Report Shows Investing At Colleges Less Conservative

College investment policies have grown loss conservative since war days, although they rest on a sound basis, according to an article in the May 9 issue of the Harvard Alumni Bulleitn.

The article, written by George Putnam, Jr. '49, and labelled "Sound Investing: A Brief Comparison of the Financial Policies of Five Eastern Universities," campares the investment set-ups at Harvard, Yale, Columbia, Princeton, and M.I.T.

Putnam points out that purchase of common stocks increased during and immediately after depression days, in the hope of stepping up the rate of the return. During the inflationary war and post-war days, the common stock trend kept up. Harvard's common stocks made up 12.4 percent of the endowment fund at market value in 1932, 34.7 percent in 1941, and 49.1 percent in 1952. At book value, which is the initial cost to the fund for purchase, common stock made up 37 percent-and the largest single part-of the fund.

Harvard Fund Tops

The Harvard Endowment Fund is by far the largest, at both book and market value. At market value, it is valued at 309 million dollars; at book value it is worth 246.3 million. Next closest of the four other colleges studied by Putnam is Yale, whose fund at book value is 137.2 million, followed by Columbia, with 103.9 million, Princeton, with 53.9 million, and M.I.T., with 45.1 million. The totals at market value are a good deal higher.

Putnam notes that investment policies today seek to strike a balance between common stocks and a reserve of cash, commercial paper, and short-term Government bonds. Except for Columbia, common stocks at book value now make up between 30 and 40 percent of the funds of these institutions. At market value, they are, again, much higher: 51.7 percent for Princeton, and 46.9 percent for M.I.T., for example.

Emphasis on Utilities

Harvard, Yale, and Columbia have the greatest concentration of common stocks in public utilities, Princeton in oils, and M.I.T. in chemicals and drugs. Harvard' next most important stocks are oils, insurance, banks, railroads, and chemicals and drugs, in that order.

In bonds, Harvard, Columbia, Princeton, and Tech have their largest book value investments in U.S. Governments, while Yale has its greatest amounts in public utilities and industrials.

Among Harvard's top stocks are Standard Oil of New Jersey, General Electric, General Motors, B.F. Goodrich, Texas Company, Union Carbide, and, appropriately enough, Hiram Walker.

Common Stock Largest

The Harvard Endowment Fund is broken down as follows: common stock, 37 percent cash and U.S. Government bonds, 33.1 percent; other bonds, 20.9 percent; preferred stock, 7.1 percent; real estate and mortgages, 1.9 percent. Yale, on the other hand, has 32.6 percent common stock; only 8.5 percent cash and U.S. bonds, 32.1 percent in other bonds, and 14.3 percent in real estate and montgages.

Putnam notes that one reason for the increased emphasis on common stock investment has been the decline in return on bonds. While the return averaged five percent from 1886 to 1931, it dropped to four during the depression, and has risen to 4.5 in more recent years.