(Updated) Hartford HealthCare drops lauded investment team, puts Morgan Stanley in charge of $4.3B investments

HBJ PHOTO | STEVE LASCHEVER Hartford HealthCare Chief Investment Officer David Holmgren and his team were replaced last week by Morgan Stanley

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By Michael Puffer

Hartford HealthCare has dropped its widely lauded internal investment department, placing its $4.3 billion investment and endowment portfolio in the hands of Morgan Stanley.

The move shocked members of Hartford HealthCare's Investment Subcommittee, a largely volunteer board composed of experienced investment executives and experts. Five of seven volunteer members -- including Chairman David M. Roth -- have resigned since the surprise announcement at a special meeting held over Zoom last Tuesday.

"We are not saying it should have been our decision, but we are saying you should have been talking to us," Roth said. "That's why we are here."

Roth said the move to outsource investments is not unprecedented, but it is hard for him to understand given the extraordinary performance of Hartford HealthCare investments over the past several years. Whatever the reasons, they were not shared with the subcommittee, he said.

"They have created a lot of dollars for the balance sheet or for the hospital to use for its mission," Roth said. "We were shocked. Why would you terminate these people? It was never explained to us."

Hartford HealthCare’s investment fund had earned an average of 12.2% annually over the past five years, bucking trends and earning praise for Chief Investment Officer David J. Holmgren and his team.

In a statement released by a spokeswoman, Hartford HealthCare acknowledged the funds’ strong performance.

“The investment team’s acumen has earned national recognition from investment industry experts,” reads the statement. “We are grateful for (the) many contributions of these colleagues, and will support them through this transition, either into new roles within the organization or to positions outside of Hartford HealthCare.”

According to Hartford HealthCare’s statement, its leadership decided – with approval from the Board of Directors – to select a full-time investment firm to manage the portfolio.

Hartford HealthCare’s statement did not address why executives chose to replace Holmgren and his team but did tout Morgan Stanley’s capabilities.

“We are confident that Morgan Stanley, a respected multinational investment management and financial services company that manages $6.5 trillion in client assets, will be a valued partner,” reads a portion of the Hartford HealthCare release. “Our portfolio will benefit from Morgan Stanley’s deep bench of research analysts, market strategists and investment managers. A dedicated team will provide HHC with a full suite of investment management, fiduciary oversight and operational services.”

Holmgren served as the principal investment officer for the State of Connecticut Treasury for four years prior to his hire by Hartford HealthCare in 2010. Attempts to reach Holmgren were not immediately successful.

Roth is senior managing director of South Ocean Capital Partners, a real estate equity firm based in Florida. He lives in Connecticut and volunteers on various philanthropic boards in the Hartford area. Roth said he volunteered on Hartford HealthCare's Investment Subcommittee for the past nine years, the last three as chair.

Roth resigned that position in an email sent to Hartford HealthCare President and Chief Executive Officer Jeffrey A. Flaks and other senior leaders last Thursday.

"There was a total lack of transparency and a deliberate bypassing of the subcommittee and usurpation of its role," Roth wrote in a portion of the email. "Personally, as chair, I was not even granted the courtesy of being informed and given the opportunity to address the issue. As I previously noted, I find the whole process to be unacceptable."