A growing number of US public university endowments are increasing their allocations to private equity, viewing the current market downturn as a strategic entry point despite ongoing valuation pressures and sluggish distributions, according to a report by the Financial Times.
A total of seven state school investment offices told the FT they were planning to raise their PE allocations by as much as 150% over the next several years – a notable shift in strategy from typically conservative public endowments, driven by concerns over muted public equity returns and long-term return enhancement.
Clemson University Foundation CIO John Alexander, for instance, said the school plans to increase its PE exposure from 18% to 24%, arguing that private equity “will maintain their risk premium” relative to public markets. Similarly, the University of Utah Growth Capital Partners Foundation recently raised its PE target to 30%, up from 10%.
While Ivy League endowments have long dominated the private equity landscape – allocating an average of 36% to PE – many top-tier managers are now engaging with public universities as elite institutions pull back.
Challenges remain, particularly around access to premier funds and internal risk appetite. Smaller public institutions often lack the geographic proximity or scale to secure allocations in top-tier venture and buyout strategies.
Despite the risks, many public CIOs believe now is the time to expand their footprint in PE, although some remain cautious. Virginia Commonwealth University, for example, is maintaining its 18% allocation.
Analysts too remain divided. While some see the current environment as ripe for long-term value creation, others, like Cambridge Associates founder Hunter Lewis, warn that overvaluation and high rates could prolong the pain in private markets. “I don’t think we are anywhere close to the bottom of private equity,” Lewis said.
