Press

The top-performing university and college endowments in fiscal year 2024 had high exposures to public companies assisting in the artificial intelligence revolution, according to an NEPC report released Jan. 14.

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For a second consecutive year, the largest endowments mostly trailed behind their smaller and mid-sized peers — particularly those with more exposure to public equities, wrote Colin Hatton, principal and senior consultant at NEPC’s endowments and foundation practice.

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And while “it’s often true that compelling new technologies arise in the private markets first, which is a reason why the mega endowments have historically outperformed,” longstanding, U.S.-domiciled public companies such as Nvidia, Amazon and Microsoft have been responsible for 24.6% of the S&P 500’s gains, Hatton added.

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Although AI drove strong returns for large-cap U.S. stocks, Hatton noted “we’re not convinced this is a trend with staying power.” He added it may be hard for technology firms to outperform earnings expectations to support high valuation multiples, which have contributed to their gains so far.

In fiscal 2024, university endowments followed a similar trend as the prior year: Endowments with a higher allocation to equites were top performers, while endowments with higher allocations to private markets often saw single-digit returns.

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The median endowment, out of 78 endowments NEPC tracked, returned 11.9% in the fiscal year.

“The [UC San Diego Foundation’s] success stems from a unique approach to endowment management that is a particularly good fit for current market trends,” Colin Hatton, an NEPC principal for endowments and foundations, wrote in the NEPC report. “They utilize several University of California General Endowment Pool accounts, enhancing them with their own strategic position which consists primarily of U.S. large-cap equity. It’s a hybrid approach that allows them to benefit from the University of California Investment Office’s resources while employing an asset allocation that meets their own needs.”

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“We also believe that private equity and venture capital aren’t likely to remain underperforming sectors for an extended period of time,” the NEPC report noted. “Both segments needed to endure a period of repricing in an environment of higher interest rates, but we think that cycle will come to an end now that interest rates are expected to remain stable or come down.”

Pensions in New York, California, Ohio, Connecticut and New Hampshire are upping their focus on real assets, spurred by improved real estate fundamentals and AI infrastructure.

As 2025 portends to be filled with political, legislative and regulatory uncertainty, defined contribution plan executives are focusing on what they can do and should do — rather than what might happen.

“Uncertainty creates inaction,” said Mikaylee O’Connor, head of defined contribution solutions at NEPC.

It’s possible that Donald Trump’s latest tariff threats on Mexico and Canada are just negotiating bluster. It’s also possible that he’s serious. Either way, US manufacturers are going to get caught in the middle.

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“The president has latitude to carve out exemptions by individual product code to more specifically target Chinese manufacturers that have invested in Mexico or other areas of national priority without crippling the US supply chain,” said Phillip Nelson, head of asset allocation at NEPC, an investment consultant that oversees $1.7 trillion of assets.