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9-206-005

REV: MAY 22, 2007

JOSHUA COVAL

Partners Healthcare

In May 2005, Michael Manning, the deputy treasurer of Partners Healthcare System, was

formulating a recommendation to the Partners Investment Committee. He had been asked to analyze

the role that different “real assets” could play in Partners’ $2.4 billion long-term pool (LTP) of

financial assets. He was then expected, on the basis of that analysis, to recommend both a size and a

composition for the real-asset portfolio segment within that LTP.

Background

Partners Healthcare System was the largest health-care network in New England, providing a

range of primary, secondary, and tertiary health-care services to millions of patients from throughout

eastern Massachusetts. The Massachusetts General Hospital and the Brigham & Women’s Hospital,

two world-famous acute-care hospitals in Boston, had joined together in 1994 to found the Partners

network. Both Mass. General and Brigham not only provided acute clinical care but were also

research and teaching hospitals affiliated with the Harvard Medical School. Over the next few years,

four suburban hospitals had also joined the network, as had dozens of physician organizations

(practices with multiple numbers of doctors) across eastern Massachusetts. A variety of important

staff functions, including treasury functions like asset management, had been centralized at Partners

headquarters in downtown Boston, but all the clinical care and research took place in the

decentralized network of hospitals and physician offices (see Exhibit 1). Partners’ Treasury

Department, headed by Manning, reported up through a senior vice president of Treasury to the

chief executive officer and the board. Importantly, there was also an investment committee consisting

of well-known and respected investment professionals who determined the investment policy for

Partners’ pools of investments, several of whom also served as directors and trustees of Partners and...