BOSTON--(BUSINESS WIRE)--NEPC, LLC (www.nepc.com), one of the industry’s largest independent, full-service investment consulting firms to endowments and foundations, today announced the results of their latest Endowments and Foundations Survey, a measure of those organizations’ views on the economy, investment opportunities, and key market trends. This survey focused on how endowments and foundations view private equity relative to other asset classes, the strength of the U.S. economy, the domestic equity market, and the biggest threats to their portfolio over the next 12 months.
Overall, the results show that investors plan to stay the course with private equity, despite expectations for flat or negative returns from public equity in the U.S. More than half of the survey respondents (51%) expect private equity to outperform other asset classes over the next 12-24 months. Forty-five percent believe private equity returns will be neutral, and only 4% expect it to underperform over that same period compared to other investments.
“Given the aging U.S. 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,” said 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%). Growth Equity and Regional Strategies are also expected to perform well, with both receiving 17% of responses each.
One area that respondents aren’t as optimistic on, however, is U.S. equities, as 58% 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% expect the rally to continue.
Turning their attention abroad, investors have largely brushed off concerns that appeared in emerging markets. Nearly half (47%) of survey respondents say they’re actively monitoring their exposure to emerging markets, but despite the recent market sell-off, 94% have not made any changes to their emerging markets allocation.
Other main survey results include:
- Strengthening U.S. Economy: Fifty-three percent think the U.S. economy is in a better place today than this time last year. Just under a third (32%) think it’s in the same place, and only 15% think it’s in a worse place.
- Political Climate Tops Investor Concerns: Twenty-three percent cited geopolitical tensions as posing the greatest threat to their portfolios over the next 12 months. An additional 17% chose political uncertainty as their top concern.
- Rising Rates Remain a Risk: Another 23% of respondents highlighted rising interest rates as posing the biggest threat, an increase of 12 percentage points from NEPC’s previous survey of endowments and foundations in April 2018.