Stanford University Stanford Merged Pool Portfolio — page 1

STANFORD MANAGEMENT COMPANY

Stanford University

Stanford Merged Pool

Portfolio

Fiscal Year 2024-2025 Analysis

INSTITUTIONAL INVESTMENT STRATEGY & GOVERNANCE REVIEW

Stanford University Stanford Merged Pool Portfolio — page 2

STRATEGIC PORTFOLIO REVIEW

EXECUTIVE OVERVIEW

Executive Overview

The

Stanford Merged Pool (MP)

represents

the primary investment vehicle for Stanford

University’s long-term capital. Valued at

approximately

$47.7 billion

, the Merged Pool

is a sophisticated institutional portfolio

designed to support the university's mission

in perpetuity.

Managed by the

Stanford Management

Company (SMC)

under the leadership of CEO

Robert Wallace, the MP consolidates diverse

capital sources—including the university's

endowment, healthcare reserves, and

expendable funds—into a unified, high-

performance investment engine.

Investment Philosophy

SMC employs a multi-generational

investment horizon. The strategy is

characterized by:

Equity Orientation:

Focused on long-

term capital appreciation.

Global Diversification:

Seeking

opportunities across geographies and

asset classes.

Manager Partnership:

Identifying and

backing elite investment talent

globally.

$47.7 Billion

TOTAL MERGED POOL VALUE

$40.8 Billion

UNIVERSITY ENDOWMENT PORTION

20%+

UNIVERSITY OPERATING BUDGET SUPPORT

•

Confidential Institutional Analysis • Internal Use Only

Stanford University Stanford Merged Pool Portfolio — page 3

CAPITAL ARCHITECTURE

SOURCING FRAMEWORK

Capital Sourcing & Consolidation

The Stanford Merged Pool functions as a "fund of funds," aggregating capital from distinct

institutional buckets to achieve economies of scale and access to private markets that

would be unavailable to smaller, individual pools.

University Endowment

Comprising thousands of

donor-restricted funds

supporting financial aid,

faculty chairs, and research.

Healthcare Reserves

Long-term investment capital

from Stanford Health Care and

Stanford Medicine Children's

Health.

Expendable Funds

Institutional reserves and

operating cash invested for

long-term growth beyond

immediate needs.

The Merged Pool Architecture

A unified vehicle for institutional excellence

[ Endowment ] + [ SHC Reserves ] + [ Expendable Funds ]

↓

STANFORD MERGED POOL

↓

[ Global Diversified Asset Allocation ]

Section 2: Capital Flow & Architecture

Stanford University Stanford Merged Pool Portfolio — page 4

PORTFOLIO STRATEGY

ASSET ALLOCATION

Strategic Asset Allocation

Stanford’s portfolio is intentionally equity-biased, recognizing that long-term purchasing

power is best preserved through ownership in productive enterprises. The allocation

reflects a high conviction in private markets and alternative strategies.

Figure 1: Target Asset Allocation for the Merged Pool

Asset Class

Target %

Strategic Role

Private Equity & Venture Capital

38%

High growth, innovation capture, and alpha generation.

Absolute Return

19%

Diversification and idiosyncratic returns (Hedge Funds).

International Public Equities

16%

Exposure to global economic growth outside the U.S.

Real Assets & Real Estate

10%

Inflation protection and tangible asset yield.

Fixed Income & Cash

Liquidity provision and deflationary hedge.

Domestic Public Equities

Core U.S. market exposure.

Section 3: Investment Diversification

Stanford University Stanford Merged Pool Portfolio — page 5

STRATEGIC EDGE

PRIVATE MARKETS

The Venture Capital & Private Equity Edge

Stanford Management Company maintains a world-class exposure to private markets,

specifically venture capital. Located in the heart of Silicon Valley, Stanford benefits from a

unique ecosystem of innovation, entrepreneurship, and technical expertise.

The Innovation Premium

By partnering with elite venture capital firms—many of which were founded by

Stanford alumni—the Merged Pool gains early access to the companies that define

the future of technology, healthcare, and energy.

Strategic Pillars:

Selection Alpha:

SMC focuses on the top-quartile of managers where performance

persistence is highest.

Long-term Capital:

The "locked-up" nature of private equity matches the

university's perpetual time horizon.

Direct Co-investments:

Leveraging deep relationships to participate directly in high-

conviction opportunities alongside general partners.

Portfolio Contribution

Private equity has historically been the primary driver of Stanford’s outperformance

relative to traditional 60/40 portfolios. In periods of market volatility, the illiquidity

premium and active management of portfolio companies provide structural resilience.

•

Section 4: Alternative Investment Strategy

Stanford University Stanford Merged Pool Portfolio — page 6

MISSION SUPPORT

BUDGETARY IMPACT

Powering the Mission: Distributions

The Merged Pool is not merely a financial asset; it is a foundational pillar of Stanford’s

academic and research excellence. Annual distributions from the pool provide a critical

stream of "evergreen" funding.

Funding Distribution

The endowment payout typically funds

20%

to 25%

of the university's annual operating

expenses. This reduces reliance on tuition

and clinical revenue.

Key Funding Areas:

Financial Aid:

Ensuring a "need-blind"

admission policy.

Faculty Support:

Endowed chairs for world-

leading researchers.

Research:

Seed funding for high-risk, high-

reward interdisciplinary projects.

Infrastructure:

Maintenance and expansion

of the Stanford campus.

Spending Policy

Stanford employs a smoothing formula to

ensure stability in annual payouts. This protects

the university budget from short-term market

swings while ensuring intergenerational equity

—the principle that the endowment should

support future students as robustly as it does

today's.

•

Section 5: Operational Support & Funding Models

Stanford University Stanford Merged Pool Portfolio — page 7

FINANCIAL ANALYSIS

PERFORMANCE REVIEW

Financial Analysis & Performance

Stanford’s investment performance is measured over decades, not quarters. The Merged

Pool has consistently outperformed passive benchmarks through its heavy weighting in

alternatives and manager selection.

10-YEAR ANNUALIZED RETURN (ESTIMATED)

9.5% - 11.0%

Relative to a diversified policy benchmark.

Risk-Adjusted Returns

By incorporating

Absolute Return

strategies (19% allocation), the portfolio aims to

generate "alpha" that is uncorrelated with broad equity market movements. This lowers

overall portfolio volatility while maintaining high return targets.

Metric

Target / Status

Annual Payout Rate

~5.0% of smoothed value

Long-term Growth Target

CPI + 5.0%

Liquidity Buffer

High-quality fixed income & cash (9%)

Geographic Exposure

Global (Significant Emerging Markets focus)

Section 6: Investment Scorecard

Stanford University Stanford Merged Pool Portfolio — page 8

STEWARDSHIP

GOVERNANCE & RISK

Governance & Risk Management

The Stanford Management Company operates under the oversight of a Board of Directors,

which includes university trustees and outside investment professionals. This structure

ensures fiduciary alignment and institutional discipline.

Fiduciary Oversight

The SMC Board approves the strategic asset

allocation and monitors performance, while the

investment team handles day-to-day manager

selection and capital deployment.

Risk Stress-Testing

The portfolio is regularly stress-tested against

historical scenarios (e.g., 2008 Financial Crisis, 2000

Dot-com Bubble) to ensure that the university

maintains sufficient liquidity for operations during

market distress.

Key Risk Categories:

Liquidity Risk:

Managing the high percentage of illiquid private assets against the

need for annual cash payouts.

Concentration Risk:

Ensuring exposure to any single manager or sector (e.g., Tech)

does not threaten overall portfolio stability.

Inflation Risk:

Utilizing Real Assets (Real Estate, Natural Resources) to protect

purchasing power.

•

Section 7: Fiduciary Responsibility

Stanford University Stanford Merged Pool Portfolio — page 9

FUTURE VISION

STRATEGIC OUTLOOK

The Path Forward: Sustainability & Innovation

As Stanford moves into its next century of leadership, the Merged Pool is evolving to

address global challenges, including climate change and ethical investing, while

maintaining its primary financial mandate.

Net Zero Commitment

Stanford has committed to achieving net-zero greenhouse gas emissions across its

investment portfolio by 2050. This involves engaging with managers on ESG

integration and shifting capital toward the energy transition.

Executive Outlook

The investment landscape for the next decade is likely to be characterized by higher

inflation and increased geopolitical fragmentation. Stanford’s response includes:

Deepening Venture Partnerships:

Capturing the next wave of AI and Biotech

breakthroughs.

Global Resilience:

Diversifying supply chain exposure through real asset

investments.

Operational Agility:

Maintaining a "fortress balance sheet" to capitalize on market

dislocations.

"Our goal is to ensure that Stanford’s financial resources are as enduring as its

commitment to knowledge and discovery."

•

Section 8: Conclusion & Vision

Stanford University Stanford Merged Pool Portfolio

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