Secondaries lead foundations’ alternatives with 20.6%, as commodities gain 20.1% - Pensions & Investments

Private foundations achieved their third consecutive year of double-digit returns in 2025, propelled primarily by secondaries investments, according to Commonfund Institute research. Secondaries emerged as the dominant alternative investment strategy, generating an average gain of 20.6% for foundation investors that participated in private equity secondary markets—whether through direct acquisition of secondhand fund stakes or backing managers specializing in secondary transactions. This performance makes secondaries the clear leader among alternative strategies deployed by the foundation universe.

The surge in secondaries returns reflects broader market momentum. Global secondaries transaction volume reached $226 billion in 2025, representing a 40% increase over 2024. This growth trajectory has accelerated into 2026, with first-half volume surpassing $120 billion—the strongest six-month period on record and up nearly 20% year-over-year. General partner-led secondaries activity has led this expansion, generating $65 billion in H1 2026 and consistently outpacing the steadily growing LP-led segment.

Capital formation in secondaries has undergone a structural shift. Dedicated secondaries fundraising captured 18% of total private capital raised in 2025, up sharply from just 7% in 2021, demonstrating accelerating institutional allocation to the strategy. Beyond closed-end vehicles, strong inflows to evergreen retail structures and direct LP participation have further strengthened the sector. Secondaries investors globally maintain an estimated $477 billion in available capital, providing substantial dry powder for future deployment and reflecting the growing confidence in secondary market opportunities.

Institutional allocators across multiple investor types have integrated secondaries as a systematic portfolio tool. Public pension funds now allocate roughly 10–12% of private market exposure to secondaries, while sovereign wealth funds—with broader private markets allocations of approximately 25–30% of assets under management—increasingly rely on secondaries to manage liquidity and maintain target allocations. The strategy's utility in addressing LP liquidity needs, narrowing bid-ask spreads, and diversified portfolio construction has broadened adoption beyond traditional PE investors.

Complementing secondaries performance, commodities delivered 20.1% returns in 2025, positioning both strategies as the principal drivers of above-market gains for foundation alternatives portfolios. This dual outperformance underscores the continued relevance of diversified alternative exposure as institutional investors navigate evolving market dynamics and liquidity requirements.