Investors plan to stay the course with private equity, despite expectations for flat or negative returns from public equity in the US.

That’s according to a new Endowments and Foundations Survey from NEPC, looking at how endowments and foundations view private equity relative to other asset classes, the strength of the US economy, the domestic equity market, and the biggest threats to their portfolio over the next 12 months.

More than half of the survey respondents (51 per cent) expect private equity to outperform other asset classes over the next 12-24 months. Forty-five per cent believe private equity returns will be neutral, and only 4 per cent expect it to underperform over that same period compared to other investments.

“Given the ageing US equity bull market and the need for endowments and foundations to meet their expected rate of return, it’s not surprising to see them investing in areas such as private equity,” says Scott Perry, Partner and member of NEPC’s Endowments & Foundations practice. “With volatility reemerging after a fairly calm environment for the last few years, alternative asset classes in general have been generating interest among institutional investors.”

When asked to identify which private equity strategy will deliver the strongest return over the next 5-10 years, Special Situations took the top spot with slightly more than a quarter of overall responses (26 per cent). Growth Equity and Regional Strategies are also expected to perform well, with both receiving 17 per cent of responses each.

One area that respondents aren’t as optimistic on, however, is US equities, as 58 per cent think domestic equity returns will be relatively flat to negative in 2019. Thirty-eight percent believe domestic equities will taper a bit but still eke out returns in the mid-to-high single digit range, and only 4 per cent expect the rally to continue.

Turning their attention abroad, investors have largely brushed off concerns that appeared in emerging markets. Nearly half (47 per cent) of survey respondents say they’re actively monitoring their exposure to emerging markets, but despite the recent market sell-off, 94 per cent have not made any changes to their emerging markets allocation.

Read on Private Equity Wire here.