Endowment Managers See Slow Growth as Top Threat to Investments

  • Business officers to shun energy this year, NEPC survey shows
  • Caution abounds as 22% say they don't see any good investments

Managers of U.S. endowments and foundations see a slowdown in global economic growth posing the biggest near-term threat to their investment performance.

There’s little consensus on where to invest or the direction of the volatile markets, according to a survey by consulting firm NEPC of 54 endowments and foundations, most with assets of $50 million to $1 billion. Slowing growth overshadowed such concerns as rising interest rates and potential overseas conflicts.

Twenty-four percent of the business officers said domestic equities will be the strongest performer this year, the highest vote among asset classes, but expectations are modest across the board. Eighty-four percent of respondents said they expect the Standard & Poor’s 500 Index to either lose ground or return no more than 5 percent in 2016. U.S. stocks joined a rout Thursday that has global equities poised to enter a bear market.

“The No. 1 concern is global economic growth,” Cathy Konicki, head of the endowment and foundation practice at Boston-based NEPC, said in an interview. “Then there’s a lot of concern of what to do with their portfolios. There are different ideas about what to do.”

NEPC, which has about 300 clients with combined assets of more than $900 billion, conducted the survey in January, polling business officers of universities, foundations and other nonprofits on their market outlook and asset allocation.

Energy Investing

Energy-related investments didn’t win any popularity contests, with 65 percent saying they weren’t planning an “opportunistic allocation” to the downtrodden sector this year. Of those who said they would, 53 percent said they were considering investing through private equity.

Despite worries about global growth, many respondents said they weren’t planning to make major changes in asset allocation, with 66 percent maintaining their investments in private markets, 67 percent keeping the same amount in hedge funds and 65 percent sticking with U.S. equities.

Some respondents weren’t optimistic at all -- 22 percent said they don’t see any attractive opportunities.

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