Endowment
An endowment is a pool of assets invested to support a long-term mission, typically for universities, foundations, or non-profits.
Allocator relevance: A major allocator type with distinct governance, spending policy constraints, and long-duration portfolio construction needs.
Expanded Definition
Endowments seek to balance long-term growth with predictable spending needs. They often allocate meaningfully to illiquids due to long horizons, but must manage liquidity mismatches because spending obligations continue during market drawdowns. Governance is typically committee-driven with documented policies.
Endowment investment behavior is shaped by spending policy, risk budget, investment policy statements, and manager selection frameworks.
How It Works in Practice
Endowments build diversified portfolios across public and private markets, use pacing models for privates, and manage rebalancing through liquid sleeves. They evaluate managers through IC processes and long-term performance expectations rather than short-term tactical trading.
Decision Authority and Governance
Decision authority often sits with an investment committee, with staff or CIO executing within IPS guardrails. Governance cadence can slow decisions but improves consistency and accountability.
Common Misconceptions
- Endowments can ignore liquidity because they are long-term.
- Endowment portfolios are identical to family office portfolios.
- Endowments are always aggressive risk takers.
Key Takeaways
- Spending policy creates real liquidity constraints.
- Governance is formal and policy-driven.
- Long horizons support illiquids, but pacing must be disciplined.