September 28, 2007
Stanford Management Company report issued
The Stanford Merged Pool (MP) generated a 23.0 percent investment return for the 12 months ended June 30, 2007, according to the Stanford Management Company (SMC).
Over this one-year period, the U.S. equity market, as measured by the S&P 500 Index, was up 20.6 percent, and the U.S. bond market, as measured by the Lehman Aggregate Bond Index, was up 6.1 percent. Investment returns over the last year were particularly strong in international markets, private equity and real estate investments. Over the past 10 years, the MP has achieved an annualized return of 15.1 percent, growing from $4.3 billion to $18.9 billion.
The MP is Stanford's primary investment pool and includes the university's endowment and most of its expendable funds, as well as capital reserves from Stanford Hospital and Clinics and Lucile Packard Children's Hospital. The MP is distinguished from the endowment in that it includes expendable funds and capital reserves. Stanford's endowment increased from $14.1 billion to about $17.2 billion for the fiscal year ending Aug. 31, 2007.
In June, the university's Board of Trustees approved an increase in the target payout rate of the university's endowment from 5.0 percent to 5.5 percent to help fund important university capital improvement projects over the next several years. This increase will take effect in the new fiscal year that began Sept. 1.
"Our successive strong years of returns have direct bearing on Stanford's ability to deliver on its far-reaching education and research vision," said John Powers, chief executive officer of the Stanford Management Company. "We are pleased with our results for the June 30, 2007, year. The team at SMC has really come together over that period of time, and these results speak to the quality of their efforts."
Powers said, "Over the past five years, ended June 2007, the Stanford portfolio achieved an annualized return of 17.7 percent, while over the same period the U.S. stock market gained, on average, 10.7 percent per year. This strong absolute and relative performance over a longer measurement horizon is a testament to the broadly diversified nature of our endowment pool, its capacity to withstand negative market shocks and the ability of our managers to add alpha."