Stanford’s endowment grew 9.6 percent to $13.8 billion for the year ending Aug. 31, 2010, the University said Monday. Its merged pool, which includes most of the endowment, took a nearly 25.6 percent hit the year before, ending June 30, 2009.

Return on the pool’s investment for the year ending June 30, 2010 was 14.4 percent, according to Stanford Management Company. On an annualized basis, the pool has yielded a return of 6.9 percent since 2000, outpacing the U.S. equity market, which slipped an average of 1.6 percent per year, as well as the U.S. bond market, which grew 6.5 percent per year.

“Our investment managers took advantage of strong equity and credit markets through the first three quarters of the fiscal year, allowing us to make up some of the ground lost in fiscal 2009,” said John Powers, Stanford Management Company’s chief executive, in a statement.

Still, Stanford’s endowment remains $3.4 billion, or 20 percent, smaller than it was two years ago. The University responded to the impending recession by cutting budgets across its schools and smoothing the endowment’s payout formula in order to retain funds.

“We made the difficult budget adjustments that are enabling the university to continue operating smoothly with less annual payout from the endowment,” said Randy Livingston, Stanford’s chief financial officer, in the statement.

In fiscal year 2010, Stanford reduced individual endowment fund payouts by 10 percent, then in FY2011 by another 15 percent. The budgeted payout for this fiscal year is $758 million, or 5.5 percent of the endowment’s beginning-of-year value.

— Devin Banerjee