With $1.6 billion in gains, Stanford investment return slips, but still exceeds expectations

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Stanford netted $1.6 billion in investment gains from the University’s Merged Pool, which contains most of Stanford’s endowment funds, according to annual financial results released on Thursday. The 5.6% return — though Stanford’s chief financial officer said it was higher than expected — marks a decrease from 2019’s returns of 6.5% and 2018’s returns of 11.3%

At Thursday’s Faculty Senate meeting, Provost Persis Drell introduced budget cuts totaling around $100 million, saying that while the endowment performed “better than expected,” the University had been unable to invite as many students as it had planned to campus for fall quarter. Endowment payouts are used to support functions including research and student financial aid. 

The endowment was valued at $28.9 billion as of Aug. 31, indicating a year-over-year increase of 4.5%.

The performance is “welcome news” that “will help offset a worse than expected revenue shortfall caused by our inability to bring back two undergraduate classes in the fall quarter,” Randy Livingston, Stanford’s chief financial officer and vice president for business affairs, told Stanford News.

University units were asked in April to “prepare for perhaps the worst” by developing budget plans that would account for a 15% reduction in endowment payout and a 10% reduction in general funds. The Stanford Board of Trustees approved a conservative budget this June that increases endowment payouts to student financial aid by 3% and raises endowment spending overall, despite anticipating both decreased revenue and weaker returns. 

The 5.6% return trails returns of peer institutions’ endowments, such as Yale (6.8%) and Harvard (7.3%). But it outperformed the median return of 1.6% from other college endowments tracked by Cambridge Associates, according to Stanford News.

Stanford Management Company controls the Merged Pool, which is now valued at $30.3 billion and includes the majority of endowment funds. The rest of the endowment is composed of endowed lands and separately managed investments.

Endowment returns make up roughly 20% of the University’s annual operating budget, although about 75% of total endowment funds are restricted for certain use for the specific purpose designated by the donor. 

Contact Benjamin Zaidel at bzaidel ‘at’ stanford.edu.

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