In part, Weil suggests that Harvard's decision to invest in the "less traditional areas" has been not so much a question of a riskier strategy as a function of the University's financial strength. Weil points out that many colleges do not have the money to make the high-return investments Harvard has made.

While it is clear that Harvard's top-ranked endowment gave HMC investment freedom which other schools did not have, it is Cabot's decision to move away from traditional financial deals which helped to more than triple the endowment.

"My traditional philosophy has been the 'tension' portfolio," Cabot says. "The usual standard of performance has been the Standard and Poors 500 index, and it is representative of the large common stocks. I have tried to diversify away from blue-chip into less competitive areas of the equity market."

According to Cabot, one of the major goals of the HMC diversification was to move into areas where Harvard is an "exceptional" investor and can "make a difference" for an individual company.

One of the previously ignored areas which Cabot identified as an opportunity when he first arrived at Harvard was private investing. Over the years, HMC has increased its holdings in private assets in areas as varied as real estate, petroleum and LBOs. The University now has more than $1 billion--about a third of all assets, Cabot says--invested in this type of holding.

Cabot says the HMC portfolio's dependence on large public stocks has now been reduced to just a third of the company's total assets. The final third is made up of high-risk trading and hedging strategies, another area pioneered by Cabot.

"Certain schools have gotten more involved in [higher-risk areas], but it depends on the attitude," Weil says, adding that many institutions abandoned this foray after taking heavy losses in the October 1987 stock market crash.

Shrugging off those who say Harvard should not be involved in the high-risk financial frontier, Cabot says his critics "lack a knowledge of what we're trying to do."

"People don't understand the nature of risk--just because it's different, they think it's risky," Cabot says. "We probably have three or four hundred private investments. Now sure, any one of those could probably go bottoms-up, but the likelihood of all of them [doing so] is very low. So you've diversified the risk."

But the recent bankruptcy of Lomas Financial Corporation in which Harvard had invested $45 million--roughly one percent of the University's endowment--has raised questions about whether the risks are truly worth the potential gain. Harvard has charged the investment firm Merrill Lynch with "misrepresenting" Lomas' viability as an investment and is suing for triple damages over the incident.

HMC's involvement with outside LBOs and venture capital firms has also come into question, particularly after one of the partnerships--Wall Street-based Kohlberg, Kravis, Roberts and Company--took over tobacco and consumer goods producer RJR-Nabisco at a time when the University was questioning its public investments in the company.

But HMC has answered this concern by moving to internally managed LBOs--again a combination of an expert investment team and the University's financial strength makes this an option for Harvard, where it isn't for most schools.

And because many of the investment decisions made in the past few years--like internal management of LBOs--indicate a long-term plan for HMC, Harvard insiders say they doubt the structure and philosophy of HMC will change significantly once Cabot's replacement is found and takes over the reins.

College Treasurer D. Ronald Daniel says that as long as the University does not suddenly change its long-term objectives, then HMC will continue to manage the endowment in the same way as before.

"There is no question of changing the risk-reward strategies," Daniel says. "We're more interested in looking at other areas. We have to strengthen international investment, for example."

Cabot agrees that "if we aren't global in thought then we're not going to be competitive" and says HMC should concentrate its attention on foreign investment over the next decade, but he adds that this should not require a new strategy, just a broader playing field.

"In the next 10 years, we could see as much change here as in the last 10 or 15," Cabot says. "There will be as many opportunities, you just have to be smart enough and have the courage to take them."

In the search for a new president, Daniel says, the priority is not to find someone who wants to turn HMC's investment policies around, but to move the current strategies into a wider arena.

"We need somebody who is both a gifted investment strategist and someone who is a good people person--if you can't get along with the people you have to work with in this business then you won't be successful," Daniel says. "And just as Walter has been, his successor will have to be a leader and an institution builder. We need to replicate the qualities that Walter has shown over the years."

And while Cabot says he is ready to step aside, he hopes the new president isn't going to turn back the clock and "bring [HMC] back into a very traditional, conservative structure that the rest of the world is built on. We're better than that."