Endowments, foundations expect to lift PE allocations this year: survey

  • 43 pct intend to increase PE allotment in 2018
  • PE expected to be second strongest performing asset
  • U.S. economy in a better place this year compared to 2017

Across the LP universe, institutional investors are eager to build exposure to private equity.

This holds true for endowments and foundations, 43 percent of which plan to boost their allocations to PE this year, a survey by the investment consulting firm NEPC shows.

At the same time, 15 percent expect private equity to be the strongest performing asset class in 2018. The latter is the second highest percentage for that question; 45 percent expect emerging market equities to be the highest performing asset class.

The survey polled about 50 foundations and endowments during the first two weeks of February.

“The high return potential of private equity makes it attractive for endowments and foundations despite the heated market environment,” said Sam Pollack, principal and senior consultant for the endowments and foundations team at NEPC.

PE dropped to 6 percent of total allocations in 2017 from 7 percent in 2016 and 6 percent in 2015, the survey shows.  But “the decrease can be attributed to the significant run-up in public equity markets, rather than a conscious decision to reduce exposure to private equity,” Pollack said.

In addition, endowments and foundations have been strong adopters of new teams and strategies in private equity, Pollack said. They have shown a willingness to work with emerging managers and first funds, often based on experience with management teams, he said.

Survey respondents listed geopolitical instability, rising interest rates and slowdown in global growth as top concerns in 2018.

Still there is cautious optimism: 55 percent of the respondents said the U.S. economy is in a better place now than this time last year and 47 percent expect the S&P 500 to return between 6 percent and 10 percent.

Action Item: Read more on the NEPC survey here NEPC Survey

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