Nearly a third (32 per cent) of endowments and foundations have introduced or expanded their private markets programs, as market volatility tops their list of macro-level concerns, according to new research by Mercer.
More than half (56 per cent) of endowments and foundations are increasing portfolio diversification, as 83 per cent identified market volatility as a top risk, up 10 per cent from last year, Mercer’s 2025 Global Endowment & Foundation Investment Survey found.
Domestic and international political developments were cited by 82 per cent of respondents as key risks.
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Asset owners are diversifying and increasingly looking to private markets to generate excess returns relative to public markets and to source differentiated return drivers to help them better withstand those risks, the survey revealed.
Larger organisations are leading private markets adoption, with 50 per cent either increasing or introducing such programs, compared to only 7 per cent of smaller organisations.
Mercer highlighted that private markets remain a “complex” asset class, however, with 44 per cent of respondents acknowledging “significant challenges” in navigating it.
“As private markets expand, identifying top-tier performers becomes more difficult, and smaller institutions may face resource and expertise constraints,” said Natalie Yapp, head of endowment and foundation sales at Mercer UK.
She told Alternative Credit Investor that endowments and foundations need to have carried out due diligence “to make sure you’re putting the right investments within your overall portfolio”, and said this is more of a challenge for smaller organisations without the in-house expertise.
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The survey identified a “clear trend” toward increased allocations to private equity, private debt and infrastructure among endowments and foundations, with expected net increases of 26 per cent, 24 per cent, and 14 per cent, respectively.
Yapp said that organisations are diversifying across private equity, private debt and infrastructure in the search for “consistent income” where the “typical 60/40 is going out of fashion”.
Europe is expected to significantly increase allocations to private equity, with a net expected rise of 37 per cent, versus 19 per cent in North America, where private equity exposure is already higher.
Organisations in the US are focused on growing allocations to private debt, with an expected 33 per cent net increase over the next three years.
Both European and US organisations intend to increase allocations to infrastructure, seeking to capitalise on long-term trends such as AI and technological innovation.
Speaking to Alternative Credit Investor, Yapp said there are more opportunities for these organisations “to go into alternatives” and also, to “make an impact through alternatives”.
However, she noted that smaller organisations below $50m (£38.1m) in size might find these opportunities “hard to identify” without the “expertise” of an external fiduciary manager or investment consultant, whereas larger organisations above $1bn have the capabilities in-house.
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