Djâafar Aballeche, Senior Cross-Asset Specialist & Jacques Henry, Head of Equities, Pictet Wealth Management.

While the fiscal year that ended on June 30 2022 (FY2022) was challenging for US endowments, figures show they fared relatively better than bonds and equities and thus outperformed 60/40 portfolios. Large endowments (those worth over USD1 bn) did much better than smaller ones, due essentially to their larger allocations to alternative assets like private equity, real assets and hedge funds and their low exposure to bonds. Indeed, endowments’ important exposure to alternative assets, especially real assets, cushioned the market shock experienced by stocks and bonds in 2022. Overall, US endowments continue to rely on alternative assets to boost long-term returns.

Despite endowments’ negative performance in FY2022, annual returns for US endowments over the past 10 years, especially for large ones, still look enticing when set beside standard 60/40 portfolios. US endowments are pencilling in average annual returns of above 8% over the next 10 years. While this is higher than our own expectations, endowments still look attractive over the long term when compared with 60/40 portfolios