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Stanford Management Company
Company typePrivate
IndustryInvestment management
Founded1991 (1991)
Headquarters
Stanford, California
,
U.S.
Key people
Robert Wallace (CEO & CIO)
AUMIncrease US$47.2 billion (FY 2023)[1]
OwnerStanford University
Websitestanford.edu
smc.stanford.edu

The Stanford University endowment, includes real estate and other investments valued at $47.2 billion as of August 31, 2023,[2] and is one of the two largest academic endowments in the world.[3] The total value is comprised of $29.9 billion in a merged pool of assets, $10.7 billion in Stanford Hospital and other long-term funds, and $6.6 billion of real estate in the San Francisco Bay Area. Along with Stanford's pension assets, working capital, and non-cash gifts, the endowment is managed by Stanford Management Company (SMC), a Stanford-owned investment management company.[4]

History

Formation and Early Years

The Stanford Management Company was founded in 1991 in response to the growing complexity of investment markets and the need for specialized asset management.[4] Prior to the establishment of SMC, Stanford’s financial assets were managed internally by the university’s Office of the Treasurer, which is now a function of the SMC.[5] The creation of SMC aimed to professionalize asset management, bringing in specialized financial expertise to optimize investment strategies and enhance returns.[6]

Growth and Expansion

From its inception, SMC adopted a diversified investment strategy, spreading its investments across various asset classes, including equities, fixed income, real estate, and alternative investments such as private equity and hedge funds. This diversification aimed to balance risk and return, ensuring long-term growth and stability.[7][8]

Significant Milestones

In the 1990s, SMC navigated various market conditions, including the dot-com boom and subsequent bust. The company focused on building a robust investment portfolio that could withstand market volatility.[9][10] During the 2000s, SMC continued to grow the endowment significantly, benefiting from the global economic expansion and the rise of technology and innovation sectors.[11]

The global financial crisis of 2008 posed significant challenges for all institutional investors, including SMC. However, its diversified investment strategy helped mitigate the impact, and SMC emerged from the crisis with valuable lessons that further refined its approach to risk management and asset allocation.[12][13]

Investment Strategy

SMC employs a diversified investment strategy to manage Stanford University's endowment, allocating funds across various asset classes, including public equities, fixed income, private equity, venture capital, real estate, and natural resources.[14][15] The investment strategy currently is comprised of 8,800 smaller funds, of which more than 75% have restricted usage for purposes specified by donors.[5]

Sustainable and Responsible Investing

In recent years, SMC has increasingly focused on sustainable and responsible investing. The company has integrated environmental, social, and governance (ESG) factors into its investment processes, reflecting a broader trend among institutional investors to consider the long-term impact of their investments on society and the environment.[16][17]

Performance

The endowment has experienced significant growth, particularly during periods of economic expansion, while also facing challenges during market downturns, such as the 2008 financial crisis.[18][19]

Governance

SMC is governed by a Board of Directors, which includes members of the Stanford University Board of Trustees and experienced investment professionals. This governance structure ensures that SMC's investment strategies align with the university's mission and goals.[20][21]

Impact

The successful management of Stanford's endowment by SMC has had a significant impact on the university. It has provided critical funding for scholarships, faculty positions, research projects, and campus infrastructure, enhancing Stanford's ability to attract top talent and remain at the forefront of academic and scientific innovation.[22][23] SMC's approaches and strategies have influenced endowment management practices across higher education institutions, setting a benchmark for diversification, innovation, and responsible investing.[24]

See also

References

  1. ^ Cite error: The named reference smc_faq was invoked but never defined (see the help page).
  2. ^ Stanford, © Stanford University; Accessibility, California 94305 Copyright Complaints Trademark Notice. "FAQ | Stanford Management Company". Investment Office of Stanford Management Company. Retrieved 2024-07-04.{{cite web}}: CS1 maint: numeric names: authors list (link)
  3. ^ Wood, Sarah (2023-10-02). "15 National Universities With the Biggest Endowments".
  4. ^ a b "About Stanford Management Company". Stanford Management Company. Retrieved July 3, 2024.
  5. ^ a b "How does Stanford's $36.5 billion endowment work?". 2024-04-28. Retrieved 2024-07-04.
  6. ^ Kolata, Gina (December 15, 1991). "Personal Finance; A Rich School Tries to Get Richer". The New York Times. Retrieved July 3, 2024.
  7. ^ "Stanford Management Company Overview". Bloomberg. Retrieved July 3, 2024.
  8. ^ Sender, Henny (January 5, 2011). "Stanford's Endowment Shows Gains". The Wall Street Journal. Retrieved July 3, 2024.
  9. ^ "Stanford Endowment Investment Performance". Stanford News. May 10, 2021. Retrieved July 3, 2024.
  10. ^ Hechinger, John (November 22, 2002). "How Stanford Endowment Navigated the Dot-Com Bust". The Wall Street Journal. Retrieved July 3, 2024.
  11. ^ Swensen, David (2009). Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment. Free Press. ISBN 978-1416544692.
  12. ^ "Stanford's Endowment Lost 25% Last Year". The Wall Street Journal. October 29, 2009. Retrieved July 3, 2024.
  13. ^ Clark, Andrew (January 29, 2009). "Stanford University endowment suffers $4.6bn loss". The Guardian. Retrieved July 3, 2024.
  14. ^ "Our Investment Approach". Stanford Management Company. Retrieved July 3, 2024.
  15. ^ Whitesides, John (November 14, 2018). "Stanford endowment returns beat market, trail Ivy League peers". Reuters. Retrieved July 3, 2024.
  16. ^ "Stanford Management Company Commits to ESG Investing". The Stanford Daily. November 2, 2021. Retrieved July 3, 2024.
  17. ^ DiNapoli, Jessica (October 15, 2019). "Stanford Management to focus more on sustainable investing". Reuters. Retrieved July 3, 2024.
  18. ^ "Stanford Endowment Investment Performance". Stanford News. May 10, 2021. Retrieved July 3, 2024.
  19. ^ McDonald, Michael (October 25, 2018). "Stanford Endowment Gains 11.3% in Year, Trailing Ivy League Rivals". Bloomberg. Retrieved July 3, 2024.
  20. ^ "Leadership". Stanford Management Company. Retrieved July 3, 2024.
  21. ^ Browning, E.S. (June 25, 2012). "Stanford Hires Veteran Endowment Chief". The Wall Street Journal. Retrieved July 3, 2024.
  22. ^ "Impact Report". Stanford University. Retrieved July 3, 2024.
  23. ^ Rosenberg, John (October 22, 2018). "Stanford's Successful Capital Campaign Raises a Record $6.2 Billion". U.S. News & World Report. Retrieved July 3, 2024.
  24. ^ Swensen, David (2005). Unconventional Success: A Fundamental Approach to Personal Investment. Free Press. ISBN 978-0743228381.
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