Stanford Management Company’s investment strategy is designed to provide material support to annual University operations while preserving the purchasing power of the Endowment for future generations of students and scholars.
Our Investment Strategy
The dual goals of our mission dictate an investment program that is equity-oriented to generate sufficiently high long-term real returns, and well diversified to dampen annual volatility and mitigate the risk of principal loss. With the University’s goals in mind, SMC applies a rigorous assessment of risk and return to formulate an optimal asset allocation model that can deliver adequate returns over time. Within each asset class, SMC selects expert external partners to execute security-level decisions and drive gains from active management.
The Merged Pool includes domestic and foreign public equities, real estate, natural resources, and private equity. While the portfolio is primarily exposed to equity positions, absolute return strategies that have low correlation to broader markets significantly contribute to diversification. Acknowledging the University’s long time horizon, the investment program is designed to accept a responsible degree of illiquidity to drive incremental returns. A small portion of the Merged Pool is held in high-quality fixed income and cash for liquidity purposes. Policy Asset Allocation targets are updated annually.
Since SMC’s inception in 1991, the Merged Pool has enjoyed impressive results relative to a number of benchmarks. SMC’s long-term performance has generated substantial resources for the University, adding billions of dollars to its Endowment versus the results of peers and the traditional passive portfolio of equities and bonds.