Smaller endowments and foundations are rapidly increasing their investments in private markets, closing a gap that long separated them from the largest institutions.
The average allocation to private equity and venture capital has nearly doubled over the last five years, rising to 11.2 percent in the first quarter from 5.8 percent during the same period in 2021, according to new data from OCIO Analytics. The allocations are based on data from 56 OCIOs.
Institutions with less than $100 million more than doubled their exposure. Institutions between $250 million and $500 million increased allocations by more than five percentage points. Even institutions that already maintained meaningful private market exposure continued to increase allocations.
These changes come at a time when the outsourced chief investment officer industry has grown to roughly $4 trillion. It also coincides with expectations for weaker stock returns. “OCIOs have all the vehicles to invest in the space even for smaller portfolios,” Brad Alford, founder of OCIO Analytics, told Institutional Investor.
Up until five years ago, portfolios with high allocations to PE and VC were typically reserved for larger, more sophisticated institutions. But now, even smaller institutions with less than $1 billion in assets are building portfolios with 15 to 20 percent invested in private markets.
“The big endowments and foundations have always been heavy in private equity and venture,” Alford said. “Now, so many endowments and foundations go OCIO, and OCIOs have the capabilities to invest in these asset classes.”
Alford added that the move toward private markets may be further advanced than the current allocation data suggest: Reported allocations often lag investment decisions, so a portfolio with an 11 percent allocation to venture in 2026 may have made many of the underlying commitment decisions in 2022 or earlier.
