Endowment Plans’ Private Equity Allocation by Assets under Management – January 2016

by Joseph Borda

  • 26 Jan 2016
  • PE
  • VC

Preqin’s Investor Intelligence module on Private Equity Online currently tracks over 6,000 investors worldwide that are investing in private equity funds. Within this group, Preqin holds detailed information on 551 endowment plans collectively holding approximately $662bn in assets under management (AUM), with almost $100bn allocated to the asset class. 

Smaller endowment plans (those with less than $500mn in AUM) are more numerous than their larger counterparts (more than $1bn in AUM), representing 60% of endowment plans investing in private equity compared to the 23% accounted for by larger endowments, as shown in the chart above. However, larger plans account for a much higher percentage (87%) of total capital invested in private equity partnerships by endowments; the more numerous small endowment plans account for just 6%.

As a whole, the average endowment plan has a current allocation to private equity of 11.3% and target allocation of 13.0%. However, this differs by the size of the endowment plans; larger plans generally allocate a higher proportion of their total assets to private equity. Small plans allocate an average of 9.4% of their AUM to private equity, while large plans allocate an average of 14.8% of their total AUM to the asset class.

Two-thirds of endowment plans have indicated a preference for venture capital vehicles, while buyout (56%) and fund of funds (52%) are strategies also ranked highly by endowment plans. The largest endowment plan by current allocation to private equity is Yale University Endowment, which allocates 33% of its total assets to private equity funds. The $23.9bn endowment plan invests in a range of fund types, yet has a preference for US-focused buyout funds. However, it has increasingly invested in non-US partnerships, in particular Europe-focused buyouts.

Endowment plans will continue investing in private equity over the next 12 months, with examples including Abilene Christian University Endowment, Ohio University Foundation and Cambridge University Endowment Fund. Texas-based Abilene Christian University will look to invest in buyout, growth and venture capital vehicles on a global scale, typically committing $3-5mn in each private equity vehicle. Ohio University Foundation, with $586mn in AUM, expects to invest in a small number of private equity funds on a global scale, committing between $20mn and $35mn across the funds. Additionally, UK-based Cambridge University Endowment Fund expects to invest £200mn across six to eight private equity funds in 2016. The endowment plan prefers to invest in buyout, distressed debt and venture capital vehicles.

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