Stanford reports steady growth in 2023 return on investment after 2022’s negative returns

Stanford announced a 4.4% return on investment in its Merged Pool for the 2023 fiscal year on Oct. 12. The Merged Pool consists of a majority of the University’s endowment, funds from Stanford Health Care and Stanford Medicine Children’s Health and additional long-term reserves of the University.

This fiscal year’s gains contrasted with the 4.2% investment loss from the last fiscal year, signifying a steady recovery. However, the gains remain below the 10.84% mean returns over the past 10 years and the 40.1% returns from the 2021 fiscal year. 

“While we report results annually, it is important not to focus on one, two or even three years’ investment performance in isolation,” wrote University spokesperson Luisa Rapport.

The Stanford Management Company (SMC) is responsible for managing Stanford’s endowment investments and other financial assets, investing according to the long-term goals of the University. SMC’s website states that its two main goals are to “provide material support for current University operations, including student financial aid, and to preserve the purchasing power of the Endowment so that future generations of students and scholars benefit from similar support.”

Stanford News reported that this year’s Merged Pool was valued at $40.9 billion as of June 30. The endowment, consisting of approximately 75% of the Merged Pool and additional assets, was $36.5 billion on Aug. 31, the end of the 2023 fiscal year.

The University’s growth still trailed behind the 6.9% median return for U.S. college and university endorsements for the year, preliminarily stated by Cambridge Associates. Additionally, a typical “70/30” passive portfolio of global stocks and bonds returned 10.9% during the 2023 fiscal year.

Rapport wrote that Stanford’s long-term investment trends illustrate a clearer representation of its investment performance comparatively to other universities.

“Stanford’s five- and 10-year net annualized investment performance of 9.5% and 9.4%, respectively, compares with the median college and university endowment return of 8.0% and 7.6% over the same time periods,” Rapport wrote.

The endowment incorporates more than 7,900 funds from philanthropic donors over the years designated for specific purposes. This includes support for vital university resources and programs like financial aid, student scholarships and research funds.

In the 2023 fiscal year, the endowment disbursed $1.7 billion for financial aid and academic programs. The endowment payout funded over 22% of the University’s 2023 operating expenses. A budgeted $1.8 billion is expected for next year’s endowment payout.

“SMC’s investment strategy, which has not shifted in any material fashion over the last three years, is designed to deliver attractive risk-adjusted performance over long time periods,” Rapport wrote.

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