Alts take the lead
Alternatives have now surpassed public US equity as the single largest allocation in endowment and foundation portfolios, representing 36% of assets under management compared to 27% for domestic stocks.
But the build-out phase appears largely complete. Fewer organizations plan to increase alternatives exposure over the next 12 months, and the proportion planning to reduce allocations has more than doubled since 2023.
“The survey results indicate that endowments and foundations are entering a new phase of portfolio management, where liquidity, spending discipline and governance are just as important as long-term returns,” said Jeremy France, head of Institutional Consulting Solutions at Morgan Stanley. “As alternative allocations mature, in our view, the priority is shifting from portfolio construction to resilience – helping institutions meet their obligations while navigating continued uncertainty.”
That shift is evident in how organizations now describe their biggest challenge with alternatives.
Nearly half of respondents, 47%, identified liquidity as the single greatest concern, up sharply from 21% in 2023. Getting into private markets, once the dominant preoccupation, has given way to managing the ongoing demands of capital locked up in illiquid vehicles.