The value of the Merged Pool, the university’s principal investment vehicle for endowment, expendable funds and hospital reserves, rose to $30.3 billion as of June 30, 2020.

“In a volatile year, disciplined adherence to policy asset class targets aided performance and helped the portfolio recover from pandemic-related losses,” said Robert Wallace, chief executive officer of Stanford Management Company.

Stanford’s 5- and 10-year results have benefited from efforts to concentrate and upgrade the Merged Pool since 2015. The university’s 7.1 percent and 9.3 percent net annualized return over the last 5 and 10 years exceed the 5.0 percent and 7.4 percent median endowment result over the same periods, respectively, and place Stanford well into the top decile of the peer universe.

The value of the university’s endowment increased 4.5 percent to $28.9 billion on August 31, 2020, the close of Stanford’s fiscal year. Spending from the endowment to support university operations in fiscal year 2019-20 was $1.36 billion, equal to 4.9 percent of the endowment’s value at the beginning of the fiscal year. These funds provide support for the university’s core research and teaching mission, including financial aid for undergraduate and graduate students.

In June, anticipating significantly impaired revenues and investment returns as a result of the pandemic, Stanford’s Board of Trustees approved a conservative budget for fiscal year 2020-21. “The better than expected performance of the Merged Pool and the endowment is welcome news and will help offset a worse than expected revenue shortfall caused by our inability to bring back two undergraduate classes in the fall quarter,” said Randy Livingston, Stanford’s chief financial officer and vice president for business affairs. “We believe the conservative financial stance we have taken will serve us well as we continue to deal with the financial challenges related to the pandemic.”

Stanford’s endowment is intended to provide financial support for the university and its strategic objectives in perpetuity. Payout from the endowment funds approximately 20 percent of the university’s operating budget. Rather than a single fund, the endowment consists of thousands of individual gifts from donors, with most gifts restricted to specific uses.

With interest rates at extremely low levels and the valuations of many risk assets elevated, baseline returns for capital markets may be below average for a period of time, pressuring the university’s dual objectives of using the endowment to support current operations and preserving its value, adjusted for inflation, for future generations.