The Mail INVESTING THE ENDOWMENT

To the Editors of the CRIMSON:

Recent pleas for the Corporation to relieve the burden of the Faculty deficit by reducing its capital endowment will surely fall on deaf ears. Educational and other non-profit trusts and foundations are loathe to take such a step. However, much the same result could be achieved by better management of Harvard's endowment assets.

A review of Harvard's investment record over the last decade reveals a rather dismal performance. Over the period 1965-1970 the market value of assets depreciated about ten per cent. During that period the popular stock market indices increased, and many private money managers realized substantially greater gains. The Corporation's review of its endowment indicates a preoccupation with yields, continually stressing that interest income has risen. This preoccupation is further evident in the one-third holdings in bonds and the concentration of equity investments in large oil, utility, and auto stocks. This concern over yields misses the point. The essence of good investment management in the postwar period has been capital appreciation through equity investment. That remains the point, the recent stock market decline and higher bonds yields notwithstanding. Were it not for Harvard's investment in IBM (five per cent of its assets,) the record would be far worse.

Harvard could do much better with its endowment. Wider diversification in equity holdings should be pursued. Most private and public pension funds and trust accounts have been switched during the postwar period from private management to management by bank trust departments or other professional money managers. Harvard should do likewise. The best hedge against risk is to split the funds several ways, with periodic evaluation, replacing managers who didn't perform well. Harvard's failure to seriously rethink and update its investment philosophy is costing all concerned dearly.