March 25, 2025 — U.S. institutional investors are making important changes to their portfolios by reducing their exposure to public equities, continuing to shift assets into private markets, and setting aside environmental, social and governance requirements. 

Just a decade ago, U.S. and international equities made up more than 45% of U.S. institutional assets. In 2024, the combination of U.S., global and international equities constituted just 38% of assets. Most of the assets shifted out of equities and into alternative asset classes. Today, private equity makes up 12% of institutional assets and private debt accounts for 4%, with hedge funds, real estate, real assets and other alternatives making up the balance.

That trend shows no signs of letting up today. On net, the 563 tax-exempt funds taking part in a recent Crisil Coalition Greenwich U.S. Institutional Investors Study plan to continue paring back target public equity allocations in the coming three years, with the biggest reductions expected in global and emerging market equities.

Meanwhile, institutions plan to continue raising target allocations to private assets. Overall, about 16% of U.S. institutions plan to significantly increase target allocations to private equity in the next three years, and more than one in 10 plan to make major increases to private debt and private infrastructure equity. These planned increases are being driven by public pension funds, endowments and foundations. For example, nearly one in three endowments and foundations plan to significantly boost target allocations to private infrastructure equity and/or listed infrastructure in the next three years, and almost a quarter plan additional big increases to private equity.

While public pension funds, endowments and foundations continue shifting portfolios toward private assets, corporate pension funds are taking a much different approach. Over the past three years, elevated interest rates have helped shore up funding ratios for U.S. corporate pension funds, which now stand at an average 102%.

“Today, corporate plan sponsors are moving to take advantage of robust funding levels to achieve their long-held goal of minimizing pension risk,” says Mark Buckley, Global Head of Investment Management at Crisil Coalition Greenwich.

To that end, 17% of U.S. corporate pension funds plan to significantly increase portfolio allocations to liability-driven investment strategies in the next three years, and more than one in 10 expect to boost allocations to active fixed income assets useful in asset-liability matching strategies.

Less ESG
Environmental, social and governance investing is losing steam among U.S. institutional investors. In 2023, 47% of U.S. institutional investors considered ESG criteria when selecting asset managers for their investment portfolios. In 2024, feedback obtained before the presidential election showed that share dropping to just 38%. The U.S. divergence from Europe is significant, where more than 90% of institutional investors consider ESG factors when choosing asset managers.

Among U.S. institutional investors the trend is similar with regards to diversity, equity and inclusion (DEI). The share of institutions considering DEI criteria in manager selections dropped to 39%, pre-election in 2024 from 48% in 2023.