Stanford University's primary investment pool achieved returns of 1 percent for the year ending June 30, the university reported Thursday, Sept. 27.

"Fiscal year 2012 was a challenging year for international equity markets, which was a drag on the portfolio," said John Powers, CEO of the Stanford Management Company.

"Nevertheless, we exited the year with improved liquidity and a high-quality portfolio in the face of a macroeconomy which still poses significant risks."

Over the past decade, Stanford's so-called merged pool has earned an annualized return of 9.7 percent, growing from $7.5 billion to $19.7 billion. In the same period, the U.S. equity market, as measured by the S&P 500 Total Return Index, earned an annualized return of 5.3 percent and the U.S. bond market, as measured by the Barclays Aggregate Bond Index, grew 5.6 percent per year.

The merged pool represents most of the endowment and expendable funds as well as capital reserves from the hospitals and clinics.

The university's endowment value rose by 3.2 percent, standing at $17 billion as of Aug. 31. Endowment value represents investment gains and losses, endowment gifts and other funds transferred into the endowment, offset by the annual payout for university operations.

Endowment payout for 2012 was $872 million, or 5.3 percent of the beginning-of-year endowment value. The budgeted payout for 2013 is $926 million, or 5.4 percent.

At $17 billion, Stanford's endowment has nearly recovered from its biggest-ever loss four years ago, when it plummeted from $17.2 billion in 2008 to $12.6 billion as of Aug. 30, 2009.

Investment losses that year led Stanford to lay off more than 400 staff members, freeze salaries, consolidate programs and postpone $1.1 billion in capital projects.

"Our endowment is still smaller than preceding the 2007-09 financial downturn and we continue to be concerned about the possible reductions in federal research funding and an investment downturn driven by global economic malaise," said Randy Livingston, university vice president for business affairs and chief financial officer.

However, Livingston said, "Thanks to the generosity of Stanford's donors and disciplined financial management, and despite low investment returns, the endowment had modest growth last year."

— Palo Alto Weekly staff

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