U.S. university endowments take on more market risk as funding pressure rises

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Highlights

Eight of the 20 largest U.S. university endowments increased Q1 exposure to technology stocks or cryptocurrency-linked ETFs amid high valuations and volatility.
Harvard faces a $2.2 billion federal grant and $60 million contract freeze, while Princeton sees $200 million in grants suspended due to funding cuts and policy disputes.
Princeton abandons its oil and gas divestment rule to boost endowment flexibility, as ExxonMobil gains 22 percent YTD versus a 30 percent bitcoin drop.

Portfolio shifts reflect search for returns

As first reported by Financial Times, eight of the 20 largest U.S. university endowments by assets under management raise their exposure in the first quarter to technology stocks or cryptocurrency-linked ETFs compared with the end of 2025. The moves include positions tied to companies such as Nvidia, Cisco and Ciena, even as investors remain wary of high valuations and market volatility.

Endowments remain a major funding source for universities, accounting for 15.2 per cent of annual operating expenses, according to a 2025 study by the National Association of College and University Business Officers and Commonfund. At the same time, many of the biggest funds are dealing with weak private equity distributions, with McKinsey data showing top-quartile global buyout funds return 8 per cent in 2025 versus 18 per cent for the S&P 500 index.

The performance gap is also showing up across the sector. Endowments with more than $5 billion in assets return an annualised 7.8 per cent over the three years to June 2025, compared with 11.5 per cent for funds with less than $50 million, according to the NACUBO-Commonfund study.

UTIMCO, which manages money for the University of Texas and Texas A&M systems, reports higher holdings in several technology and AI infrastructure stocks in the first quarter. The University of Chicago also increases technology-focused ETF holdings while reducing its position in an S&P 500 ETF, and Emory University expands its stake in the Grayscale Bitcoin Mini Trust ETF, while Dartmouth College adds a new position in the Bitwise Solana Staking ETF.

Advisers say some institutions see crypto-linked ETFs as a way to diversify portfolios now that regulated vehicles make digital assets easier to access. But consultants also warn that a sharper market correction could expose universities to losses at a time when budget pressure is already intensifying.

Funding cuts and policy reversals reshape strategy

Financial pressure on universities has been growing since last year as the Trump administration freezes or cancels billions of dollars in federal research grants. Harvard faces a freeze of $2.2 billion in grants and $60 million in contracts after rejecting federal demands, while Princeton says about $200 million of grants from agencies including the Department of Energy and the Department of Defense have been suspended.

That strain is also influencing portfolio policy. Princeton this week scraps its rule requiring divestment from publicly traded oil and gas companies, stepping back from a climate-related commitment adopted four years ago. Vincent Tuohey, president of the Princeton University Investment Company, says the revised approach is meant to give the endowment more flexibility while keeping its goal of reaching net zero by 2046.

Princeton's change comes as energy stocks outperform many other higher-risk assets this year. ExxonMobil gains about 22 per cent, helped by stronger oil prices and geopolitical tensions, while the Nasdaq Composite rises more than 10 per cent and bitcoin falls 30 per cent.

Consultants say the policy shift may provide both political and financial advantages. Greater exposure to natural resource companies could help hedge inflation and geopolitical shocks, while also aligning more closely with a federal administration that is promoting oil and gas development and pushing back against climate-linked investment restrictions.

In our earlier article on English universities raising fees for overseas undergraduates, we detailed how leading institutions are pushing international tuition sharply higher to offset stagnant domestic funding. We highlighted steep increases at Cambridge and Oxford and noted that growing reliance on international student revenue is becoming a key lever for university finances as local tuition caps limit income growth.

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