Each day at the Boston offices of the Harvard Management Company (HMC), Harvard's seventh-floor trading room shakes with activity as a staff of investors scrambles to keep the University's wealth growing.

With Dow Jones tickers clicking outside and electronic monitors spewing stock quotes, the traders follow the progress of different companies on computer screens, occasionally calling outside investment firms on their bank of phone lines.

"That tends to be sort of a noisy, feverish, high-pitched, somewhat of an emotional climate," says Walter M. Cabot '55, president of the company. The staff's favorite football team is the Los Angeles Raiders, and black-and-silver caps dot the heads of investors, some of whom take advantage of a nearby Nerf basketball hoop to burn off the tension.

Harvard's billions are safe for another day.

It used to be that a University could simply lay its endowment into bonds or a few good blue-chip stocks, and Harvard was no exception. But during the last decade, investing has become a frenzied, anxious business, and the potential for overnight disaster strikes most acutely at institutions like Harvard that rely on their endowment to provide much of their income.

Fortunes and blowouts that used to build up over years now happen in months and weeks. And to the old investing choice among stocks, bonds and "cash"--certificates of deposit and other short-term instruments--have been added dozens of new securities which are traded many different ways.

Harvard's way of insuring a permanent source of income while being able to capitalize on ephemeral opportunities came in 1974, with the establishment of the Management Company. Harvard is almost unique in having its own in-house investment team; the University of Texas and University of California systems both manage their endowments through state-affiliated committees, and Columbia and Rochester are the only other major private universities that do their own investing.

What sets Harvard apart in endowment management, investors say, is its degree of sophistication. The Management Company is a $6 million-a-year operation employing a staff of 90, keeping 88 percent of Harvard's $2.5 billion endowment. Lately HMC has moved into risky areas where universities never dared trod--venture capital, stock options and futures, complex bond arbitrage operations--and has even pioneered a scenario (called "stock lending") where it lends short-term securities like bonds to private investors. Harvard takes the cash those investors pay and deposits it at market rates of return--a double-edged way of boosting endowment by having money in the bank and bonds to cash in later. In addition, Harvard has begun assembling a full-time research and analysis team under John R. Chase '50, a former portfolio manager.

Cabot, who has headed the operation since its founding, says that despite these initiatives, the company remains deeply aware of how critical endowment income is to Harvard and also of how administrators' peace of mind depends on a lack of volatility in the endowment. "The President and trustees get upset if the market value is up and down and up and down. They're human beings--you know, they'll say, 'I don't like this kind of stuff,'" he notes.

Still, Cabot says he's no wimp about investing. "I am not going to be like a typical trust officer in a bank who says, 'No decision is the best decision--don't ever take a risk.' We are in the business of making money for Harvard, and therefore we are risk takers, but we are risk takers within an overall prudent environment."

That prudent environment derives from a few simple principles: first, that the endowment income is "to equally benefit today's generation of students as well as tomorrow's. I can't make you guys so rich that the guys who follow you 10 years from now don't have anything," Cabot says.

Harvard also wants a real return above inflation. Putting up buildings, luring scholars to the Faculty, and continuing a policy of aid-blind admissions demands that income rise faster than prices. And finally, some of the Crimson pride goes into endowment management: "We want to do competitively well relative to, say, 10 other major institutions," Cabot says.

Harvard has generally stayed ahead of the market, with sluggish years balancing out against booms. Since 1973, the endowment has grown by more than 10 percent in five of 11 years; Harvard took a fall in 1973 when it lost 10.1 percent, but last year the University registered its most lucrative year ever--riding the bull market of 1982. Harvard scored $700 million in gains, boosting the endowment to $2.4 billion, the highest in the nation.

What has happened since June, 1982 exemplifies the new interventionist brand of money management at Harvard. HMC had shifted heavily into stocks (at one point, almost 80 percent of the endowment was in stocks). But last December, accurately sensing an imminent tumble in the market, the company took a $300 million slug out of equities and put it into bonds, and rearranged stock holdings to include more health care and small technology companies. These two industries proved to be the only sectors rising at all in a sleepy market.

But last week reports showed that Harvard's endowment had dropped about $150 million, as some of those same computer and health care issues fell.