Larger endowments, foundations lean on private equity allocations

Larger endowments and foundations did beter during the first quarter's COVID-19 driven decline. Funds with assets greater than $1 billion outperformed their smaller peers by about 100 basis points, a product of the respective allocations to public and private equities. The smaller cohort was notably heavier in U.S. public equities compared to the larger group, with an aggregate allocation 13 percentage points higher. Conversely, the larger funds had an aggregate allocation to private equity almost 17 percentage points higher.

The long-term outperformance of private investments is highlighted in the three- and five-year return differentials among plans on either side of the $1 billion dividing line.

The quarter's 20% equity decline affected the aggregate asset allocation to global public equities within the 93 plans observed, with fixed income and private equity offsetting those declines.

The lagging nature of private investment reporting could show a different picture as additional performance reporting better reflects the impact of the economic slowdown.