Endowments have always been the mother’s milk of venture capital and private equity funds, typically allocating 11.8% of their portfolio to these assets, as compared with the 8.8% of all institutional investors.
Yet only 33% of endowments have made new PE commitments this year according to a recent survey by Preqin and 35% won’t be making another commitment until 2011.
And if you’re getting revved up about pitching one of the big boy endowments on your latest fund, you may be disappointed.
The study found that 42% of endowments with over $750 million under management were over-allocated to private equity. That’s nearly three times as many over-allocated funds than the endowments with $350 million or less under management.
What’s worse is that expectations for private equity fund performance is surprisingly low: 48% of fund managers expect PE funds to return within four percentage points of a portfolio of public market equities. That’s not exactly a particularly high bar.