At this time last year, Harvard treasurer George Putnam '49 and the other members of the Corporation were floating the idea of establishing an independent, but internal, company to manage Harvard's financial portfolio. By January, Harvard will not only have a new management company with about five outside companies to help handle small segments of the $1.3 billion portfolio, but it will almost certainly have a new custodial bank to hold its accounts, and possibly a whole new roster of "service vendors" to provide the management company with technical assistance--brokers, bankers, auditors, and even legal consultants.

Since the Harvard Management Company took over the portfolio on July 1, its president, Walter M. Cabot '54, has gradually shifted the focus of attention from his initial task of naming a small, but carefully selected staff to the job of assessing the working financial relationships his company will have with many others. Harvard Management is now completely reviewing all the outside service arrangements Harvard set up during the years that George F. Bennett '33 served as president of the company that handled the University's portfolio, director of several corporations in which Harvard had substantial investments, financial advisor to the Harvard Corporation, and Harvard treasurer.

There will undoubtedly be many changes in the companies from which Harvard Management will seek services and these shifts will probably cause some anxiety and controversy in the Boston financial community. The companies with which Harvard chooses to do business will receive a substantial monetary windfall and additional benefit from the prestige a Harvard affiliation carries.

The management company will attempt to establish the procedures and criteria to which it will adhere in handling Harvard's investments. Last week, Cabot held the first formal meetings for a review of past and future economic policy. Meetings for an investment strategy review are scheduled for this week. It is not yet clear to what extent questions of corporate and social responsibility will influence the new investments the company will make or its decisions to maintain or divest Harvard's existing shareholdings. But these considerations will no doubt be at least a part of the policy discussions.

The five-to-seven outside firms which will handle $50,000-to-$100,000 segments of the portfolio will probably not be chosen until January. Although Cabot originally expected to choose the outside firms by late fall, the time required to interview representatives of the 125 firms which have applied and to do all the necessary research has taken longer than Cabot and his staff originally anticipated. Within the next month or two, the list of candidates will probably be narrowed down to about 25 or 30 firms which will then be closely scrutinized before the final selections are made. At least some of the firms selected will be asked to pool investment and economic information with Harvard Management in an experimental program to accumulate the best available information for investment strategy.

The amount of money the firms will be asked to manage for Harvard is relatively small in comparison with many large fund or corporate accounts, but the prestige of managing part of Harvard's portfolio and the opportunity to engage in a unique and fiarly new financial arrangement has attracted an extremely large and diverse pool of applicants. Until the outside managers are selected, Harvard Management will continue to handle the entire portfolio.

Despite the continuing inflation and sharp declines in the stock market that have most financial observers extremely uneasy Harvard's portfolio value has not declined significantly this year. Since about 50 per cent of the portfolio is made up of bonds and cash assets, Harvard has not suffered nearly so much as those institutions that have a majority of their holdings in common stock.

However, Harvard fund-raisers are very concerned that the usual end-of-the-year bulge in donations will be light this year if the stock market does not turn around before then. This could severely crimp the Harvard and Radcliffe College Funds, the Joint Scholarship Fund and the University's other fund drives.

This summer, Cabot finished naming all but one of the partners and associates for the Harvard Management staff. Most of the new partners and associates have spent the last few months acclimating themselves to the Harvard investment scheme and are now picking up their respective tasks in managing Harvard's investments.

Cabot, on the other hand, will not be able to devote full time to the portfolio until he and the treasurer's office complete their efforts to establish a new slate for Harvard financial management.