Charities To Boost Private Equity, Hedge Fund Allocations

A new study from UK wealth manager Rathbones finds that charities plan to increase allocations to private equity, hedge funds and real estate over the next two years. The survey covered senior executives at charities with a collective £5 billion ($6.8 billion) in stock market-related investments. According to the findings reported by WealthBriefing, private markets and alternatives have recorded the largest allocation increases over the past two years. Almost nine in ten respondents have raised private equity allocations, while 86% have increased allocations to hedge funds and real estate. Other notable shifts include renewables, where nearly three in four respondents have added exposure, and fixed income, with 70% increasing UK fixed income and 78% increasing non-UK fixed income allocations.

The shift is expected to continue. Per Rathbones' survey, almost all respondents plan to increase private equity allocations over the next two years, and 92% plan to increase hedge fund allocations. UK equities show a more mixed outlook, with 68% planning to increase exposure, 4% planning to maintain it, and 28% planning to reduce it. A separate Rathbones survey of 100 charity executives overseeing £5 billion, as reported in supplemental coverage, similarly found that 98% plan to raise private equity allocations and 92% plan to raise hedge fund allocations over the same period.

Respondents attribute these changes mainly to the pursuit of capital growth, cited by 56%, and improved diversification, cited by 55%. Another 31% are changing allocations to reduce volatility. The survey also points to a broader move toward active management. Seventy-one percent of charities plan to increase allocations to active strategies over the next three years, and 11% expect a dramatic increase. Rathbones characterizes this trend as charities seeking stronger long-term returns to support their investment objectives.