The university announced on October 10 that the combined pool’s return on investment for fiscal year 2024 (FY24) will be 8.4%. The combined pool, valued at $42.8 billion as of June 30, is made up of funds from Stanford University, the bulk of the university’s endowment. Additional long-term reserves for pediatric care and the University of Health Care and Stanford Medicine.
Profits for the current financial year have nearly doubled from the 4.4% investment return in FY23. However, the profit is still well below the FY2021 return of 40.1% published in the FY2021 Annual Financial Report.
Stanford Management Company (SMC) is responsible for managing Stanford University’s endowment investments and other financial assets, making investments consistent with the university’s long-term goals. The endowment incorporates more than 8,100 funds established by philanthropic donors and designated for specific purposes over the years, according to SMC’s website. These gifts fund student scholarships and advance specific areas of research through professorships, fellowships, and research funding.
Louisa Laporte, a university spokeswoman, said such fluctuations are expected as a natural condition of capital market investments. Stanford tries to reduce volatility through “appropriate levels of portfolio diversification,” but the risk can never be completely eliminated, LaPorte wrote.
Although fiscal 2021 results were much better than expected, likely due to the unpredictable impact of COVID-19 on global markets, Rapport said, “In the long term, “Short-term fluctuations tend to smooth out, and results tend to fall within tighter ranges.”
Stanford University’s performance was below the median annual return of 10.1% for U.S. university endowments, preliminary reported by Cambridge Associates. A typical investment portfolio with 70% in global stocks and 30% in high-quality U.S. bonds also outperformed Stanford’s investments, returning 13.5% over the same period.
However, the median endowment size of U.S. universities included in the Cambridge Associates report was only $1.2 billion. “Small endowments tend to invest heavily in public equity, but Stanford (and some of its larger peers) invest in illiquid private equity such as private equity and venture capital,” Rapport said. “We have significant exposure to market strategies.”
SMC CEO Robert Wallace said in the Stanford report that public markets outperformed private market alternatives last year, potentially explaining the discrepancy between Stanford’s performance and that of other portfolios. He said that there is.
Over the long term, investing in the private market has benefited Stanford University. Rapport reports that the university’s 10-year consolidated pool net return was 8.6% per year, which is 1.7% per year above the 10-year median for Cambridge Associates Colleges and Universities, and the passive ’70 /30” performance by 2.4% per year. portfolio.
Stanford News reported that in fiscal year 2024, $1.8 billion was disbursed from Stanford University’s $37.6 billion endowment.
“Support for the Stanford community, especially low- and moderate-income students, is one of the most important programs sponsored by the endowment,” LaPorte wrote. She noted that nearly 87 percent of all undergraduates graduate from Stanford with no student loans.
According to Rapport, the fund’s disbursement will increase to $1.95 billion, which will be dispersed to support the FY25 operating budget.
SMC invests capital in accordance with the Ethical Investment Framework guided by the Stanford University Board of Trustees’ Special Committee on Investment Responsibility (SCIR). The framework notes that university boards may choose to divest certain companies or categories of investments that are deemed “abhorrent or ethically unconscionable.”
In light of the ongoing Israel-Gaza war, student organizations such as Stanford Students for Palestine Justice (SJP) have unsuccessfully petitioned the university to divest from defense companies affiliated with the Israeli Defense Forces. . SCIR rejected SJP’s request to disclose the university’s endowment investments on October 15, but Professor Rapport said there were “no material changes” to the university’s long-term investment strategy as a result of geopolitical tensions. ” he revealed.
