Key Takeaways
- • Nearly a third (32%) of endowments and foundations have introduced or expanded private markets programs, with market volatility topping their macro concerns, according to Mercer's 2025 Global Endowment & Foundation Investment Survey.
- • 83% of respondents identified market volatility as a top risk, up 10 percentage points from last year, while 82% cited domestic and international political developments as key risks.
- • Expected net allocation increases are 26% to private equity, 24% to private debt and 14% to infrastructure, with Europe planning a 37% net rise to private equity versus 19% in North America.
- • US organisations expect a 33% net increase to private debt over the next three years, and both regions plan to grow infrastructure exposure tied to AI and technological innovation.
- • Adoption is concentrated in larger institutions: 50% of large organisations are increasing or introducing private markets programs, versus 7% of smaller ones, and 44% report significant challenges navigating the asset class.
Summary
Nearly a third (32%) of endowments and foundations have introduced or expanded their private markets programs, as market volatility ranks highest among their macro-level concerns, according to new research by Mercer. The firm's 2025 Global Endowment & Foundation Investment Survey found that 56% of respondents are increasing portfolio diversification, and 83% identified market volatility as a top risk, up 10 percentage points from last year. Domestic and international political developments were cited as key risks by 82% of respondents.
Asset owners are looking to private markets to generate excess returns relative to public markets and to source differentiated return drivers that can better withstand these risks, the survey found. Adoption is strongly size-dependent: 50% of larger organisations are increasing or introducing such programs, compared with only 7% of smaller ones. Mercer also noted that private markets remain a "complex" asset class, with 44% of respondents acknowledging "significant challenges" in navigating it.
The survey identified a "clear trend" toward higher allocations to private equity, private debt and infrastructure, with expected net increases of 26%, 24% and 14%, respectively. Natalie Yapp, head of endowment and foundation sales at Mercer UK, told Alternative Credit Investor that investors are seeking "consistent income" as the "typical 60/40 is going out of fashion." Europe is expected to make a significant push into private equity, with a net expected rise of 37% versus 19% in North America, where private equity exposure is already higher. US organisations are focused on private debt, with an expected 33% net increase over the next three years. Both regions intend to increase infrastructure allocations to capitalise on long-term trends such as AI and technological innovation.
Yapp cautioned that identifying top-tier performers becomes more difficult as private markets expand, and that smaller institutions may face resource and expertise constraints. She said due diligence is required to ensure investments fit within the overall portfolio, a challenge more acute for organisations without in-house expertise. Organisations below $50m (£38.1m) in size may find opportunities "hard to identify" without an external fiduciary manager or investment consultant, whereas those above $1bn generally have the capabilities in-house.
Asset owners are looking to private markets to generate excess returns relative to public markets and to source differentiated return drivers that can better withstand these risks, the survey found. Adoption is strongly size-dependent: 50% of larger organisations are increasing or introducing such programs, compared with only 7% of smaller ones. Mercer also noted that private markets remain a "complex" asset class, with 44% of respondents acknowledging "significant challenges" in navigating it.
The survey identified a "clear trend" toward higher allocations to private equity, private debt and infrastructure, with expected net increases of 26%, 24% and 14%, respectively. Natalie Yapp, head of endowment and foundation sales at Mercer UK, told Alternative Credit Investor that investors are seeking "consistent income" as the "typical 60/40 is going out of fashion." Europe is expected to make a significant push into private equity, with a net expected rise of 37% versus 19% in North America, where private equity exposure is already higher. US organisations are focused on private debt, with an expected 33% net increase over the next three years. Both regions intend to increase infrastructure allocations to capitalise on long-term trends such as AI and technological innovation.
Yapp cautioned that identifying top-tier performers becomes more difficult as private markets expand, and that smaller institutions may face resource and expertise constraints. She said due diligence is required to ensure investments fit within the overall portfolio, a challenge more acute for organisations without in-house expertise. Organisations below $50m (£38.1m) in size may find opportunities "hard to identify" without an external fiduciary manager or investment consultant, whereas those above $1bn generally have the capabilities in-house.
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