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Endowments & Foundations Survey: What peers are doing differently as complexity rises

Endowments and foundations are navigating a portfolio landscape where alternatives have moved into the core of the portfolio allocations, and where geopolitics, liquidity and spending pressure are reshaping day-to-day decision-making. Our recent survey of investment decision-makers at 100 mid- to mega-sized organizations, shows organizations tightening governance, leaning more on consultants, and reassessing portfolio flexibility as complexity becomes a defining feature of portfolio management.

A few early signals from the research1

  • Return confidence is down. Only 13% of respondents said they are very confident they’ll hit their target annualized return over the next three years (down from 19% in 2023).
  • Alternatives now represent the largest asset class in portfolios. Alternatives rose to 36% of AUM, surpassing public U.S. equity (27%) as the largest allocation.
  • Liquidity has become the defining challenge in private markets. Nearly half (47%) named liquidity as the single most significant alternatives challenge (up from 21% in 2023).
  • Governance is increasing, but unevenly. The share of organizations without a formal investment committee fell to 9% (from 18% in 2023).
  • Consultant relationships are becoming more common. 46% work with an external investment consultant (up from 39% in 2023) with an average tenure working with the provider of 9.4 years.
  • Spending pressure is rising. 31% expect their spending rate to increase over the next three years (vs. 15% in 2023), and more portfolios are primarily funding operations/programming (53%) versus grantmaking (41%).

Want the full findings?

Download the complete Endowments & Foundations Survey results to see the deeper dive by AUM size and organization type, plus more detail on allocations, benchmarks, governance practices, consultant relationships, fundraising expectations and spending outlook.

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Footnotes

12026 Endowments and Foundations Survey, Morgan Stanley.

Disclosures:

This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are appropriate only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing.

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