Stanford Addresses Economic Downturn's Effect on Endowment. (May 30, 2009)

Valued at US$17.2 billion in 2008, the worth of Stanford University's endowment is expected to drop by 30% this financial year (September 1, 2008 - August 31, 2009), declining to about US$12 billion.

As a result Stanford intends to reduce the amount of money it will draw from the fund over the next two financial years, resulting in additional budget cuts by the university. In the current financial year it expects to draw US$1 billion from its endowment, but this will be reduced to US$900 million  in FY-2010 and US$750 million in FY-2011.

Stanford's president John Hennessy explained: "By decreasing the payout by 10% next fiscal year and 15% in fiscal year 2011, we hope that the endowment payout will begin to recover within three to four years, rather than five or six,” and added that this year, for the first time in Stanford’s history, investment income—including endowment income and other investment income—was the largest source of revenue, accounting for 29% of the university’s US$3.5 billion in operating revenues.

Professor Hennessy also noted that Stanford had recently completed raising US$1 billion through a bond offering: "Fortunately, we do not have a pressing need to spend these proceeds immediately, but we believe that the added liquidity will enhance the university's financial stability and provide insurance against the need to raise funds at a time when the market might be less attractive," and added that Harvard and Princeton also had recently raised money through bond sales. "Of course we will have to pay that money back, with interest," Professor Hennessy said, "For that reason, those funds are being kept in a segregated account of highly liquid securities, and they will be kept there unless a true emergency demands their use."