Type: Article

Executive Summary

• By joining an Investment Committee, you are making the decision to contribute to the oversight and governance of long-term institutional capital.
• While all Committees operate differently, there are common themes that can guide the questions you may want to consider as you prepare to step into this new role.
• These key questions include: What is the role of the Investment Committee? How does the Committee define success? How is the investment strategy implemented? How does the Committee fulfill its oversight responsibilities? What makes an Investment Committee successful over time?
• TIFF understands the importance of Investment Committee membership in supporting the missions of non-profits and believes that a mindset of continual learning will help you to become an effective and impactful member of your new Investment Committee.

Joining an Investment Committee is an exciting, albeit intimidating, undertaking. On the one hand, this decision opens the door to supporting an organization whose mission you feel strongly about. On the other hand, you are becoming involved in the governance of a pool of assets which, up to this point, is likely to be unfamiliar to you. It is important to remember that Investment Committee members are overseeing institutional capital, not personal assets, and the governance process must be treated as such. Further, every Committee functions differently in terms of objectives, role and responsibilities, processes, and overall missions, with many Committees working with external partners such as outsourced CIOs (OCIOs). Despite the inherent differences across Committees, we have laid out five key questions for everyone to answer as they begin their Investment Committee member journey.

5 Key Questions for New Investment Committee Members

1. What is the Role of the Investment Committee? Your job as a member of an Investment Committee is to be a fiduciary of the organization and provide governance and oversight, not to be a portfolio manager. Key responsibilities for Investment Committee members include setting high-level objectives for the endowment, approving and ensuring compliance with the Investment Policy Statement, and monitoring outcomes for the portfolio to ensure they meet the organization’s ongoing needs. The Committee may have a relationship with an external investment advisor, which may have a discretionary approach, where the external advisor maintains control over investment decision making, or an advisory approach, where the Committee has a say in some or all portfolio decisions. As a newcomer, it is important to understand where decision making sits and what voting processes entail, where applicable.
2. How Does the Committee Define Success? To understand the goals and uses for their endowment funds, new Committee members should read key documents (e.g., Investment Policy Statement, Spending Policy) and understand the role that the endowment plays in the financials of the institution. For high-level objectives, is the stated long-term goal to simply maintain the pool of capital’s inflation-adjusted principal or does the organization have growth-oriented goals? For impact on the institution’s financials, what is the annual spending rate from the portfolio and how is this expenditure actually allocated (e.g., payroll, grant making, scholarship funding)? To what extent is the organization’s budget reliant on the endowment? A high budgetary reliance on the endowment can, for example, constrain the illiquidity and risk-taking ability of the funds. Should the endowment not be able to meet the stated level of spending, such as in an extreme market event, are there any resulting organizational risks? Understanding the above will help to ensure that the endowment’s investment strategy is aligned with the organization’s overall goals and sensitivities.
3. How Is the Investment Strategy Implemented? Once you understand the goals and objectives, the next step is to familiarize yourself with the investment strategy chosen to support the endowment’s needs. First, you will want to identify the endowment’s risk profile (e.g., equivalent to a 70/30 equity/bond index) and determine whether this is the appropriate level of risk for the organization’s long-term goals and constraints. Within this risk profile, what is the asset allocation strategy for the endowment? Does it take a traditional (i.e., stock and bond) approach or an alternatives-heavy approach (i.e., emphasis on hedge funds, private markets, and other alternative assets)? Does the endowment prefer active investing or passive investing? Is the endowment highly diversified or does it prefer to make bigger “bets”? What is the endowment’s exposure to private markets? Appreciating the answers to these questions is vital for managing expectations, such as whether to expect significant performance deviation relative to a benchmark, how much capital is readily available for withdrawal if the organization has a one-off, urgent need, or the level of drawdown to expect if there is an equity market correction.
4. How Does the Committee Fulfill Its Oversight Responsibilities? Fulfilling the oversight responsibilities of a Committee member requires ongoing monitoring and, at the highest level, ensuring that the Investment Policy Statement is being followed. On a regular basis, Committee members should evaluate whether the endowment is allocated in such a manner that meets its goals and objectives and complies with its stated constraints. As you think about portfolio results, it is important to consider what constitutes investment success for the organization. This could be results relative to a corresponding benchmark, such as a 70/30 equity/bond index, or relative to an inflation + spending hurdle. Over the longer term (TIFF recommends a five- to 10-year period), portfolio performance should be evaluated to determine whether it has proven appropriate in terms of both level and stability of the returns needed to support the current and future needs of the organization.
5. What Makes an Investment Committee Effective Over Time? As the name suggests, Investment Committees function as a team, so ongoing collaboration is important. It is essential to be respectful of this collective decision-making dynamic and avoid letting any single voice overpower the broader process. A successful Investment Committee also has role clarity between parties, including within the Committee, such as the specific role of the Committee Chairperson relative to other voting members, and outside of the Committee, such as whether investment decision making lives with an OCIO. Further, Committee membership is not meant to be perpetual, so ensuring continuity in process and goals is important as membership inevitably turns over. Finally, financial markets are volatile. A successful Investment Committee has a strong willingness and ability to stay the course and remain disciplined in difficult markets, thereby avoiding material changes in long-term strategy in response to shorter-term market signals.

Conclusion

Given TIFF’s history of supporting endowed non-profits over the past 35 years, we understand just how important Investment Committee membership is in supporting the mission and goals for non-profits that work for the betterment of society. We have made it our mission at TIFF to support Investment Committees across market cycles and help them to focus on governance for their various organizations. Answering the questions above will offer you a solid starting point toward becoming an effective and impactful member of your new Investment Committee. Asking the right questions matters more than having all of the answers and we encourage you to be open to continual learning and growth as you begin your new role as a steward of long-term institutional capital.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• PE exits are reopening. Liquidity is returning after a prolonged slowdown, with 2025 marking a meaningful step forward in overall exit activity.
• Rebound is material but concentrated. Mega-exits have accounted for an outsized share of recovery value, but exit count is also steadily increasing.
• Middle market is showing balanced recovery. Recovery is driven through sustained growth in both exit count and value, suggesting a more durable return of transactions compared to the top end of the market.
• Lower middle market managers are winning through discipline. In this new environment, strong outcomes are being driven less by financial engineering and more by patient realizations, operational execution, and active ownership.

More Than Green Shoots: Exits Return to U.S. Private Equity

Exit activity is showing encouraging signs of recovery, with 2025 marking a reacceleration in both deal count and value. As buyer-seller expectations begin to converge,1 a greater number of transactions have come to market. In 2025, exit activity showed a meaningful rebound with a 17% increase in total deal count and a 90% increase in total exit value from 2024,2 signaling a reopening of liquidity. Notably, this recovery occurred despite a period of disruption in the second quarter, when market volatility and macro uncertainty, including policy-related events and a government shutdown, temporarily slowed activity.

This return follows a period of dislocation. In 2021, U.S. PE exit activity reached an all-time high. Following COVID-related delays, the surge was driven by exceptionally favorable market conditions like abundant liquidity, strong public valuations, and a backlog of assets ready for sale. As financing tightened and valuation expectations reset, exit activity slowed over the next two years, with many sponsors opting to hold assets rather than transact at lower multiples.

U.S. PE Exit Activity (Q4 2025)

While 2025 marked a meaningful step forward, there is a caveat. According to Pitchbook, 78% of total exit value was accounted for by mega-exits.3 These larger transactions have driven a significant share of the recovery (and of headlines) but, lost in the narrative, there has been a broader, more gradual recovery in the middle market.4

The Middle Market Is Driving a More Durable Exit Recovery

Emerging data points indicate that recovery dynamics are not uniform: Smaller segments of the market are exhibiting more balanced recovery. Activity in the middle market exhibits steady improvement, with exit count and value increasing by 11.6% and 5.6% YoY, respectively.5 Moreover, both exit count and value have increased for the second consecutive year and now surpass pre-pandemic averages for the first time since 2021. This double-digit growth in transaction volume indicates that active deal flow is returning more broadly. As pricing expectations normalize and buyers re-engage, exits in the middle market appear less dependent on episodic liquidity events and more reflective of underlying transaction demand.

U.S. PE Middle-Market Exit Activity (Q4 2025)

Value Creation Over Timing: How the Lower Middle Market (LMM) Is Driving Outcomes

Anecdotal commentary from our own partners provides further perspective on current trends and dynamics in the lower middle market. Their commentary suggests a similar pattern of moderate and nuanced recovery. While overall sentiment remains cautiously optimistic, a few actionable themes emerged from our conversations and research:

• Discipline Over Liquidity: LMM managers remain disciplined on exit timing, with realizations occurring selectively as buyer-seller alignment improves, rather than relying on continuation vehicles or other engineered liquidity solutions.
• Fundamentals Are Driving Outcomes: Returns are increasingly driven by operational execution and earnings growth, with one manager noting that the current environment “rewards firms that generate returns through fundamental business improvement rather than reliance on favorable market conditions.”
• Where Active Ownership Wins: Managers emphasize the ability to drive outcomes through hands-on ownership and sector specialization, with the LMM favoring investors “willing to roll up their sleeves and do the groundwork” in fragmented, recurring-revenue businesses.

A Shift Toward Fundamentals Favors the Lower Middle Market

While remaining cautiously optimistic, LMM managers appear particularly well positioned to capitalize on an exit environment increasingly defined by disciplined underwriting, fundamentals-driven returns, and selective buyer demand. EY reports that 73% of PE firms expect exit activity to increase in 2026, the highest reading since the survey began in 2023, while 79% anticipate a pickup in acquisitions.6 Their expectations are fueled by shifts towards more disciplined entry pricing, more conservative capital structures, and a renewed emphasis on operational value creation.

These shifts are particularly constructive for the lower middle market, where these characteristics are not just cyclical adjustments but long-standing features of the segment. Unlike larger-cap strategies that have historically relied more heavily on multiple expansion and financial engineering, LMM investing has consistently been driven by earnings growth, operational improvement, and hands-on ownership. As returns across private equity become more dependent on these levers, the LMM is structurally aligned with the direction of the market rather than adapting to it.

At the same time, improving acquisition appetite and selective buyer demand reinforce the LMM’s exit pathways. Scaled LMM platforms, particularly those with demonstrated operational progress and defensible unit economics, remain attractive to both strategic buyers and larger sponsors seeking platform expansion. As capital increasingly concentrates around high-quality assets, this dynamic should support consistent exit opportunities for well-positioned LMM companies.

Conclusion

Exit activity in private equity has begun to recover, with 2024 and 2025 marking a clear re-opening of liquidity across the market after a period of below average exit activity. While a few large transactions have grabbed headlines, this masks a more consistent and sustained improvement within the middle market. In particular, the middle market is demonstrating steady gains in transaction activity, supported by a re-engagement of buyers and more disciplined realization behavior.  Anecdotal commentary from our lower middle market managers suggests this steady recovery extends to that part of the market as well.

At the same time, the drivers of successful exits are evolving. In contrast to prior cycles that benefited from multiple expansion and favorable financing conditions, current outcomes are increasingly tied to operational performance, earnings growth, and active ownership. This shift favors segments of the market, particularly the lower middle market, that have historically relied on these levers rather than adapting to them.

While near-term exit activity may continue to fluctuate, the evidence suggests that the market is not constrained by a lack of exit opportunities but rather is undergoing a transition toward a more fundamentals-driven environment. As this shift continues, investors positioned with managers capable of executing in this context may be better placed to achieve more consistent liquidity outcomes over time.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• Holdings transparency is essential to TIFF’s equity investment process.
• Security-level holdings reveal portfolio factor exposures.
• They allow TIFF to isolate managers’ idiosyncratic stock risk from factor risk, illuminating manager value-add.
• Granular holdings data enables precise portfolio construction and risk management.
• TIFF utilizes these elements in portfolio construction, risk management and manager selection.

Overview

For the marketable equity allocations, one of the most important portfolio analysis views is provided by security-level holdings. For most of our marketable equity managers, TIFF receives security-level detail, meaning what stock is held and at what size. This information is in addition to traditional exposure reports most managers provide. This level of detail allows TIFF to have a more robust and accurate view of our portfolio and to manage our exposures appropriately. The multi-dimensional, timely detail inherent in holdings is critical to TIFF’s risk management and equity portfolio construction approach.

Why are holdings so important? There are three key reasons:

1. Granularity & Specificity: Holdings tell us the magnitude and sources of exposures at the most granular possible level.
2. Idiosyncratic Risk Identification: Active managers’ specific stock views are the primary source of value in TIFF portfolios. The only way to identify and measure the individual risk and impact of these individual positions net of their generic factor exposures is to know the positions in detail.
3. Actionable Risk Management: Knowing detailed manager holdings enables TIFF to manage portfolio risk with passive exposures and hedges with more efficacy and precision, and with less chance of overlooking an important exposure or of inadvertently offsetting managers’ specific stock views. Tracking the performance of individual stocks allows us to track these factor exposures in near-real time without having to rely on manager updates.

1. Granularity & Specificity

Security-level holdings allow us to understand our exposures, both magnitude and sources, at the most granular level possible. TIFF works with its managers to get holdings level data beyond the traditional exposure returns, allowing TIFF a better understanding of those exposures. Granularity below the summary level matters, sometimes very much.

Active equity managers will generally provide summaries of portfolio exposures at the regional level (e.g., US, EAFE, EM) or sector level (e.g., healthcare, IT). They may bucket market capitalization in broad categories (e.g., mega, large, small cap). To the extent they track style factors, the information they share is generally qualitative (e.g., “overweight growth”). Style factors are security-specific characteristics, such as Value (price:book), Profitability (profit:revenue) or Momentum, that help explain risk and return of a stock.

Case Study: Sector Distinctions that Matter

These kinds of industry-level distinctions are significant more often than not.

• Healthcare comprises both large cap value-like pharmaceuticals (J&J, Pfizer), and small cap volatile biotech. It is one thing to have no net exposure to either industry and a very different thing to report no net healthcare exposure while being 5% overweight biotech and 5% underweight pharma.
• Both software and semiconductors are components of IT, recently displaying dramatically different behaviors.

Case Study: Style Factor Decomposition

For style factors, granularity illuminates how a given factor is arising. Style factors are defined on a spectrum comparing a given portfolio’s exposure to the average exposure of the full equity investing universe. A style such as a Profitability overweight can arise via larger holdings in stocks that are more profitable than average or, instead, via underweights to unprofitable stocks. These are very different portfolio constructions that look the same at the qualitative “overweight Profitability” level.

2. Idiosyncratic Risk Identification

TIFF primarily aims to add value by identifying and investing with active managers that take idiosyncratic risk, risk over and above the factor risk inherent in their portfolios. A number of such TIFF managers take a “fundamental” approach, characterized by concentrated portfolios of stocks with relatively long-term investment theses (i.e., not high-frequency trading strategies), each of which is selected to deliver outperformance vs. similar stocks with similar factor profiles. The only way to understand the portfolio’s sources of idiosyncratic risk and their performance is to analyze these at the individual stock level.

Even among very similar stocks the differences in ex-ante risk and ex-post performance can often be dramatic. Although Nvidia and Analog Devices are both larger cap semiconductor designers, there has been a massive difference between these stocks over the past few years. This year, there has been extreme dispersion between AI “winners” and “losers” within the software industry.

Absent holdings data, it is very difficult to tell how effectively fundamental managers are taking idiosyncratic risk. While they will generally manage to self-selected benchmarks such as the S&P 500 (SPX), or even much more specific ones such as the NASDAQ Biotechnology Index (NBI), they will generally take on factor risks with respect to these benchmarks. Without knowing their factor-driven performance we cannot identify their idiosyncratic performance. Even if a manager were to report total idiosyncratic performance, we are very interested in the details. Did a manager rely on a single Nvidia-like outperformer? Or did they generate idiosyncratic alpha across their portfolio?

Longer term, the factor postures and idiosyncratic risk efficacy of our managers are critical to understanding whether a manager is adding value and whether we maintain, upsize or redeem our positions.

3. Actionable Risk Management

The detail we get from holdings only really matters if it is actionable. We use this information to fine-tune our portfolio factor exposures through a few techniques including:

• passive ETF exposure
• custom baskets of individual stocks, designed to offset any unwanted factor exposures at an equally granular and timely level. Knowing our managers’ intentional idiosyncratic risk-generating stock selections, we exclude any such overweighted stocks from our custom factor hedges to avoid inadvertently negating managers’ views.

Where Holdings-Level Doesn’t Matter

We are equally careful not to overuse holdings information. Alongside fundamental managers, we intentionally allocate to “systematic” managers (including multi-manager portfolios). These strategies are characterized by much more diversified portfolios with many more individual stocks and are also often characterized by higher-frequency trading strategies. Many systematic managers are not seeking to generate idiosyncratic risk via fundamental stock analysis but rather via proprietary strategies that take advantage of factor-like characteristics that are different from the common factors that we concentrate on in our factor analysis.

Knowing the holdings of these strategies does not help us; but, critically, we know that these managers carefully manage their traditional factor exposures. That means that if they say they are managing to a benchmark such as SPX or NBI, we can count on them to match the factor exposures of that benchmark. We can then confidently use the benchmark’s holdings as a proxy in our holdings-based factor analysis. We can also confidently ascribe all their performance vs. that benchmark to idiosyncratic risk. In this way, we appropriately combine holdings detail across different types of managers in our analyses and portfolio management.

Holdings-Level Detail Matters

Holdings detail is central to our equity portfolio management. Whether via fundamental manager individual stock holdings or very reliable proxies for systematic managers, we rely on it and would feel partially blind without it — to the extent that this information is a prerequisite for inclusion in our portfolios. We use it to efficiently and effectively construct portfolios with only the factor exposures we seek, minimizing unwanted, unproductive factor risk. In doing so, we allocate more of our risk budget to productive idiosyncratic risk, the area where our managers differentiate themselves and add value.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

Executive Summary

• Private foundations are sustaining payout levels well above the 5% minimum, supported by recent strong market performance.
• However, forward-looking return expectations are moderating, while multi-year grant commitments remain elevated.
• This is forcing foundations to reassess the strategic questions around short-term grantmaking and long-term sustainability of the foundation assets.
• TIFF analysis highlights long-term purchasing power erosion, not short-term liquidity, is the major risk for foundations.
• Foundations should periodically reassess and scenario test portfolio return expectations and grantmaking plans and flexibility to ensure sustained long-term mission capacity.

The Current Environment: Capacity Has Expanded, But So Have Commitments

Recent data from the 2025 Report on Private Philanthropy indicates that private foundations paid out approximately 7.1% of assets in 2024, well above the statutory 5% minimum requirement.1 At the same time, many foundations continue to emphasize multi-year, targeted grant commitments that extend support and obligations several years forward.

This environment has been shaped by several years of strong public market returns. Asset growth has supported elevated grantmaking and, in many cases, longer-dated commitments. Boards appropriately leaned into mission impact.

However, forward-looking capital market assumptions are more measured than the realized returns of the recent past. For boards and investment committees, the key question is not whether foundations can afford elevated spending today, but whether it is sustainable across a full market cycle.

Structural Trade-Off: Real Return vs. Spending

At its core, sustainability is a function of basic arithmetic. For a foundation to preserve its purchasing power over time, the portfolio’s long-term return must cover both the spending rate and inflation. However, if spending plus inflation exceeds the portfolio’s long-term return, purchasing power will erode over time.

This erosion can be difficult to detect in certain environments, particularly during steady or rising markets. In these conditions, the impact may appear modest. Portfolios may continue to grow in nominal terms, while their real value (e.g., adjusted for inflation), and therefore future grantmaking power, slowly declines.

The dynamic becomes more consequential when market declines coincide with elevated spending and fixed multi-year commitments.

The most challenging scenario occurs during a material drawdown, when several forces compound at once:

• Asset values decline.
• Grant commitments remain fixed in dollars.
• The effective payout rate rises as a percentage of assets.
• The capital available to compound in recovery is permanently reduced.

Liquidity Isn’t the Risk—Erosion Is

Modeling representative private foundation portfolios under base case and stress scenarios shows a consistent pattern. Even when obligations remain fully fundable, maintaining elevated spending through a significant market decline materially accelerates long-term real erosion.2

The risk facing many foundations is not an immediate liquidity shortfall. It is the amplified long-term cost of maintaining fixed withdrawals during periods when assets are temporarily impaired.

Key Considerations for Boards and Investment Committees

As foundations navigate a normalizing return environment, several considerations may warrant renewed attention to ensure that mission ambition and portfolio capacity remain aligned across a full cycle:

• Alignment between spending and forward-looking return assumptions
  Is the current payout level supported by long-term real return expectations rather than recent experience?
• Interaction between commitments and portfolio behavior
  How would a material market decline affect effective withdrawal rates given existing multi-year obligations?
• Flexibility within grantmaking
  What portion of spending is structurally committed versus discretionary, and how clearly is that flexibility defined?
• Reassessment framework
  Have conditions been articulated in advance under which spending or portfolio risk tolerance would be revisited?

Conclusion

Private foundations have benefited from a period of strong market support. As conditions normalize, elevated payout levels may remain appropriate, but their durability depends on deliberate alignment with long-term real return capacity.

The most resilient institutions are not those insulated from volatility. They are those that define in advance how spending, commitments, and portfolio risk tolerance interact so that decisions made during periods of stress are disciplined rather than reactive, and long-term impact is not unintentionally impaired.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.

In FY25, the NBOA-Commonfund Benchmarks Study of Independent Schools reported annual returns of 11.5% across the peer set, bringing 10-year average returns to 7.7%. Independent schools remain concerned about budget headwinds from both inflation and enrollment pressure, despite strong market performance helping to increase operating budget support from the endowment and a moderate increase in annual gift budget support. Donor trends appear to be shifting, with major gifts becoming increasingly concentrated among a smaller group of donors. OCIO usage continues to increase, in part as a solution to budgetary pressures and increasing portfolio complexity.

Key themes from the report include:

• Strong Investment Performance: Investment performance remained strong in FY25, with an average annual return of 11.5%, modestly below FY24’s 12.3% but still well above long-term returns for most institutions (average ten-year return is 7.7%). Size-based performance differences have reversed again, with larger endowments outperforming smaller endowments after smaller endowments outperforming FY23-24. Smaller endowments under $10M returned 10.9% in FY25, trailing the $10M–$50M and $50M+ cohorts at 11.6%. Over a three-year horizon, the smallest cohort outperformed, returning 12.7% versus 11.2% and 11.1% for the $10M–$50M and $50M cohorts, respectively. These performance shifts predominately reflect allocations of public vs. private equity, with larger endowments typically having larger allocations to private assets.
• Operating Budget Support from Endowments Increased while Spending Rates Remained Steady: Institutions are increasingly relying on endowments to support operating budgets (total average 7.1% in FY25 vs. 6.4% in FY23), even as total average stated spending rates have remained steady at 4.3%. This implies that the growth in operating budget support from the endowment is driven by strong investment performance rather than increased spending. This trend is most pronounced among the $50M+ cohort, where operating support from endowments rose from 7.8% in FY23 to 8.5% in FY25. While the short-term trends have increased, they remain below the 2000s when both spend rates and operating budget support from the endowment were higher.

NBOA Stated Spend Rate and % Operating Budget from Endowment (FY05-FY25)

• Increase in Annual Giving Budget Support: Operating support from annual giving has also moderately increased over the past three years (6.8% in FY25 vs. 6.5% in FY23), particularly in schools with the largest endowments. Similar to endowment support, the increase in annual giving likely reflects strong market performance, as donors tend to give more during periods of investment gains.
• Donor Trends Shifted: While overall gifts (annual giving or endowment) vary from year to year, there is a clear trend that a majority of gifts are coming from fewer donors. Historically, 80% of donations came from 20% of donors, whereas now roughly 90% of donations come from just 10% of donors. Institutions are also seeing a continued shift toward restricted gifts, as donors are more focused on the impact of their gift. Despite the increase in dollars, median gifts per student have remained relatively stable. Fundraising remains a top concern for schools.
• Increased OCIO Involvement: Use of OCIO providers by secondary schools continues to expand, regardless of endowment size. As independent schools face operating budget pressures and constrained resources, the investment landscape becomes increasingly complex with the operational needs of alternatives, regulatory changes, and increased market volatility. OCIO providers can provide access to constrained investment opportunities and diligent risk management, freeing up time for investment committees and business offices.
• Inflation and Enrollment Headwinds Persisted: Enrollment continues to be the top concern facing secondary schools, especially those with endowment assets under $10M. Demographic shifts are contributing to student population declines. However, enrollment declines disproportionately affect New England, New York, and New Jersey while the rest of the country experiences enrollment increases. Additionally, inflation remains a challenge, increasing operating costs and placing additional strain on budgets already more reliant on endowment and gift support.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute an offer or advertisement of TIFF’s investment advisory services or investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

These materials may contain forward-looking statements relating to future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. Although TIFF believes the expectations reflected in the forward-looking statements are reasonable, future results cannot be guaranteed.