As the bull market continued along, 2019 brought good performance in some asset classes. But the average endowment performance of 4.9% to 5.9% left some nonprofits falling short of their expected return target which averaged around 7.0%.

As long as you go through the education process [for alternative investments], the access is there and the interest is there – MJ Bobyock

According to Fundfire, to keep returns in this range, some institutions will likely build out their alternative allocations further. Roughly 57% of respondents to a SEI survey, which included both universities and other nonprofit institutions, said they expect to increase their use of alternative instruments in the next 12 months. That’s compared to 42% who wanted to push further into alternatives in 2017, when SEI last did the survey.

Mary Jane Bobyock, Managing Director, Nonprofit Advisory Team, Institutional Group, says that it is universities that are really driving this push towards alternatives as they have demographic and enrollment challenges adding more pressure to keep up returns. But, she notes, the appetite for alternatives isn’t bound by a minimum threshold of assets anymore. 

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Legal Note

Information provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company.

The Nonprofit Management Research Panel in Q2 2019 surveyed 101 nonprofits with assets ranging from $25 million to over $1 billion, none of which are SEI clients, to learn how their committees are constructed and some of the challenges they face. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.

Investing involves risk including possible loss of principal. Diversification may not protect against market risk. Bonds and bond funds will decrease in value as interest rates rise. Alternative investments typically charge higher fees, are subject to a complete loss of capital and are only appropriate for parties who can bear that risk and the illiquid nature of such investments.