Endowment and Foundation Investment Survey 2023 

Endowment and foundation (E&F) investors have elevated concerns around the short-term risks presented by inflation, the potential for recession, ongoing market volatility and evolving geopolitical risks. Below are some of the highlights from the report:

• More than half (52%) of organisations anticipate a rise in spending targets over the next three years.
• More than half (54%) of organisations regard delivering a level of investment return sufficient to meet spending needs as a significant risk.
• Following a series of extreme weather events and natural disasters across regions in 2023, more than half (54%) of organisations deem climate change to be a significant risk to portfolios over the next 12 months.

Endowment and foundation (E&F) investors look to diversification as a – if not the – core component to drive growth across portfolios over the long-term.  Below are some of the highlights from the report:

• Allocations beyond traditional developed market equities and bonds – from private markets and alternatives to emerging markets – are strongly correlated with the size of portfolios, reinforcing the access challenge for smaller organisations.  
• More organisations (68%) have increased allocations to private markets than any other asset class over the last three years. 
• 41% of organisations plan to introduce or increase allocations to ESG and sustainability strategies over the next three years; 60% of organisations with existing allocations plan to increase allocations.

Endowment and foundation (E&F) investors continue to drive forward the pathway into private markets as they push through near-term uncertainty to increase private market allocations. Below are some of the highlights from the report:

• More than half (58%) of E&F organisations are currently invested in private market assets or are considering investing over the next 12 months. This rises to 90% of E&F portfolios in excess of $1bn, and 75% of portfolios between $100-$250m.
• The experience investing in private markets is overwhelmingly positive for organisations already doing so, with nearly four fifths (79%) determining that they have been adequately compensated for illiquidity risk.
• Organisations are very comfortable with extended lock up periods in private markets; nearly three quarters (73%) agree that performance has compensated for high fees, a view that remains broadly consistent across organisations by size.

Endowment and Foundation (E&F) investors look to sustainable investment and the net zero transition to align portfolios with the mission of their organisations – yet investors’ approaches vastly differ from other another. Below are some of the highlights from the report:

• A quarter (26%) cite impact investment as the mechanism through which they align their portfolio with their organisation’s mission. At a global level, however, impact investing is not widespread across E&F portfolios; nearly two thirds (62% of organisations) do not have an allocation to impact strategies or projects.
• Concerns around return implications, a lack of robust data, and the risk profile of investible assets are the barriers most cited by investors in, or those intending to invest in, impact specific strategies.
• Just 15% of organisations have set a science-based Net-Zero target across their portfolio; a fifth (21%) have implemented a DEI framework across their investment programme.
• Climate transition is the most-cited social issue that organisations believe could be better supported through portfolio allocation; this issue is most important for organisations in the United Kingdom, Australia & New Zealand, and across the AMEA region.