Endowments, Foundations Shift Focus to Liquidity and Governance
Investment leaders at endowments and foundations are increasingly prioritizing liquidity, governance and operational resilience as they navigate a more complex investment landscape, according to Morgan Stanley’s Institutional Consulting Solutions’ 2026 Endowments and Foundations Survey.
The survey, which polled investment decision-makers at 100 mid-sized to mega-sized nonprofit organizations in January 2026, found growing caution around return expectations and a heightened focus on managing private market exposures.
Only 13% of respondents said they are very confident they will achieve their target annualized returns over the next three years, down from 19% in Morgan Stanley’s 2023 survey. At the same time, alternative investments have become the largest asset class in institutional portfolios, accounting for 36% of assets under management, surpassing U.S. public equities at 27%.
As allocations to private markets have expanded, liquidity has emerged as a key concern. Nearly half of respondents, 47%, identified liquidity as the single biggest challenge associated with alternative investments, more than double the 21% reported in 2023.
The survey also highlighted improvements in investment governance. The percentage of organizations operating without a formal investment committee declined to 9%, down from 18% three years ago. Meanwhile, reliance on external advisors continues to grow, with 46% of organizations now working with an investment consultant, compared with 39% in 2023. Those relationships average 9.4 years in duration.
Nonprofits are also facing increasing spending demands. Thirty-one percent expect their spending rate to rise over the next three years, more than double the 15% reported in 2023. Additionally, 53% of organizations now use portfolio assets primarily to fund operations and programming, compared with 41% focused primarily on grantmaking.
“The survey results indicate that endowments and foundations are entering a new phase of portfolio management, where liquidity, spending discipline and governance are just as important as long-term returns,” said Jeremy France, head of Institutional Consulting Solutions at Morgan Stanley. “As alternative allocations mature, the priority is shifting from portfolio construction to resilience.”
