The study, based on NACUBO data and other sources, shows how a decline in endowment values amid Covid-19 has placed additional strain on these funds, thereby threatening to destabilize revenue sources for universities.

This, coupled with the struggle to find yield, is seeing endowments reallocate to risk assets as they look to generate higher returns to keep pace with university spending.

Endowments, with an estimated market size of $630 billion, represent a potentially lucrative source of growth for asset managers. Using data from NACUBO’s 2019 Study of Endowments and other secondary sources, this paper examines the challenges facing endowments and the opportunity set presented to asset managers that can provide solutions to these challenges.

While endowments face similar challenges to other institutional investors, such as volatility and low interest rates, they also need to overcome a more specific set of hurdles. For instance, they must maintain certain levels of liquidity for the institutions they support while also seeking to last in perpetuity.

Meanwhile, the Covid-19 pandemic has introduced new challenges and uncertainties such as how long universities will remain closed and how this will impact endowment spending. The pandemic presents a greater challenge for smaller endowments compared to their bigger counterparts which have demonstrated their resilience during past recessions.