US public university endowments ramp up private equity exposure amid market reset
A growing number of US public university endowments are increasing their allocations to private equity, viewing current market conditions as a rare entry opportunity despite ongoing underperformance.
According to the Financial Times, seven public endowments plan to boost private equity exposure by up to 150% in the coming years, taking advantage of falling valuations and subdued public market expectations.
Clemson University Foundation, for example, intends to raise its allocation from 18% to 24% within four years. “Private equity will maintain their risk premium over public equity markets,” said John Alexander, the foundation’s Chief Investment Officer, who views the asset class as key to future returns.
The University of Utah Growth Capital Partners Foundation has also increased its private equity allocation, tripling it from 10% to 30% late last year. CEO David Anderson said the shift was driven by the need for higher long-term performance. “The PE market is far less efficient than the public market,” he added, “but there are more opportunities to get excess returns.”
While private university endowments, particularly Ivy League institutions, were early adopters of private equity, public endowments have traditionally moved more cautiously. Limited access to top-tier managers and conservative governance structures have constrained their participation. However, as some large institutions pare back commitments, public universities are stepping in.
Still, not all endowments are increasing exposure. Virginia Commonwealth University’s $2.3bn endowment plans to maintain its current 18% allocation. “We are not seeing this as a great opportunity to add to privates,” said CIO Bruce MacDonald.
Despite mixed views, the trend signals a growing confidence among public institutions in private equity’s long-term value proposition — especially as public markets face a muted return environment.
As Michael Stohler, CIO of the University of Wisconsin-Madison’s $4.3bn endowment, put it, “As long as we are compounding above our cost of capital and our assets are fairly valued, we have a reasonable tolerance for long hold periods.”