What is endowment style investing?

February 5, 2026 Share

What do Ivy League colleges like Yale and Columbia, public universities like UVA and Texas A&M, and non-profits like the Rockefeller and Ford Foundations have in common? They all invest their capital very differently than the average American.

By practicing an endowment-style investment approach, these institutions have been able to generate outsized returns over many decades. They take advantage of being patient, long-term investors to build portfolios that can capture upside during bull markets and provide downside protection in bear times.

How have these endowments and foundations created such remarkable results? One key to their success is taking advantage of the illiquidity premium.

Illiquidity premium refers to the idea that investments that require the investor to lock up their money for some period of time (illiquid) have historically outperformed ones where the investor can sell at any time (liquid).

For example, stocks are liquid: you can choose to sell your shares whenever you want, with no minimum holding period. Private equity investments, on the other hand, often require that an investor lock up their money for years. But in return for this illiquidity, private equity investors have been rewarded: over the last 25 years, they have earned 4.45% additional annualized return over investors who invested only in global stocks.1

Another way to look at it: an investor who only invests their long-term capital in liquid stocks and bonds is potentially leaving significant money on the table. The endowment-style approach aims to help investors take advantage of their patience.

Read more about the illiquidity premium.

Also core to the endowment-style approach is an active asset allocation and manager selection strategy.

Asset allocation refers to the process of determining how the dollars in a portfolio should be split among various types of investments. For example, in certain market conditions, an asset allocation that leans more heavily towards equity investments, like stocks and private equity, might be expected to outperform. In other market environments, more credit-oriented investments might be more attractive. In an endowment-style approach, active asset management, led by an experienced investment team, helps ensure that the portfolio is consistently well-positioned for changing markets.

To best take advantage of the unique opportunities that may exist in different types of investment areas, endowment-style portfolios typically invest in strategy-specific funds, or managers. For example, within the private credit ecosystem, there are funds that specialize in direct lending and others that focus on asset-based lending. A rigorous manager selection process helps identify the funds best suited to execute on the desired strategies.

Read more about Ivy Invest's approach to asset allocation and manager selection.

We don't think it's fair that only the wealthiest institutions have access to the benefits of this proven long-term investment strategy, so we've built an endowment-style, public & private markets fund that is available to all investors. With active asset allocation and manager selection run by an experienced institutional Chief Investment Officer, our Fund is designed to help you take advantage of your illiquidity premium.

Learn more about our Fund.