been reflected in us being consistently ranked among the top AMCs, including #1 in 2019 and #2 this past year. When you're a physician-led organization like Rush, patient care will always be at the center of what we do.
"Though my joining brought more internal resources to the equation, we were still very much operating under a consultant-led model. As our investments grew over time, both in size and complexity, it became apparent we were outgrowing that model."
In terms of the investment program, it is an important source of funds. We're a little over $3 billion in assets under management across multiple portfolios, including operating and insurance reserves, an endowment fund, and a defined benefit pension plan. The majority of the funds are restricted to use, but nevertheless are important in helping us with our mission.
Trusted Insight: You were named Chief Investment Officer in 2019, but you have always held leadership responsibility within the investment team. How has the team dynamic changed over the years?
Alex Wiggins: When I first joined the organization, investments under management were less than $1 billion and they were managed by our treasurer with the help of investment consultant. Though my joining brought more internal resources to the equation, we were still very much operating under a consultant-led model. As our investments grew over time, both in size and complexity, it became apparent we were outgrowing that model. That doesn't mean our performance was bad. Our results were in-line with expectations given our asset allocation and manager decisions but there was always the feeling we could be doing better.
"Warren Buffett, arguably the greatest investor of our lifetime, has been successful because he understands his circle of competence. Until we've developed that competence with the right resources and expertise, I don't see our allocation to alternatives growing materially."
What tends to happen in consultant-led models, from my experience, is consultants can fall in and out of favor with boards for one reason or another. The result can be a revolving door of consultants and money managers. That, in turn, can lead to potential changes in investment approach, increased trading, and higher switching costs in general. And that, in my opinion, is not a blueprint for long-term success. So we gradually started to take more ownership of the portfolios, migrating to a model where our consultant became a more true extension of staff. In 2019, we formally separated the investment team from treasury and started building out an investment office. We're currently at four FTEs and have a sightline to 5-6 within the next year or two. We have an investment philosophy we believe we can do well with over time. It is on us to execute with consistency and with discipline.
Trusted Insight: How do you see the strategic asset allocation strategy evolving in the next 5-10 years? Many health system peers say they are increasingly allocated to alternatives assets, is this the case also with Rush University Medical Center?
Alex Wiggins: I hope our strategic asset allocation strategy doesn't change much, as it's built with a long term orientation in mind. We're pretty straightforward in our approach to portfolio construction. We use equities for capital appreciation, bonds for income, and treasuries for liquidity and to hedge equity and credit risks. We have private equity and private debt, but we don't invest in hedge funds.
In terms of our alternative investments, our current allocation across the portfolios is 10% in aggregate. That modest allocation, in part, reflects our current resources. Investing in alternatives requires a lot of work. Though it only represents 10% of our allocation, it probably takes 30 to 40% of our time. Investing in alternatives and having a chance at doing it well, which to me means outperforming the public markets consistently, requires resources with the right expertise. Warren Buffett, arguably the greatest investor of our lifetime, has been successful because he understands his circle of competence. Until we've developed that competence with the right resources and expertise, I don't see our allocation to alternatives growing materially.
Trusted Insight: I’m sure it was overwhelming managing a health system during the pandemic, but how do you position yourselves for another potential downturn/recession?
Alex Wiggins: Downturns or recessions are inevitable and they're part of the market cycle. We know there are going to be periods where our portfolios are down. The question for us is whether the drawdown is within our expectations. We've invested in portfolio risk systems to manage and monitor our portfolio risk factors. As an example, for our unrestricted funds, we translate that investment risk to its impact on our hospital liquidity measures, such as days cash on hand and cash to debt. For pension assets, we monitor surplus volatility to changes in interest rates and/or equity market declines for impact on minimum required contributions. I think the key is to look at the best and worst case scenarios and to plan for outcomes accordingly.
"We’ve increased our assets with minority or women-owned firms from 4% in 2020 to 20% presently... From my perspective, having diverse representatives within the key stakeholder groups involved in the investment process is essential for sustained improvement."
With respect to the pandemic related sell off, it's different than the 2008 financial crisis, which was housing induced and really squeezed banks. For COVID-19, hospitals were on the front line and many still haven't recovered financially. One of the things that we were reminded of during that event was the importance of liquidity. Like many other hospitals, we did have to liquidate some funds to support hospital operations. However, we found that some of our bond managers were overweight credit at the time, and we would've taken realized losses had we redeemed from them. That's one of the reasons we have dedicated treasuries in our portfolios today. Howard Marks said, "Liquidity isn't defined if you can sell it, it's can you sell it at a price equal to or close to the last price," which is something worth remembering.
Trusted Insight: Is Rush University Medical Center open to the idea of more collaboration between traditional health systems and innovation/tech startups?
Alex Wiggins: The short answer is yes. We have investments in healthcare focused funds and we discuss with them common areas of interest. As a result of those relationships, we've made a few direct investments, but we do not have a corporate venture fund by any means. That said, the need for business model innovation for hospitals is real. If there's anything we can do to facilitate partnerships with portfolio companies in our investment program, we need to do our part.
Trusted Insight: Are there any final thoughts you’d like to add?
Alex Wiggins: The Knight Foundation recently published updated research indicating minimal progress in U.S.-based AUM managed by diverse-owned firms. I believe the number was 1.4% as of 2021 compared to 1.0% in 2016 despite no statistically difference in performance between diverse- and non-diverse-owned firms. A couple of years ago, we looked at our own progress and suffice to say, we were not satisfied with the results. With the support of our board, we recommitted and set goals, not limits, for improvement. Since then, we’ve increased our assets with minority or women-owned firms from 4% in 2020 to 20% presently. We accomplished this using both actively managed and passive strategies and across asset classes without excessive manager proliferation. We also looked to address a lack of diversity on our people side, including the composition of our investment committee, consulting team and investment office. From my perspective, having diverse representatives within the key stakeholder groups involved in the investment process is essential for sustained improvement.
Lastly, I’d like to close with highlighting some of the investments we’re doing in support of the organization’s commitment to health equity. RUSH is a member of the Healthcare Anchor Network and has committed to allocate at least one percent of our unrestricted, long-term reserves to place-based investments. The intent of the investments is to get capital into the underinvested and underserved communities of the west side of Chicago, where there is a life expectancy gap of as much as 14 years. To date, we have invested over $6 million with Community Development Financial Institution (CDFI) loan funds, who in turn have provided debt capital to small businesses and not-for-profit organizations in our communities. We are also part of an investment collaborative with other like-minded investors in Chicago to bring more capital to these communities in a coordinated approach. It has been rewarding to see the partnerships we have developed in pursuit of a common good – improving people’s lives – and I am fortunate to work for such an organization.
View our full catalog of interviews here.
The full list of Top Health System Chief Investment Officers can be found here.