Endowment & Foundation Investors See Challenges Ahead, According to Graystone Consulting Study

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Graystone Consulting, a business of Morgan Stanley, has published its first annual institutional investor survey. The study reveals that endowments and foundations have relatively muted expectations for their portfolios, with only 19% of respondents feeling 'very confident' in achieving their targeted investment returns. However, working with an external investment consultant significantly increases confidence, with 31% of those who work with a consultant feeling very confident. Respondents are concerned about fundamental challenges such as hitting investment targets and managing risk in a volatile and slowing economic environment. More than half of respondents (52%) plan to increase their allocations to alternatives in the next year, and 30% plan to grow their investment teams in the next three years.

Majority looking more closely at alternatives, while nearly one-third plan to staff up investment teams

NEW YORK--(BUSINESS WIRE)-- Graystone Consulting, a business of Morgan Stanley (NYSE: MS), today published its first annual institutional investor survey. The study explores how endowments and foundations are responding to the market environment, managing their portfolios, and positioning their approaches to governance, operations, and staffing.

Key findings in the report include:

• Endowments & foundations have relatively muted expectations for their portfolios. Only one of five (19%) respondents are “very confident” that their organizations will achieve their 3-year targeted investment returns.
• Working with an external investment consultant, however, seems to have a dramatic impact on these expectations. Nearly three times as many respondents who work with an external consultant feel very confident compared to those who do not (31% compared to 11%).
• Fundamental challenges top the list of respondents’ concerns, including those related to hitting investment targets and managing risk in an environment marked by volatility and slowing economic growth.
• More than half (52%) of respondents — and nearly two-thirds (64%) of smaller endowments & foundations — expect to increase their allocations to alternatives in the next year.
• Three in 10 endowments & foundations plan to grow their investment teams in the next three years, while just 6% expect to reduce staff.

“Market headwinds and geopolitical uncertainty loom large, and the data suggest endowment and foundation investors are not immune from these concerns—from both investment and fundraising perspectives,” said Jeremy France, Head of Graystone Consutling. “Further, amid a market seemingly in search of direction, it’s no surprise to see these investors seeking alpha in alternatives like private equity. Likewise, the positive impact that working through these challenges with a consultant has on investor confidence is clear, which is something we see every day in the work we do with clients.”

The inaugural survey was fielded by independent research firm 8 Acre Perspective, and focuses on endowments and foundations, containing responses from investment decision-makers at 100 organizations with at least $100 million in assets under management. The complete study can be found here: Graystone Consulting: 2023 Endowment and Foundation Survey.

Graystone Consulting has a dedicated practice group focused exclusively on Endowments and Foundations, with concentrations in higher education, not-for-profits, and private foundations. Other practice groups include Strategic Retirement, Healthcare, Insurance, Taft-Hartley, Faith-Based, and Professional Services. Graystone is committed to providing trusted advice and customized solutions, tailored to your organization’s specific needs.

About Graystone Consulting
Graystone Consulting, a business of Morgan Stanley Smith Barney LLC, provides a complete range of investment consulting services to institutional clients, which include corporations, educational institutions, faith-based institutions, endowments and foundations, healthcare organizations, insurance entities, and Taft-Hartley funds. Tailored investment advice is delivered by experienced investment professionals, supported by a dedicated team and the broad resources of Morgan Stanley. To learn more, please visit www.morganstanley.com/graystone.

About Morgan Stanley
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm's employees serve clients worldwide including corporations, governments, institutions and individuals. For more information about Morgan Stanley, please visit www.morganstanley.com.

When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit www.morganstanley.com/disclosures/dol. Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are appropriate only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing.

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Graystone Consulting is a business of Morgan Stanley Smith Barney LLC.

© 2023 Morgan Stanley Smith Barney LLC. Member SIPC

CRC 6035549 10/2023

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Source: Morgan Stanley

FAQ

What is the name of the company that published the survey?

The survey was published by Graystone Consulting, a business of Morgan Stanley.

What percentage of respondents are 'very confident' in achieving their targeted investment returns?

Only 19% of respondents are 'very confident' in achieving their targeted investment returns.

How does working with an external investment consultant impact confidence?

Working with an external investment consultant significantly increases confidence, with 31% of those who work with a consultant feeling very confident.

What are the main concerns of respondents?

The main concerns of respondents include hitting investment targets and managing risk in a volatile and slowing economic environment.

What percentage of respondents plan to increase their allocations to alternatives in the next year?

52% of respondents plan to increase their allocations to alternatives in the next year.

What percentage of respondents plan to grow their investment teams in the next three years?

30% of respondents plan to grow their investment teams in the next three years.