For endowment and foundations, alternative investments have overtaken public equities as the largest allocation within these institutions’ portfolios. Based on data collected in January, this group of investors allocated 36% of their assets to alternatives, up from 22% in 2023, according to Morgan Stanley’s 2026 endowments and foundations survey.
For comparison, allocations to public equities stood at 35% in 2023 and dipped to 27% in this year’s survey. Public non-U.S. equity investments fell to 17% from 20%; public fixed income declined to 14% from 16%, cash and cash equivalents dropped to 4% from 5%, and other asset classes dipped to 2% from 3%.
The results summary noted that many of these institutions have less room to grow their allocations to alternative investments, leading to a slowdown in the rapid growth of commitments to the asset class. According to Morgan Stanley, the percentage of endowments and foundations that plan to decrease their alternative investments has doubled since 2023.
Instead, endowments and foundations are increasingly interested in public non-U.S. equities, with this asset class the only traditional one poised for an increase in allocations. According to the survey, these investors are exploring opportunities in emerging markets and seeking to diversify their portfolios amid geopolitical and economic concerns.
After years of increasing allocations to alternative investments, liquidity concerns also rose. The survey found that in 2026, 47% of endowments and foundations reported that liquidity was their single greatest challenge of using alternatives, up from 21% in 2023.
High fees, access to top-tier managers and the asset class’s lack of transparency were also listed among the main challenges for adopting alternative investments. As alts became more mainstream, the institutions reported notable declines from 2023 in concerns based on due diligence, portfolio design and board approval.