Key Takeaways
- • Endowments and foundations are bracing for weaker returns from traditional assets, with CIOs at the iConnections conference in Miami Beach citing high equity valuations, near-historic-low credit spreads and crowded private markets.
- • Columbia Investment Management Company CEO Kim Lew described the outlook as both return compression and likely alpha compression, and said generating outperformance may require moving "a little bit further on the risk curve."
- • A foundation executive cited by the article, Carlos Rangel of the W.K. Kellogg Foundation, said "If you don't earn returns of 8% the model doesn't work," given the roughly 5% annual payout requirement plus operating costs.
- • Harvard and Brown disclosed positions in spot bitcoin and ether ETFs in their latest 13F filings, which the article characterizes as small, high-volatility satellite allocations.
- • Bitcoin fell 26% over the past year while the S&P 500 rose nearly 17%, and bitcoin is down nearly 50% from its October all-time high, per the article.
Summary
Endowments and foundations are reassessing their portfolios as they anticipate lower returns from stocks and bonds. According to CoinDesk's coverage of the iConnections conference in Miami Beach, several chief investment officers said the playbook that generated gains over the past decade may not work as well in the coming years. Equity valuations remain high, credit spreads are near historic lows, and private markets are crowded, leaving limited room for error. Many institutions are tempering expectations after strong market performance, with equity risk premiums appearing thin, private markets holding record amounts of unsold assets, and macro uncertainty elevated.
Kim Lew, CEO and president of Columbia Investment Management Company, said the firm expects "return compression and probably Alpha compression" across the traditional asset classes it invests in. Lew indicated that pursuing outperformance may require taking more risk and exploring strategies the firm has not used before. Lew added, "I think it's a really hard setup for outstanding returns."
The pressure is particularly acute for private foundations, which must pay out about 5% of assets annually. Adding operating costs raises the required return hurdle. Carlos Rangel of the W.K. Kellogg Foundation, one of the largest U.S. philanthropic foundations, said that without returns of around 8%, "the model doesn't work."
That search has in some cases led endowments toward crypto. Yale and Harvard backed crypto-focused venture funds years ago for indirect exposure. More recently, the approval of spot bitcoin and ether ETFs in the U.S. has provided a more straightforward route, and Harvard and Brown have disclosed positions in both products in their latest 13F filings. The allocations are small relative to these funds' overall portfolios, but the article notes they illustrate how digital assets have moved from the fringe of institutional finance toward the mainstream toolkit, with crypto ETFs positioned as high-risk, high-volatility satellite holdings.
The case for crypto is complicated by recent performance. Per the article, digital assets have failed to outperform broader equity markets over the past year, with bitcoin down 26% while the S&P 500 gained nearly 17%, and bitcoin trading roughly 50% below its October all-time high. The article notes that long investment horizons may allow these institutions to tolerate short-term drawdowns, and suggests they may be looking at underperforming assets such as crypto with that in mind.
Kim Lew, CEO and president of Columbia Investment Management Company, said the firm expects "return compression and probably Alpha compression" across the traditional asset classes it invests in. Lew indicated that pursuing outperformance may require taking more risk and exploring strategies the firm has not used before. Lew added, "I think it's a really hard setup for outstanding returns."
The pressure is particularly acute for private foundations, which must pay out about 5% of assets annually. Adding operating costs raises the required return hurdle. Carlos Rangel of the W.K. Kellogg Foundation, one of the largest U.S. philanthropic foundations, said that without returns of around 8%, "the model doesn't work."
That search has in some cases led endowments toward crypto. Yale and Harvard backed crypto-focused venture funds years ago for indirect exposure. More recently, the approval of spot bitcoin and ether ETFs in the U.S. has provided a more straightforward route, and Harvard and Brown have disclosed positions in both products in their latest 13F filings. The allocations are small relative to these funds' overall portfolios, but the article notes they illustrate how digital assets have moved from the fringe of institutional finance toward the mainstream toolkit, with crypto ETFs positioned as high-risk, high-volatility satellite holdings.
The case for crypto is complicated by recent performance. Per the article, digital assets have failed to outperform broader equity markets over the past year, with bitcoin down 26% while the S&P 500 gained nearly 17%, and bitcoin trading roughly 50% below its October all-time high. The article notes that long investment horizons may allow these institutions to tolerate short-term drawdowns, and suggests they may be looking at underperforming assets such as crypto with that in mind.
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