Endowments Turn to Crypto ETFs as Traditional Investments Falter

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Endowments eye crypto allocations amid tougher return outlook for traditional investmentsFinance

What to know:

  • Endowments and foundations are preparing for weaker returns from traditional assets as high equity valuations, tight credit spreads and crowded private markets limit opportunities.
  • Investment chiefs say lower expected returns threaten the sustainability of payout models, pushing institutions to move further out on the risk curve and experiment with new strategies.
  • Some major universities, including Harvard and Brown, have begun using bitcoin and ether ETFs as small, high-volatility satellite positions, signaling that digital assets have entered the mainstream institutional toolkit.

Miami Beach – Investment funds are reconsidering their strategies as they prepare for lower profits from typical investments.

During Tuesday’s iConnections conference, many leading investment professionals suggested that the strategies that have been successful for the past ten years might not deliver the same results going forward. Stock prices are currently high, borrowing costs are very low, and there’s a lot of competition in private investment markets, meaning there’s less margin for mistakes.

As an investor, I’m hearing a lot about potentially lower returns across the board in traditional investments like stocks and bonds. Columbia Investment Management’s CEO, Kim Lew, basically confirmed my concerns – she expects not only will overall returns be down, but it will also be harder to beat the market and find those exceptional investment opportunities – what they call ‘Alpha’ – going forward.

When investment returns are lower, it creates a challenge for organizations like private foundations. These foundations are generally required to distribute around 5% of their assets annually. When you factor in their operating expenses, they need to achieve a certain level of return on investments just to stay afloat. According to Carlos Rangel of the W.K. Kellogg Foundation, a major U.S. philanthropic organization, a return of at least 8% is necessary for this model to work.

With increasing pressure to deliver strong returns, investment teams are now looking at a wider range of opportunities. According to Lew, achieving better results might mean taking on slightly more risk and trying new investment approaches.

The pursuit of higher returns has led some university endowments to invest in cryptocurrency, a market previously considered too risky or difficult for traditional institutions. Universities like Yale and Harvard were early investors, initially gaining exposure through venture funds. Now, with the approval of Bitcoin and Ethereum exchange-traded funds in the U.S., investing has become much easier.

Universities like Harvard and Brown have recently reported owning shares in both Bitcoin and Ethereum exchange-traded funds (ETFs) in their latest financial filings. Although these investments are currently small compared to their total holdings, they demonstrate that digital assets are becoming more widely accepted by mainstream financial institutions.

If endowments are anticipating lower profits from traditional investments like stocks and bonds, crypto ETFs could be a small, high-risk addition to their portfolio, despite their price swings.

However, the experts emphasized that the difficulties aren’t limited to one type of investment. Many organizations are becoming more cautious with their expectations after a long period of strong market gains. Potential profits from stocks seem limited, there’s a large backlog of properties in private markets, and the overall economic outlook remains uncertain.

“I think it’s a really hard setup for outstanding returns,” Lew said.

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2026-02-25 17:55