(image from www.morganstanley.com/cs/pdf/MS-2026-Endowments-Foundations-Survey.pdf)
Endowment and foundations managers have gown less confident as geopolitical concerns gain prominence. Only 13% of respondents to new polling report being “very confident” that they would hit their three-year return targets, down from 19% in 2023. In fact, 66% of respondents cited geopolitical concerns as significant to them.
Considering that the survey was conducted before the most recent Middle East conflict, these concerns are likely even more pronounced. The top six concerns of managers all received 50% or greater when it came to their significant financial concerns:
- Generating adequate investment returns 69%
- Geopolitical uncertainty 66%
- Market volatility 64%
- Slowing economic growth/recession 63%
- Risk management/ inflation 60%
Those concerns have managers looking for Plan B when it comes to their portfolios and alternative investments have passed public U.S. equities as the largest allocation, going from 22% in 2023 to 36 this year.
That’s some of the data gather by investment house Morgan Stanley for its “2026 Endowments and Foundations Survey.” The information was gathered via a telephone survey with slightly more than 100 managers of endowments, foundations and other nonprofits. Respondent qualifying criteria included being part of the team that makes investment decisions at organizations with sums of at least $150 million. It was a near even split with 51 having less than $1 billion and 56 having more than $1 billion.
Data collection occurred during January 2026. Morgan Stanley was not identified as research sponsor. Statistical testing was done at the 90% confidence level. Independent research firm 8 Acre Perspective conducted the research.
Compared with 2023, notably fewer organizations expect to increase their alternatives allocations during the next 12 months. Meanwhile, the percentage of organizations where managers plan to decrease their alternatives allocations has more than doubled since 2023.
Interest in public non-U.S. equities has increased, making it the only traditional asset class poised for a net increase in allocations. This renewed interest likely reflects opportunities in international and emerging markets, as well as diversification considerations amid geopolitical and economic concerns.
alternatives have overtaken U.S. public equities as organizations’ largest allocation,
Investment focus has shifted from diligence and integration to liquidity analysis and management because alternatives have overtaken U.S. public equities as organizations’ largest allocation. Liquidity concern by the manager was 44%. That was not a surprise to Kathleen Enright, president and CEO of the Council on Foundations. “The concerns about liquidity make sense. We are in a moment of profound disruption, one that has many foundations reassessing their spending policies,” said Enright. “In some cases, this is leading to major expansions in payout. Those mission-based decisions to increase giving are enabled by endowment portfolios that have prioritized liquidity over time.”
Fundraising optimism heading into 2026 was tested by first quarter market volatility, according to the researchers. More than one-third (38%) expected donations in 2026 to exceed donations in 2025. Three years ago, only 22% of respondents expressed this confidence about the coming year, the data shows. The events of the first quarter of 2026, however, probably dampened that confidence. The war in the Middle East and resulting surge in oil prices, along with dwindling expectations that the U.S. Federal Reserve will cut interest rates in 2026, pushed equity markets into correction territory for the first quarter.
Investment committees (ICs) play a vital role in contributing to the financial health of endowments and foundations, particularly as complex, illiquid investment vehicles play a larger role. The percentage of organizations without a formal IC decreased from 18% in 2023 to 9%.
A full copy of the data can be downloaded here … https://www.morganstanley.com/cs/pdf/MS-2026-Endowments-Foundations-Survey.pdf
