Endowments and foundations steer away from Cryptocurrencies

20 percent of endowment clients of NEPC still shows interest

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NEPC brings out an industrial survey showing that foundations and endowments are staying away from the cryptocurrency hype. This is a situation that is temporary which could change in future. The survey released by the NEPC on Monday shows that 96 percent of the top officials in these companies have no plans to invest on cryptocurrencies. The report included results of the NEPC survey carried out last month with 47 business officers at the United States endowment and foundations. Yet, the curiosity is still present among some officials which could show future investments.

According to partner at NEPC Scott Perry, even though only 2 percent of those who took the survey have entered trade of cryptocurrencies, almost 20 percent of endowment and foundation clients of NEPC still shows interest on having a closer look at cryptocurrencies. The clients at the company in Boston have nearly 100 institutions which value at around 62 billion USD in assets. Perry stated the following in a telephone interview;

Cryptocurrencies in theory could be a real return enhancement and an interesting holding in a world that isn’t awash with lucrative investment ideas.

Endowments are on the lookout for returns. According to the National Association of College and University Business Officers, as of June 2017 the ten-year return average among United States university endowments was 4.6 percent. An investment on a fund holding 60 percent stocks and 40 percent bonds would have yielded a 6.4 percent gain.

Bitcoin as a digital asset class

Bitcoin is the most valuable cryptocurrency asset at the market right now. But, the fact that it has over 300 percent value fluctuation is the reason why it nor other digital currencies are not recommended to clients of NEPC. Perry pointed out issues of it;

There are still just so many questions surrounding volatility, liquidity and regulation… We take a strong view against its representation in our clients’ portfolios.

About 40 percent of the respondents declared they will discard the domestic equity holdings as they do believe the bull market will not continue its run. According to the predictions of NEPC, the U.S. stocks expect an annual gain of 6 percent during the next five years.

Seeking overseas returns by endowments

The endowments and foundations are seeking returns in overseas. 50 percent of survey respondents believed emerging market stocks would produce the highest returns in this year. 25 percent mentioned increasing allocations to the asset class, while 68 percent mentioned their positions would remain unchanged. Among the endowments and foundation that was polled, respondents allocated around 6 percent on average to the upcoming markets.

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