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JP Morgan outlines trends driving investment decisions for endowments and foundations

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JP Morgan Asset Management has released its latest Investment Insights paper identifying current themes driving investment decisions for endowments and foundations in today's volatile economic environment.

Authored by Monica Issar (pictured), Global Head, JP Morgan Asset Management Endowments & Foundations Group, and Anthony Werley, Chief Strategist, JP Morgan Asset Management Endowments & Foundations Group, the paper – "Seeking direction in a volatile market" – highlights prevalent trends in nonprofit investment management, as well as areas of opportunity for investors.
 
Key findings include:
 
• In a lower-return public equity environment, investors will need to shift from beta-oriented strategies to more intelligently sourced alpha in the public and private markets.
 
• Nonprofit organisations are managing multiple objectives in the face of industry pressures. Many nonprofits are increasingly focused on risk – including pension liabilities, meeting target returns and managing short-term liquidity – with limited resources and are turning to strategic partners to help them navigate these challenges.
 
• Institutions are actively restructuring their risk management, specifically in fixed income, toward more return-oriented strategies.
 
"Although most endowments and foundations benefited from double-digit equity returns in 2014, the outlook for future returns is more muted due to a paucity of readily evident market opportunities," Issar says. "However, as volatility and interest rates increase and global macroeconomic and financial cycles start to normalise, institutional investors will need to adapt to the changing market environment and look to generate opportunities in private equity, real estate, absolute-return fixed income and private credit."
 
"In a market environment that is likely to be characterised by lower absolute beta returns, endowments and foundations are reassessing their asset allocation," Werley adds. "Investment opportunities that can provide diversification, flexibility and premiums above publicly traded options are likely to represent attractive options for not-for-profit organisations that can invest in less liquid, long-term investments."

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