- Assets under management: $28.7 bln
- PE allocation:25 pct
- Why this is important: Stanford is consolidating its PE portfolio to reduce overdiversification
Stanford University’s investment portfolio generated an 11.3 percent return as of June 30, 2018, down almost 14 percent from the previous-year return of 13.1 percent.
While Stanford beat Harvard University, which generated returns of 10 percent, it did not perform as well as other peers.
Massachusetts Institute of Technology returned 13.5 percent, University of Pennsylvania returned 12.9 percent, Yale University returned 12.3 percent and Dartmouth College returned 12.2 percent in the same period.
Stanford’s merged pool, which includes its endowment, hospitals and non-endowments, grew to $28.7 billion at July 1, 2018, up 7 percent from $26.9 billion in the year-earlier period.
The endowment, which made up about 75 percent of the merged pool, grew to $26.6 billion as of Aug. 31, 2018, from $24.8 billion a year earlier.
“Performance in illiquid asset classes, including private equity, was strong in absolute terms but trailed our expectations in relative terms,” Robert Wallace, chief executive of Stanford Management Co, which manages the investments for Stanford, said in a news release.
Not much is known about Stanford’s $7.31 billion PE portfolio because endowments are not required to release details of their investments.
But Stanford’s merged pool had a 25 percent asset allocation to PE, including investments in venture, growth and buyouts, as of July 1, 2017.
While Stanford worked with managers who employ debt as part of their investment strategy, it preferred to work with partners who improved the company’s performance, instead of just financial engineering, according to its 2017 annual report.
Stanford expected annualized returns of 11.5 percent from its buyouts portfolio and 14 percent from its venture capital portfolios in the long term, the report said.
Stanford since 2015 has been consolidating its external-manager roster to reduce overdiversification in PE, the annual report said.
“Our efforts to reposition the illiquid asset classes are still in early stages and will require more time to complete,” Wallace said.
Action Item: Read Stanford’s news release here https://stanford.io/2OF2HIN