A significant number of endowments are over-allocated to private equity, according to a survey by Preqin.
The survey of 100 endowments around the world found that 27 per cent of respondents are above their target allocations to private equity, with this figure rising to 42 per cent for the largest endowments with over USD750m in AUM.
Furthermore, only 33 per cent of endowments have made one or more new commitments to private equity funds so far in 2009.
Although 65 per cent of endowments have already made or anticipate making a commitment to a fund in either 2009 or 2010, a significant 35 per cent will not make any new commitments in private equity until at least 2011.
However, the long-term outlook is positive: almost a third (32 per cent) of endowments expect to increase their exposure to private equity over the next three to five years, although 14 per cent anticipate reducing their allocations to the asset class during this timeframe.
Endowment plans have historically been an important source of capital for private equity funds. However, the global financial downturn has seen many institutional investors of all types suffer from the denominator effect and liquidity concerns, and it has been speculated that endowments, without a consistent source of income, would be especially badly affected.
