Nonprofit foundations and endowments have been re-examining their investment strategies in the wake of the market meltdown last fall, with many institutional investors jumping to higher-risk, higher-return hedge funds to exploit opportunities as the market rebounds, a new survey shows.
The Greenwich Associates survey of 152 U.S. institutions including corporate pension funds, public funds and endowments and foundations with assets greater than $1 billion found that 44 percent of endowments and foundations increased their allocations to hedge funds over the past 12 months.
Furthermore, 45 percent of endowments and foundations have been investing in opportunistic funds, an even greater rate than the one-third of public pension funds doing so.
Although 20 percent of institutions in the survey have shifted assets from active managers to passive strategies in the past year, many more foundations are turning to professional advisors for their investment strategies, including large financial companies like JPMorgan Chase, Bank of America and Bank of New York Mellon, the Wall Street Journal reported.
JPMorgan recently launched the JP Morgan Foundation Research and Investing Center, a group of investment professionals who meet monthly to manage foundation clients’ assets and coordinate grant-making execution and tax and administrative services, according to the Journal.
And after last year’s dismal market performance, when foundation assets nationwide dropped about 22 percent, or almost $150 billion, according to the Foundation Center, two-thirds of institutions plan to hire a new investment manager in the next year and almost 30 percent of endowments and foundations plan to fire a manager.
“Manager turnover could reach historic highs over the course of the next 12 months if institutions follow through on their plans for managing hiring and firing,” Greenwich Associates observed in its report. “At the very least, managers can expect tough new demands for increased transparency and disclosure.”
