Press Coverage

U.S. retirement plans in Pensions & Investments’ latest annual survey reported positive gains in assets for the third year in a row, despite considerable market volatility.

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After years of rapid growth as pension funds have built their alternative asset classes from scratch, those allocations have now settled a bit and sponsors say their discussions have evolved to topics around the construction of those existing portfolios, said Aaron Chastain, partner and corporate solutions leader at investment consultant NEPC.

“So we’ve got a private equity book. How do we make sure we re-up with strong GPs? How do we think about trimming our roster in some circumstances?” said Chastain.

In private debt, for example, a few years ago direct lending was a much smaller subset of investment managers.

“It was relatively easy to choose strong managers. Expected returns were all very similar,” said Chastain. “Now we’re focused a lot more on the portfolio construction aspect of whether you want regular direct lending, or are you thinking about other types of strategies that have come to market a little bit more specialized and nuanced? That may be more appropriate going forward, have a better return opportunity.”

Plan sponsors are much more focused now on manager selection, he said.

“With a lot more players in the space, it’s going to be very important to make sure you’ve got strong underwriting capabilities and you’re not going with covenant-lite managers that may be newer entrants and don’t have as much negotiating leverage. That’s where the focus is. It’s more to looking at within alternatives, rather than, ‘Let’s just continue to increase them at all costs.’”

For alternatives asset managers coveting the DC market, questions of cost, transparency, administration and financial returns converge on one word: education.

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“Most plans have significant allocations to target-date funds,” said Mikaylee O’Connor, partner and team leader of NEPC’s defined contribution practice. It’s the easiest for sponsors to understand from a liquidity and allocation standpoint, she added.

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“Where we get hung up the most is the implementation” of new products, O’Connor said. “Who will create the best DC-friendly vehicles”

Sponsors also must be vigilant in assessing the quality of private markets asset managers, O’Connor said.

Market volatility vastly impacted 2025 endowment performance, narrowing the gap between smaller and larger endowment returns and giving a boost to portfolios with actively managed funds.

The University of Wisconsin-Madison came out on top with a whopping 16.2% return for its $4.9 billion endowment, according to NEPC‘s most recent report on endowments.

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“For those that had strong performance, active management certainly added to returns, but that was not the case across the board,” said Colin Hatton, principal on NEPC’s endowments and foundations team. “There was a large dispersion amongst manager returns across public and private equity markets.”

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Lower middle-market buyouts and growth equity/venture had certain funds with very strong returns, he said. And venture capital returns got a boost from some of the early artificial intelligence winners that had significantly higher valuations, Hatton added.

Publicly traded AI-related stocks also fueled gains for the top-performing funds, according to the report.

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“We think this is going to be a trend with more institutions using the secondary market as a portfolio management tool,” Hatton said. “2025 saw overall [limited partner] secondary transactions increase to all-time highs. In some cases, it will be to rebalance towards targets, in others, it may be based on broader portfolio management considerations and expectations on… forward looking returns from their capital.”

Higher allocations to public markets and prudent stock selection led those with top-quartile returns in fiscal 2025, according to NEPC.

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“WISIMCO’s investment fund benefited from equity market gains generally and effective stock selection,” wrote Colin Hatton, a principal on the endowments and foundations team at NEPC, in its report. “In the endowment’s recent annual financial report, Michael Stohler, the WISIMCO CIO, noted that strong stock selection within their public equity allocation in particular, as well as in the private markets, did most to enhance results.”

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NEPC’s Hatton wrote that while large equity allocations benefited smaller endowments, investment managers’ returns were dispersed broadly.

“This suggests that active management was a meaningful factor in returns for the top performing funds,” Hatton wrote in the report. “We believe that manager selection will continue to be a driver for the strongest performing endowments going forward. This is particularly true within private markets, where the difference between top and bottom quartile performers is much broader than in public markets.”

The boom around artificial intelligence has created persistent concentration at the top end of the U.S. stock market, leading to a multistep problem for investment consultants helping their clients navigate both a fast-evolving technology and a unique investment environment.

NEPC’s longtime investment chief Tim McCusker will succeed Michael Manning to lead the $1.7 trillion investment giant — first as president, then as CEO — as part of a multiyear transition plan.

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Sarah Samuels, a partner at NEPC, has been appointed to CIO as part of this succession plan.

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“A really important part of this transition is to create continuity,” McCusker said. “That’s not to say we won’t change; NEPC will continue to evolve… we [just] want to do it in a way where our DNA, our values, our culture, don’t change.”

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“We’re going to maintain the strength of the investment team [and] enable our people to stretch and grow,” Samuels said.

Higher education institutions saw strong returns across asset classes, especially in equities, and significant exposure to themes related to digital assets and artificial intelligence.

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Colin Hatton, a principal in NEPC’s endowments and foundations practice, explained that the firm still expects private market assets to provide strong returns.

“Over the long term, we still believe that private markets will outperform the public markets,” Hatton says. “However, we’ve seen that turnaround the last three years. If you look at a 10-year time period, those with heavy alternative allocations did outperform, and if you go back beyond that as well.”

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Hatton notes that because secondary sales lead to a decline in the value of the portfolio—because the assets are generally being sold at a discount—endowments are examining how the haircut will affect spending and distributions to the university.

“I think another thing that institutions are thinking about is how it will affect their spending if they go and do a secondary sale,” Hatton says. “The effect that that can have on the spending policy and the support for the institution is another consideration that these groups are having to think through as they go through this.”

In a year marked by political headwinds, budget cuts and volatile markets, U.S. colleges, universities and associated foundations scored positive returns for a third straight fiscal year.