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Endowments: A look at their allocations to private equity

Continuing with our focus on the effects of the financial crisis on endowments, we look closer at the private equity allocations of this group of investors. In recent weeks, several reports have suggested that many endowments are being forced to sell their interests on the secondary market as a result of being above their target allocations to private equity. Of those endowments which were surveyed by Preqin, 27% were above their target allocations to the asset class, with the remainder being at, or below, their target allocation.

Endowments vary greatly in size and this is true of the participants of our survey, with no group representing much more than a quarter of participants. 27% have total assets of $150 million or less, while 26% are greater than $750 million in size. Results of our survey also show that issues with over-allocation to private equity are more prevalent amongst larger endowments. Only 15% of endowments with total assets of $150 million or less were found to be over allocated to private equity, while the figure rises to 36% for endowments with total assets of $351-$750 million, and 42% for those larger than $750 million in size.

When asked if they intended to change their allocations to private equity over the coming year, as well as if they anticipated altering their long-term private equity target allocations over the next 3-5 years, 22% said that they intend to modify their level of exposure within the next 12 months, and 78% plan to maintain their allocations to private equity over the period. Looking at the longer term, 54% of endowments stated that their target allocation will remain the same and 32% stated that they would be looking to increase their target allocation to the asset class.

The full research report with the detailed findings of the survey can be found here.

Posted by Dami Sogunro on 27-Oct-2009

Keywords: private equity, private equity allocation, endowments, private equity investors