Faculty Senate hears report on management of Stanford’s endowment

At its March 8 meeting, the senate also heard a presentation on guidelines for the use of the university’s name and emblems.

At the Faculty Senate meeting on Thursday, Robert F. Wallace, chief executive officer of Stanford Management Company (SMC), provided an overview of how the university’s endowment is managed and how Stanford’s investments support the academic mission.

The senate also heard a report from university leaders on the use of Stanford’s name and emblems and the policies that have been put in place to protect the integrity of the university’s research and teaching mission.

Robert Wallace, CEO of Stanford Management Company, speaking to Faculty Senate on March 8, 2018.

Robert Wallace, CEO of Stanford Management Company, gives a presentation to the Faculty Senate about the work of the university’s endowment and trust fiduciary. (Image credit: L.A. Cicero)

In fiscal year 2017, the payout from the university’s endowment was $1.2 billion, which represented 22 percent of the university’s operating expenses, Wallace said. That income supported Stanford’s core research and teaching mission, including student financial aid, faculty support and funding for the libraries.

Wallace said that the key goals for managing the university’s $26.9 billion investment portfolio are both short term and long term in nature – providing robust and reliable support for the university’s annual operating budget and preserving the “purchasing power” of the endowment for future generations of students and scholars.

In his presentation, he outlined how Stanford supports these two goals through a strategy of investment diversification. He presented a snapshot of the university’s current asset allocation, which is primarily composed of different types of equity exposure.

Wallace said that SMC relies on the expertise of partners to help select many of the individual investments within each asset class. In choosing partners, SMC seeks those whose interests align with the university and possess strong processes and superior judgment, he said.

“We look for partners who are ethical, principled and focused on long-term results – those with appropriate regard for environmental and human welfare,” said Wallace.

Stanford has experienced strong returns on its investments in recent years, resulting in increased support for university operations, said Wallace.

The Stanford Management Company was established in 1991 to manage Stanford’s financial and real estate assets. SMC is a division of the university governed by a board of directors appointed by the Stanford University Board of Trustees.

Wallace also addressed questions regarding Stanford investments that come up in campus discussions. Considerations of divestment requests are made by Stanford’s Board of Trustees, he said, noting that there is a community review process under way regarding the university’s investment responsibility policies and practices. Community input is being sought to inform that review.

In response to questions about Stanford Management Company’s approach to the social impact of investments, Wallace noted that “proper regard for human and environmental welfare coincide with long-term investment success.” While the university does not use the endowment to achieve specific social outcomes, he said, social and environmental issues are a part of the long-term economic viability of companies and industries that SMC and its partners assess when making investment choices.

“We spend an awful lot of time making sure that our investments are making the world a more productive place, providing goods and services that are valuable and that will improve people’s lives over time, while not damaging the communities or environment that those businesses are located in,” he said.

Wallace also addressed overseas investment partnerships or “offshore” vehicles, as they are sometimes called. Wallace emphasized that Stanford’s overseas investments are fully compliant with tax law and are reported to the Internal Revenue Service annually.

Guidelines for name and emblem use

Stanford continues to enforce name and emblem use policies to protect the integrity of the university’s research and teaching mission, said Lisa Lapin, vice president for university communications.

Lapin noted that the guidelines were updated recently to reflect increasing efforts to misuse Stanford’s name for commercial purposes. Stanford does not endorse, and cannot appear to endorse, commercial entities, she said.

In the presentation, Lapin, together with Nicole Scandlyn, senior director of university brand management, and Susan Weinstein, assistant vice president for business development, showed examples of misuse of the Stanford name, including implied endorsements that third parties have used to advertise and promote their products and services.

Policies pertaining to Stanford’s name and emblem use can be found in the Stanford Administrative Guide. Guidelines for film, photography and video requests are on the University Communications website.

Other business

In other business, President Marc Tessier-Lavigne noted the recent announcement that Dean for Religious Life the Rev. Jane Shaw will be leaving Stanford at the end of the academic year for a position at the University of Oxford. He said a search committee, chaired by Grant Parker, professor of classics, is in the process of being formed by Provost Persis Drell to identify a successor as dean.

The full minutes of the March 8 meeting, including the discussion that followed the presentations, will be posted on the Faculty Senate website. The next senate meeting is scheduled for April 12.