Investor types

Endowments, foundations and charities

Endowments, foundations and charities manage perpetual or long-dated capital to fund a mission, under spending rules rather than fixed benefit liabilities. The 657 US college endowments in the NACUBO-Commonfund Study held US$944.3 billion in fiscal 2025, of which 54.5% was in private and alternative strategies.

What endowments and foundations are

An endowment is a pool of capital held by a university, school, hospital or other institution, invested so that its returns support the institution's work over the long term. A foundation is a grant-making body whose capital serves the same purpose for its charitable objects. Charities with investment reserves follow the same logic on a smaller scale. All three spend a share of their assets each year under a spending rule and aim to preserve the real value of the capital for future generations.

They differ from pension funds, which must pay fixed or defined benefits to members, and from family offices, which serve the wealth of a single family rather than a charitable or educational mission. They also differ from sovereign wealth funds, whose owner is the state. Because an endowment has no fixed liability date and is intended to last indefinitely, it can accept illiquidity in exchange for higher expected returns.

Scale

The NACUBO-Commonfund Study of Endowments for fiscal year 2025, released on 12 February 2026, covered 657 US colleges, universities and affiliated foundations with a total of US$944.3 billion in endowment assets. The median endowment was US$253.6 million.¹ The gap between the median and the total shows how concentrated endowment wealth is: a small number of very large institutions hold most of the assets, while the typical endowment is a few hundred million dollars.

Switzerland has one of the densest foundation sectors in Europe. The Swiss Foundation Report 2026, released on 27 May 2026, counts 13,782 charitable foundations with combined assets of CHF 159.6 billion. Of that total, CHF 85.7 billion is held by foundations under federal supervision and CHF 73.9 billion by foundations under cantonal supervision.⁴

Structures and sub-types

The group divides into four sub-types.

University and college endowments, usually managed by an in-house investment office or an outsourced chief investment officer (OCIO).
Independent school endowments, generally smaller, which make greater use of outsourced managers; the Commonfund Study of Independent Schools reported increased use of OCIOs in its latest edition.³
Private and charitable foundations, established by individual or family donors or by companies, which make grants from investment returns.
Operating charities with investment reserves held to stabilise income.

Source of capital and investment horizon

Endowment capital comes from gifts, bequests and investment returns. In fiscal 2025, new gifts to the institutions in the NACUBO-Commonfund Study declined 9.2% to just under US$14.0 billion. The average annual effective spending rate was 4.9%.¹ A spending rate of about that level, set against long-term return targets, is what allows an endowment to fund operations while preserving the real value of the capital.

The investment horizon is perpetual. That horizon is the basis on which endowments commit to private equity, venture capital and other illiquid strategies whose capital is locked up for a decade or more.

How endowments invest in private markets

Endowments are among the most equity-oriented institutional investors. In fiscal 2025, an average of 86% of endowment assets was allocated to equities and equity-like strategies, including hedge funds.² On a dollar-weighted basis, public equities accounted for 31.5% of the overall allocation and private and alternative strategies for 54.5%. Private equity was the largest single asset class at 16.8%, followed by marketable alternatives at 15.4% and venture capital at 12.2%; fixed income was 10.7%.¹

Allocations rise sharply with size. Institutions with assets under US$50 million allocated 12.5% of their portfolios to alternatives, those with assets between US$251 million and US$500 million 32.3% and those with assets over US$5 billion 62.5%. The largest endowments held only 8.2% in fixed income.¹ Mercer's review of the study notes that larger endowments express equity risk through private equity and venture capital.²

Endowments invest in private markets mainly as limited partners in private equity funds and venture capital funds, with direct co-investments in some cases, and smaller institutions often reach those funds through funds of funds or an OCIO. Commitment sizes therefore scale with the size of the endowment and its alternatives allocation.

How decisions are made

An endowment or foundation is governed by a board of trustees, which sets the investment policy, the spending rule and the return target and usually delegates oversight to an investment committee of trustees, alumni or external investment professionals. Day-to-day implementation is led either by an internal investment office under a chief investment officer or by an OCIO. A new fund commitment is typically researched by the investment staff or the OCIO, reviewed for investment merit and operational soundness and then approved by the committee or under authority it has delegated.

What endowments look for and why they decline

Because an endowment exists to support a mission indefinitely, it looks for managers able to deliver long-term net returns above public markets, a stable team with a clear and consistent strategy and transparent reporting. Common reasons for declining include high fees relative to the expected net return, drift away from the stated strategy, turnover among the senior partners, limited transparency and any activity that could create reputational risk for the institution or its donors.

Governance, regulation and spending

Among institutions that set nominal return targets, which were 31% of respondents, the average target was 7.3%, and the largest institutions targeted an average of 8.1%.² The legal framework differs by country.

United States. Endowment investment is governed by state law based on the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Private non-operating foundations must distribute a minimum amount each year, defined by the Internal Revenue Service as 5% of the net value of noncharitable-use assets, subject to adjustments.⁵
United Kingdom. In England and Wales, charity trustees follow investment guidance issued by the Charity Commission.
Switzerland. Foundations are governed by Articles 80 to 89a of the Swiss Civil Code. Article 84 places them under the supervision of the public authority to which they belong by their purpose (the Confederation, a canton or a commune).⁶ The Federal Supervisory Authority for Foundations supervises classic foundations active nationally or internationally.⁷

The spending side carries growing weight in governance. Institutions in the NACUBO-Commonfund Study withdrew US$33.4 billion from their endowments in fiscal 2025, an increase of 11.0% on the previous year, and committed 47.4% of endowment spending to student financial aid.^1,3

Trends in 2025 and 2026

Fiscal 2025 was a stable year for returns and a heavier year for spending. The one-year return for the study participants was 10.9%, against 11.2% in fiscal 2024, and the ten-year average annual return rose to 7.7% from 6.8% a year earlier.^1,3 Institutions with assets above US$5 billion reported the highest return, 11.8%.¹

Endowments funded an average of 15.2% of participating institutions' annual operating budgets in fiscal 2025, up from 14% in fiscal 2024.¹ Rising reliance on endowment income, together with a 9.2% fall in new gifts, places more weight on investment returns and on liquidity planning for capital committed to private funds.¹ Fiscal 2026 results published so far are stronger: Harvard reported a 27.1% return for the year to 30 June 2026 and Yale a 26.3% return.^9,14

Notable examples

Institution	Headquarters	Size, with date
Harvard University endowment	Cambridge, Massachusetts	US$68 billion, 30 June 2026^8,9
University of Texas Investment Management Company (UTIMCO)	Austin, Texas	US$92,549.6 million total market value under management, 31 July 2026¹¹
Yale University endowment	New Haven, Connecticut	US$44.1 billion, 30 June 2025¹⁰
Wellcome Trust	London	Investment portfolio £39.9 billion, 30 September 2025¹²
Fondation Botnar	Basel	CHF 4.1 billion, 31 December 2025¹³

How advisers and placement agents work with endowments

Endowments may delegate investment management to an OCIO or rely on investment consultants to select funds, and use of OCIOs increased among independent schools in the latest Commonfund study.³ For a fund manager or company, this means the route to an endowment often runs through its consultant or OCIO as well as its own investment staff. Endowment investment offices build long-term relationships with a limited number of managers; an adviser introducing a new manager is expected to provide a full track record with performance attribution, a comparison with public market benchmarks and references. Anglo-Suisse Capital advises on capital raising, M&A and secondary transactions with professional investors.

Frequently asked questions

How much do US endowments allocate to private markets?

In fiscal 2025, private and alternative strategies accounted for 54.5% of the dollar-weighted allocation, with private equity at 16.8% and venture capital at 12.2%.¹

Do larger endowments invest more in alternatives?

Yes. Institutions with assets over US$5 billion allocated 62.5% to alternatives in fiscal 2025, against 12.5% for those under US$50 million.¹

How did US endowments perform in fiscal 2025?

The 657 institutions in the NACUBO-Commonfund Study returned 10.9% in fiscal 2025, with a ten-year average annual return of 7.7%.¹

Are endowments spending more?

Yes. They withdrew US$33.4 billion in fiscal 2025 and funded 15.2% of operating budgets, up from 14% in fiscal 2024.¹

How large is the Swiss foundation sector?

The Swiss Foundation Report 2026 counts 13,782 charitable foundations with combined assets of CHF 159.6 billion.⁴

Must US foundations spend a minimum each year?

Private non-operating foundations must distribute an amount defined by the IRS as 5% of the net value of their noncharitable-use assets, subject to adjustments.⁵

What return do endowments target?

Institutions with nominal targets aimed for an average of 7.3%; the largest institutions targeted 8.1%.²

What spending rate do endowments use?

The average annual effective spending rate in fiscal 2025 was 4.9%.¹

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Anglo-Suisse Capital advises companies, fund managers and shareholders on capital raising, M&A and secondary transactions with professional investors in the UK, Switzerland and internationally.

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Sources

This page is general information for professional investors and is not investment advice. Figures are taken from the sources listed, as at the dates stated.