U.S. college and university endowments are beginning to post their returns for the fiscal year ended June 30, with at least two citing their investments in SpaceX as a major driver of outperformance, but experts warn the high concentration of their portfolios in a single stock creates asset allocation and risk problems.
. . .
Colin Hatton, principal and senior consultant for endowments and foundations at NEPC, said concentration risk becomes more acute as a holding grows. One of the clearest warning signs for investment committees is when a single company reaches roughly 5% of total assets, he said.
Such concentrations are uncommon in modern endowment portfolios, which generally rely on diversification to generate steadier returns and support annual spending, he said. Still, large single-company positions are not unprecedented: Some institutions with sizable venture portfolios are approaching 5% exposure to individual companies, and a smaller number have exceeded that level.
. . .