That heady up-and-down action reveals how intense an environment the Management Company has become over the last few years, as more and more specialized investment work is done in-house. The few areas where Harvard uses outside managers include $230 million in venture capital and $170 million in outside investment advisory--where HMC can reap both profits and knowledge from private investors. About $70 million stays in "contrary investing"--depressed or out-of-fashion stocks which managers think have bright futures; two smaller pieces--$26 million in international securities and $16 million entrusted in a new computer trading technique--are also done on the outside.

On a given day, the company has somewhere near two-and-a-quarter billion dollars to handle. The early workers come in to work around 8 a.m. to feel out what has been brewing in the London markets and what they mean for Harvard's money. Later, with newsletters and The Wall Street Journal read, the full investment staff--traders, portfolio managers, fixed-income managers and researchers--meet at 9:30 for a half-hour of quick reports.

Twice a week the group, which includes from 15 to 25 people on a given day, splits up and starts the nitty-gritty; three days the group will stay until about 10:30 discussing a specific topic, such as a company's stock to be bought or sold. Most of the staff, though, enjoys quieter days: researching, meeting with visiting representatives of companies, and occasionally visiting the trading pit to follow the progress of a buying or selling program. While everyone at HMC juggles several projects at once, Cabot says, "everything we do leads up to some kind of decision. Everything is goal-or decision-oriented."

The company's different businesses flow at separate paces. Harvard's stock holdings tend to turn over at the rate of about 25 percent a year, while bond holdings rotate as many as four times in a given 12-month period. Down on the fourth floor, Harvard's trust and gift department, headed by Assistant Treasurer Henry J. Ameral, deals with the 10 or 12 real estate-oriented gifts that come in each month, like individual houses, plots of land or shares in a building. Almost all of it gets appraised and sold. The private placement department, which handles Harvard's holdings in different real estate trusts, buildings and shopping centers, makes only one deal every two or three months--but it will turn over $20 million at a crack.

The most frenetic dealing comes in financial futures and options--commitments to buy or sell a stock on a given future date for a given price. While turnover in options is huge, Cabot says, "it's not a strategic change, but looking for noise within the strategy, finding opportunities, looking for something that is mispriced."

Most other universities don't deal with this. Princeton, which with $1.26 billion has the third largest endowment in the country, uses seven outside managers, who occasionally report to the five-person investment committee of Princeton's 30-member board of trustees.

The New Jersey school keeps secret how much each manager has and how well each is doing, and doesn't let the seven interact. About 60 percent of the portfolio is in stocks, and the managers come from as far away as Pasadena, Calif, and Boston. Princeton has done the best of the major universities over the last five years, with an annual average growth of about 19 percent.

The number two university for endowment, Texas, is in the unique position of being able to capitalize hugely on the next energy crisis as it did in 1979 and 1973. About 75 years ago the university received 2 million acres of scrub land in 19 west Texas counties--which no one expected to one day become America's version of Kuwait.

Texas, and Texas A & M, which gets one-third of the revenue on oil, gas, sulfur, and water from the land, make money in a roundabout, tricky way. Last year $176 million came into Texas's $2.3 billion endowment from the fields, but all the income from the principal of the endowment was spent. W.L. Lobb, who oversees Texas's endowment, says that all endowment income gets spent each year paying off old bond issues the universities have taken out for construction and operations.

Once the land income comes into the account, a 1956 state law tightly restricts how it will be invested. The state treasurer is custodian of the fund, and not more than I percent of the total can be invested in any single company. Texas also can't invest in stocks that don't have a five-year dividend record, which bans venture capital and real estate. Last year the endowment for the 14-branch Texas system grew a modest $176 million, a far cry from Harvard's 42 percent increase.

Across town, Boston University pursues a far more risky--and, of late, very rewarding--investment policy. With only $100 million of endowment, BU can invest more aggressively than Harvard, because endowment income only makes up I percent of the yearly budget. If they lost it all, income could easily be made up elsewhere.

With three outside managers overseen by an investment committee, the college enjoyed a 70.3 percent increase in 1982-3, according to BU official Patricia A. Doyle. That was the number three performance in the nation, and BU's three- and five-year records are the top in the country, according to a study by the Dartmouth-based National Association of Colleges and University Business Offices.

Historically, Harvard has always been on the vanguard of endowment management. Paul C. Cabot '21, a tough, profane Brahmin and the uncle of Walter Cabot, served as Harvard's treasurer from 1948 to 1965 and quintupled the endowment. He demanded complete discretion in managing Harvard's money, arguing that you can't invest by committee. Cabot shifted more than half of the endowment out of downtown Boston real-estate and high-grade bonds, and into common stocks--considered, at the time, a radically new strategy for a private university.

In 1965, Cabot passed on guardianship of Harvard's endowment to his colleague at State Street Management. George Bennett '33. State Street, under whose aegis Cabot manipulated Harvard's money, had enjoyed awesome success--a dollar put in that firm's main mutual fund in 1924 would have grown to $100 by 1980.

George Putnam Jr. '49, himself the head of a huge 17-component group of Boston mutual funds, became treasurer in 1973--conspicuously, appointed by the same search committee he had chaired as a member of the Board of Overseers Putnam will step down on June 30 from his post, and the biggest feather he can put in his cap is the creation of the Management Company.