Yes. In our view, developed markets ex US small-cap stocks are well positioned to continue outpacing their larger-cap counterparts due to three key factors: reduced sensitivity to global tariff changes, attractive relative valuations, and improving international economic fundamentals.
Description: In today’s environment, building resilient portfolios is essential. Inflation risks are elevated and macroeconomic uncertainty is high. Allocating capital to hedge macro risks may reduce returns, so investors should carefully consider risk tolerance, objectives, and spending needs when assessing their allocations.
No. Although recent underperformance has led some investors to question whether trend-following is facing deeper structural issues, the strategy is inherently cyclical.
This report presents an analysis of manager responses submitted via Cambridge Associates’ operational due diligence questionnaire.
Our annual survey-based report summarizes returns, asset allocation, and other investment-related data for 114 foundations for the calendar year ended December 31, 2024.
While calendar year 2024 performance lagged the previous year, it remained strong, with most foundations reporting returns of near 10% or higher. However, it was also the second straight year that diversified portfolio returns fell short of an investment option with heavier public allocations. As a result, the three-year peer median return underperformed a simple blended index weighted 70% global public equity and 30% fixed income. The story was the opposite over the longer term, where private investments continued to be a primary return driver for the best-performing portfolios. The Investment Portfolio Returns section highlights these contrasting performance themes for the short-term versus long-term periods.
The primary policy benchmark for most respondents is a static-weighted blend of indexes where the weightings align exactly or closely with the asset classes and target percentages specified in the asset allocation policy. Perhaps the most consequential benchmarking decision foundations have had to make in recent years is how to represent private equity in the policy benchmark. The majority of respondents use a public index for that representation, and this cohort by and large saw significant underperformance versus their benchmark in 2024. Our Benchmarking section summarizes the various approaches that foundations use for benchmarking total portfolio performance and compares foundation performance versus policy benchmark returns.
The increase in private equity allocations was the key trend in asset allocations over the past decade. Almost every other asset class saw a decline in allocations over the same period when it came the peer group average. The takeaways were similar when looking at recent shifts in asset allocation policies, as a significant portion of the respondent group raised their target allocations to private equity and venture capital (PE/VC) in 2024. The Asset Allocation and Implementation section covers this and other topics related to portfolio implementation, including an analysis that shows that passive investing in US equities has gained more traction in recent years.
The vast majority of participants in this study are private nonoperating foundations. These types of foundations must make qualifying distributions that amount to approximately 5% of their total asset value each year. Consequently, most respondents have spending objectives that are closely tied to this legal requirement. Our Payout from the Long-Term Investment Portfolio section summarizes data pertaining to spending for these types of foundations.
US President Donald Trump signed an executive order on August 7 directing the Department of Labor and SEC to issue guidance on the inclusion of private market assets in 401(k) plans, marking a pivotal step toward unlocking a major new source of demand for private assets and substantially accelerating the democratization of the asset class.