1

%%

Endowment and Foundation Respondents by Region

Endowment and Foundation Respondents by Investable Assets

21%

35%

44%13%

22%

65%

■ Americas ■ EMEA ■ APAC

■ Less than $100m■ $100m – $499m ■ $500m or more

Endowment and foundation funds are adopting a new approach to risk as

they seek to boost their investment returns. Our recent research shows

institutional investors in this sector are moving into riskier asset classes, in

particular, emerging markets, infrastructure and private equity. But they’re

also seeking to improve internal governance, and looking for increased

transparency from their asset managers. With a more hands-on approach

to investment management, they can strike the right balance on risk and

return in an increasingly challenging environment.

About the reseArch

On behalf of State Street, the Economist Intelligence Unit conducted

a global survey of institutional asset owners during July and August

of 2014. The survey garnered 170 responses from endowment and

foundation executives globally, spanning public and private institutions.

Source: State Street 2014 Asset Owner Survey, conducted by the Economist Intelligence Unit

Research Summary

A Hands-on Future for Endowment and Foundation Funds

52% will ramp up risk appetite in search of better returns

56% say conducting due diligence in manager selection is a challenge

44% say strengthening overall governance is a high priority

www.statestreet.com/ourbusiness2

Asset Owners Research Summary

CORP-1166 Expiration Date - 11/30/2015

If you would like to discuss these results, please contact:

Martin SullivanHead of Asset Owner Sector Solutions, Americas+1 617 664 3164martin.sullivan@statestreet.com

Highlights

• Only 11% are strongly

confident their operational

infrastructure can support

portfolio changes

• 32% say they will

increase the proportion

of their assets managed

in-house

• 41% say better

data management

is a high priority

our reseArch reveAls thAt respondents Are focused on three key AreAs:

Shifting investment strategies

Endowments and foundations are taking on riskier or more complex

asset classes to drive up growth.

• The majority of global respondents (62 percent) see greater investment

opportunity in emerging markets.

• Alternatives are important to the strategy, with 38 percent planning

to increase their allocation to infrastructure and 26 percent intending

to increase their allocation to private equity.

Defining new relationships with asset managers

Endowments and foundations are looking for asset managers who

can deliver solutions that are aligned with their long-term investment

objectives. Due diligence in manager selection, both pre- and post-hire,

remains top of mind.

• Only 38 percent of global respondents believe that innovation in investment

products is keeping pace with the needs of institutional asset owners.

• Almost half (46 percent) of respondents say that gaining a complete picture

of risk-adjusted performance from external managers is a challenge.

A more hands-on approach to governance

Tighter governance controls are needed to comply with regulatory

demands and meet external stakeholder expectations.

• More than half (56 percent) of global respondents believe the increasing

sophistication of their portfolios will require a change in their trustees.

• A broader perspective on risk management is needed — one quarter

of respondents say cyber security is now a high priority.

To thrive in this new environment of elevated risk and heightened performance

demands, endowments and foundations are taking a more proactive approach

to the future and all aspects of operations and governance.

Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries. There are risks associated with investing in real assets and the real assets sector, including real estate, precious metals and natural resources. Investments can be significantly affected by events relating to these industries. The information provided herein does not constitute investment advice and is not a solicitation to buy or sell securities. It does not take into account any investor’s particular investment objectives, strategies or tax status. All material has been obtained from sources believed to be reliable but we make no representation or warranty as to its accuracy and you should not place any reliance on this information. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information. Investing involves risk including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street’s express written consent.