The gap between top and bottom performers among foundations and endowments has more than doubled in 2025, largely driven by portfolio construction decisions that may not be obvious in a strong equity year.
Even in a broadly positive year, the spread between top and bottom performers was over 10 percent, according to new data from OCIO Analytics’ endowment and foundation universe. Additionally, the three-year performance dispersion between OCIO-managed endowment portfolios has doubled to about eight percent annually in 2025 from the historical average of roughly four percent per year in 2024. In other words, that eight percent per year is compounded to over 25 percent over a three-year period.
A white paper by OCIO Analytics argues that dispersion increased primarily for five reasons: Concentrated equity leaders, lagging private market valuations, the venture capital cycle experiencing a reset, private equity vintages, and different approaches to liquidity.
“While many institutional portfolios appear similar at the asset allocation level — typically emphasizing growth assets and private markets — the implementation beneath those allocations varies significantly,” the white paper states. “Differences in equity exposure, venture capital allocations, private equity vintage timing, and liquidity policies can lead to materially different outcomes when certain market conditions emerge.”
“This aberration really exposes how the endowment model is not as simple as everybody thinks,” Brad Alford, founder of OCIO Analytics, told Institutional Investor. “All these endowments are doing the same thing” where they put 80 percent of their portfolio in growth assets and the rest in mitigating assets. “It’s the composition of these portfolios that’s what’s different, and it really shows up in these trailing three years.”
Alford explained how and where allocators invested their private market assets that determined success: those that were heavily invested in venture capital after the boom in 2021 were hurt after venture went bust over the last three years. “Long-short has [also] not done well,” he added.
As II reported in July, private equity investors are not getting enough money back from previous investments to fund new capital calls, which have exceeded distributions to investors by $1.5 trillion since 2018. Liquidity also plays a pivotal role: Portfolios that have more cash on hand can adjust faster in strong equity markets, which can widen short-term performance dispersion.
Alford also noted that an eight percent annual performance difference between top and bottom portfolios can translate into hundreds of millions of dollars for large institutions. A $1 billion endowment experiencing a 17 percent annualized return over three years would grow to about $1.6 billion. A similar institution earning 9 percent annually over the same period would grow to roughly $1.3 billion — a difference of roughly $300 million.
The gap widening relatively quickly rather than gradually suggests that the differences between portfolios were already present but not fully visible until recent market conditions exposed them. OCIO Analytics sees three likely factors that contributed: The 2022 market drawdown, portfolios concentrated in technology and other stocks during the subsequent recovery, and divergence between private market and venture capital performance.
“The findings suggest that asset allocation alone may not fully explain portfolio outcomes,” the white paper states. “Implementation decisions — including manager selection, liquidity management, and exposure within private markets — can play a critical role in determining results.”
