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What Wealthy Families Borrow From the Endowment Model
Adapted for endowment and foundation readers from the portfolio chapter of How to Start a Family Office by Richard C. Wilson.
Endowments are often the role model. In my family office book I describe five portfolio models families use. The first is a straight copy of the endowment approach.
The five models
- Endowment style. Wide diversification across managers and asset classes. The goal is to never lose the base. I see this most with third, fourth and later generation families who have billions.
- Real estate. Families who made their money in property often keep 50% to 75% there.
- Private equity style. Founders who built and sold companies run their wealth like a fund focused on one to three industries.
- Direct investment. A mix of property and private companies, with no public stocks or funds.
- Hybrid. For example a third in an endowment-style pool, a third in real estate and a third in operating businesses.
What this says about endowments
Families pick the endowment model when preservation over many generations is the goal. That is the same job an endowment has. Perpetual life, steady spending and a mission that outlasts any one person.
What endowments can learn back
Families in models 2 through 5 lean on what they know. They concentrate where they have an edge. Endowments can ask a similar question. Where does our institution have real knowledge? A medical school, an engineering program, a region?
That doesn't mean concentrating the whole portfolio. It means being open to a few deeper bets where you have an edge.
Same size, similar choices
I have found that if you drill down far enough, families of similar size, generation, risk appetite and source of wealth look more alike than different. NACUBO's yearly study shows endowments of similar size also cluster in how they allocate. See our size band benchmark study on this site.
Frequently asked questions
Is the endowment model right for every family?
No. It fits preservation goals. Families still building wealth often prefer more concentration.
Do endowments ever invest like a family office?
Some take direct stakes or co-invest heavily, which looks similar.
What is the main risk of the endowment model?
Illiquidity in private assets, and paying many layers of fees.
Sources
- How to Start a Family Office, portfolio chapter, Richard C. Wilson .
- NACUBO-Commonfund Study of Endowments FY2025, asset allocation table: https://edge.sitecorecloud.io/nacubo1-nacubo-prd-dc8b/media/Nacubo/Documents/EndowmentFiles/2025-NCSE-Public-Tables--Summary-Asset-Allocations-FINAL.pdf
