PitchBook: Elite University Endowments Confront a ‘Parade of Horribles’
NEPC’s Colin Hatton was recently quoted in a PitchBook article exploring how elite university endowments are facing pressure from underperforming private markets, rising costs, and political scrutiny. He highlights the need for diversification and suggests endowments may need to adjust asset allocations as private equity returns decline. View excerpts below or read the full article on the PitchBook site here.
Endowment investment teams at top universities are exploring options to cash out of some of their public market investments, primarily through hedge fund redemptions, to compensate for federal funding cuts and prepare for potential tax increases.
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“With greater levels of uncertainty, you want to understand what your liquidity needs are going to be,” said Colin Hatton, a principal at LP consultant NEPC, where he advises endowments and foundations.
Hatton said his firm is advising clients to keep sufficient capital in safe-haven assets, and in some cases, to take out lines of credit on their portfolios for more liquidity.
FundFire: How Michigan State’s Endowment Outperformed the Ivies
Kristin Reynolds of NEPC was recently quoted in a FundFire article offering a cautionary perspective on MSU’s tech concentration, noting potential risks from overexposure to large-cap U.S. tech stocks amid rising market volatility. View excerpts below or read the full article on the FundFire site here.
Michigan State University’s investment returns beat many elite endowment peers for the fiscal year ending June 30, 2024.
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“Endowments with high public equity U.S. tech exposure performed exceptionally well over the past two years but are likely facing challenges in the current market,” said Kristin Reynolds, a partner at NEPC.
NEPC has diversified U.S. tech exposure with value-oriented stock, Reynolds said. “Conversely, non-U.S. equities have been performing better,” she added.
Pensions & Investments: TIPS making a comeback for ETF investors
NEPC’s Phillip Nelson was recently quoted in a Pensions & Investments article highlighting TIPS as a key tool for real rate exposure, notes that breakeven rates are currently high, and says clients are increasingly looking to TIPS for diversification and liquidity. View the full article on Pensions & Investments’ site here.
Amid heightened volatility and economic uncertainty, the market for exchange-traded funds holding Treasury inflation-protected securities has rekindled after three consecutive years of outflows.
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“From an allocator’s long-term perspective, TIPS is a favorite asset class for real rate exposure,” said Phillip Nelson, partner and head of asset allocation at investment consultant NEPC. “As a rough target, we look at TIPS holdings equal to the size of a Treasury allocation or relative to investment-grade exposure.”
Nelson has observed, however, that 5-year and 10-year breakeven rates are “currently a little rich.” Breakeven rates are the spread between nominal Treasuries and TIPS at constant maturities.
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“Over the last month and a half, we’ve received a lot more questions on TIPS given the uncertainty of the tariff regime,” said NEPC’s Nelson.
“Within our OCIO business, clients want to know if they have enough liquidity to meet cash flow needs. They are looking to get more diversified, add fixed income, and allocate slightly more to TIPS.”
Click here to read the full article on the Pensions & Investment site.
Business Insider: 3 trades keeping investors in the green this year as the S&P 500 corrects
NEPC’s Head of Asset Allocation, Phill Nelson, was recently quoted in a Business Insider article to provide insights on the S&P 500 correction last week. View the full article on Business Insider site here.
- The S&P 500 has shed 4% since the beginning of the year as Big Tech stocks decline.
- However, previously unloved areas of the market like healthcare are rebounding.
- Gold and European stocks are also rallying.
Tariff volatility, mounting recession fears, and uncertainty around the AI trade have rocked markets this year — pushing the S&P 500 into correction territory last week.
But amid the stock-market sell-off, there are still pockets of outperformance.
“Anything with a more moderate valuation profile to start the year has done well,” Phillip Nelson, head of asset allocation at the investment consulting firm NEPC, said. “Areas less impacted by the headlines associated with tariffs seem to have weathered some of the uncertainty of the last several months.”
Pensions & Investments: Consolidation in the Retirement Industry Leads to Better Services and Greater Rivalry
NEPC’s CEO, Mike Manning, was recently quoted in a Pensions & Investments article to provide insights on the consolidation of DC plans and plan sponsors. View the full article on Pensions & Investments’ site here.
Consolidation of record keepers and other vendors to defined contribution retirement plans is a positive trend that leads to better services for participants, according to four speakers at Pensions & Investments’ Defined Contribution East conference March 10.
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Mike Manning, managing partner at NEPC, and Bob Oros, chairman and CEO of wealth management firm Hightower Advisors, agreed, saying consolidation leads to a better customer experience, lower fees and better participant outcomes.
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NEPC’s Manning said the trick is understanding how plan sponsors want to work with record keepers, advisers and other providers.
“It’s all about how that we can work with the data in such a way that it makes it easy for advisers to serve their customers,” Manning said.
Manning also urged plan sponsors to “put pressure on their record keepers to work with all the other folks in the ecosystem.”
Click here to read the full article on the Pensions & Investment site.
Pensions & Investments: Managed Account Offerings in Retirement Plans Shrink as Employers Wait for Better Deal – NEPC
NEPC’s DC Plan Trends and Fee Survey data was recently featured in a Pensions & Investments article which covers the decline in managed accounts in retirement plans, citing concerns about provider benefits over participants and advocating for participant-aligned, subscription-based pricing models. View the full article on Pensions & Investments’ site here.
The number of employers offering managed accounts in their workplace retirement savings plans has shrunk, according to NEPC’s “Defined Contribution Plan Trends and Fee Survey” released March 4.
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“We believe managed account providers can and do construct efficient investment portfolios, but plan providers, as fiduciaries, should push for more improved outcomes for their plan participants through negotiating lower fees and seeking to better align the interests of the managed account providers with those of participants,” Mikaylee O’Connor, principal and head of defined contribution solutions at NEPC, said in the news release.
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“By implementing a lower-based fee for less engaged participants, providers can offer an entry-level option, while more engaged participants could access expanded investment options through tiered subscription offerings,” O’Connor said.
O’Connor proposed a single-digit base fee for less engaged participants and a series of subscriptions for additional services and/or investment exposures for individuals who engage with the accounts and want the additional features.
Click here to read the full article on the Pensions & Investment site.
InvestmentNews: Managed Accounts Have Hit a Wall in DC Plans, Finds Survey
NEPC’s DC Plan Trends and Fee Survey data was recently featured in an InvestmentNews article which highlighted our findings on the increased demand for customized solutions in pension plans and the shift towards passive management in target-date funds. View the full article on InvestmentNews’ site here.
A new report from NEPC offers new insights in the workplace retirement savings space, particularly when it comes to the use of managed accounts and target-date solutions.
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“We believe managed account providers can and do construct efficient investment portfolios, but plan providers, as fiduciaries, should push for improved outcomes for their plan participants through negotiating lower fees and seeking to better align the interests of the managed account providers with those of participants,” Mikaylee O’Connor, principal and head of defined contribution solutions at NEPC, said in a statement revealing the results.
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To improve uptake among plan members, she suggested sponsors could offer a subscription-based model with lower base fees for less engaged participants, while providing more investment options for those more actively involved through tiered subscriptions.
“This approach allows for flexibility in costs and features, catering to diverse participant needs and engagement levels,” she said.
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“Analyzing this year’s survey results through a long-term lens, we are excited by the ample opportunity for industry innovation, personalization, and increased accessibility in the defined contribution marketplace, especially across areas like alternative investments, managed accounts, TDFs, and retirement income solutions,” O’Connor said.
Click here to read the full article on the InvestmentNews site.
NEPC Survey Finds Managed Accounts are Due for a Transformation
19th annual survey results emphasize growing need for more personalized retirement solutions
BOSTON, MA – MARCH 4, 2025 – NEPC, LLC, one of the industry’s largest investment consulting firms, today published the 19th annual edition of its Defined Contribution (DC) Plan Trends and Fee Survey, which examines emerging investment trends, including the shift toward passive investments and the increasing need for managed accounts to offer more personalized retirement solutions.
Potential in managed accounts
While over the last 20 years, NEPC has seen an increase in DC plans offering managed accounts, that trend has stagnated in the past 3-5 years – even starting to decline in 2025. This year’s survey found that nearly half of respondents (46%) offer managed accounts, though only 9% of participants are utilizing them.
The softening in managed accounts adoption highlights the need for a transformation in the business model as plan sponsors increasingly recognize that the current model, prevalent in many DC plans, is imbalanced, with providers reaping greater benefits than participants.
“We believe managed account providers can and do construct efficient investment portfolios, but plan providers, as fiduciaries, should push for improved outcomes for their plan participants through negotiating lower fees and seeking to better align the interests of the managed account providers with those of participants,” according to Mikaylee O’Connor, Principal, Head of Defined Contribution Solutions.
“A subscription-based model could align business incentives more closely with improved participant outcomes. By implementing a lower base fee for less engaged participants, providers can offer an entry-level option, while more engaged participants could access expanded investment options through tiered subscription offerings. This approach allows for flexibility in costs and features, catering to diverse participant needs and engagement levels.”
Growing appetite for passive
This year’s survey results also reveal that Target Date Funds (TDFs) have maintained their presence as a default retirement investment vehicle and continue to shrink the core menu, with 97% of survey respondents offering them, totaling $161 billion in TDF assets.
Over the last five years, there has been a significant shift in appetite for passive TDFs over active. This year’s survey found that 35% of survey respondents offer active TDFs, down 32% from 2020, when 67% of respondents offered active TDFs.
In comparison, most plans today (54%) offer passive TDFs, as assets in passive TDFs continue to annually outpace active. Only 11% of respondents offer a blend of both active and passive.
TDFs continue to be especially attractive for participants under the age of 35, as 86% of TDF investors are 100% invested in TDFs, in comparison to participants over the age of 65, where only 58% are 100% invested.
“Analyzing this year’s survey results through a long-term lens, we are excited by the ample opportunity for industry innovation, personalization, and increased accessibility in the defined contribution marketplace, especially across areas like alternative investments, managed accounts, TDFs and retirement income solutions,” added O’Connor.
About NEPC’s 19th Annual Defined Contribution (DC) Plan Trends and Fee Survey
The survey explores current investment trends, features, and innovations in key sectors, as well as how these plans have developed over time. Respondents to the 2024 survey include 137 clients representing $408 billion in aggregate assets and 3.2 million plan participants.
NEPC’s Defined Contribution (DC) Practice team will discuss the survey’s findings during a webinar on March 6, 2025. Those interested in hearing how NEPC is advising plans can register for the webinar here.
The 19th Annual Defined Contribution (DC) Plan Trends and Fee Survey results can be downloaded below:
About NEPC, LLC
NEPC, LLC is a leading investment consultant, private wealth advisor, and OCIO provider, serving over 400 retainer clients and $1.7 trillion in total assets. Combining a proprietary investment team dedicated to the long-term challenges facing investors with our client-centric model, NEPC builds forward-looking investment portfolios for institutional investors, ultra-high-net-worth individuals, and families. To learn more visit nepc.com.
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PlanSponsor: Fiduciary Risk Continues to Pose Barrier to Mass Adoption of Alts in DC Plans
NEPC Partner, Bill Ryan, was recently quoted in a PlanSponsor article to discuss how fiduciary risk, particularly the potential for litigation due to higher fees associated with private equity investments, continues to be a significant barrier for plan sponsors considering alternative investments in defined contribution plans. View the full article on PlanSponsor’s site here.
Many defined contribution plan sponsors have concerns about offering alternative investments in their 401(k) menu, but a supportive regulatory environment may shift the tide.
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Bill Ryan, a partner in and defined contribution leader at NEPC, argues that the industry has already administratively solved for the issue of incorporating alts into DC plans. For example, he said Washington has, for the past five years, put private equity into the state’s DC plan through target-date funds, and the University of California Retirement Plan historically had private equity target allocation in a target-risk fund.
“Most large-cap active growth managers have less than 5% in a private placement or private equity in their mutual funds already, so private equity and private markets are in DC plans and are fully functioning,” Ryan says.
However, Ryan says there is an “asymmetric risk” to the fiduciary when offering any sort of alternative investment option because the reported fees tend to be the highest when the investment performs the best.
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“It’s not that we can’t administratively deliver private markets,” Ryan says. “It’s these ancillary things that are hangnails that intimidate plan sponsors from doing it.”
Ryan emphasizes that higher fees are not necessarily a bad outcome for participants, but it can be risky for the plan sponsors because such fee disclosure often leads to litigation.
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Overall, Ryan says private markets are in DC plans today, and more adoption is anticipated.
“Access is extremely important, especially with a very [pro-alternatives] administration, and we anticipate an uptick in flows and adoption, but it should be mindful, with the appropriate governance around it,” he says.
Click here to read the full article on the PlanSponsor site.
Forbes: Tough Markets, Smart Moves: How Investors Are Reallocating Capital
NEPC was mentioned in a recent Forbes article to highlight Sarah Samuels’ warning about continued valuation declines in private equity and venture capital, along with concerns over mounting liquidity pressures. View excerpts below or read the full article on the Forbes site here.
“In a time of rising market uncertainty, sophisticated investors are making strategic shifts in their portfolio allocations to navigate an evolving investment landscape. After two years of double-digit outperformance in public equities, it is not surprising that investors are looking to increase their exposure to private markets, seeking diversification and perceived stability. However, this trend is not without risks, as private market valuations can create an illusion of security in an environment where liquidity constraints may be mounting.”
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“Additionally, consulting firms like NEPC have warned investors about potential valuation declines in private equity and venture capital. Many firms have avoided markdowns by opting for insider rounds and bridge financing to maintain valuations, but mounting liquidity pressures remain a concern.”