Despite optimism about the US economy, endowments and foundations are planning to decrease their allocations to US equities this year in favour of alternatives such as hedge and private equity funds.

That’s according to the Q4 2014 NEPC Endowment and Foundation Poll, a measure of endowment and foundation confidence and sentiment related to the economy, investing and market performance.

“Overall, endowments and foundations feel very confident about the US economy and have a favorable outlook for domestic equity markets this year,” says Cathy Konicki, Partner and head of NEPC’s Endowment and Foundation Practice. “More than three-quarters of respondents feel the economy is in a better place today than it was this time last year and US equities are forecasted to be the top asset class performer this year, with 95% of respondents expecting the S&P 500 to end 2015 in positive territory.”

Private markets is the asset class expected to see the biggest increase this year, with 33% of respondents favoring an increased allocation, followed closely by hedge funds/absolute return strategies and real assets (liquid and illiquid).

“Given the strong multi-year bull run we’ve experienced in domestic equities, we’re not surprised that endowments and foundations are dialing down their allocation and shifting to other asset classes,” says Scott Perry, Partner in NEPC’s Endowment and Foundation Practice. “Increasing exposure to investments that have recently experienced significant gains has the potential to disappoint over the long-term, so some moderation might be in order right now.”