Like a battle-scarred prizefighter on the ropes in the title match, Harvard's endowment is struggling. Long the envy of higher education for its size--at nearly $5.5 billion, it is the heaviest of the heavyweights--the fund and its managers have more recently become a punching bag for critics after years of lackluster returns.

But the final bell hasn't sounded. And even with some alumni and faculty ready to throw in the towel, Harvard's money men may have a few strong jabs left.

Earnings for the last fiscal year, which ended in June, have not yet been announced, though insiders say Harvard's investments had a great year. The reason? A heavy stake in foreign stocks, which currently amount to more than 18 percent of the University's holdings.

Those stocks, which haven't done much since 1990--when Harvard dramatically increased its stake in overseas markets--have taken off in recent months, far outpacing Wall Street. The result could be a gold mine for the University.

Given recent history, that would be welcome, albeit surprising, news. In 1992, the endowment returned a disappointing 11.8 percent, lagging behind 71 percent of the nation's colleges and universities. And in 1991, Harvard's nest egg barely grew at all.

Beyond the pain of knowing that millions of dollars were slipping through the University's fingertips, Harvard has been faced with an embarassing, and very public spectacle.

Prominent alumni, including Wall Street veterans and several of Harvard's most important benefactors, have blasted the endowment's handlers in the press. In January, shortly after the latest results made headlines, Harvard Management Company (HMC) President Jack R. Meyer, the endowment's chief administrator, was called before an impatient Faculty Council to explain his performance.

The erosion of confidence in the University's ability to manage its money couldn't have come at a worse possible time--just as Harvard prepares to announce the largest fundraising campaign in the history of higher education. And it has caused serious headaches for administrators, including Meyer himself.

The HMC president has reportedly confided to friends his frustration with all the bad press, including annual disclosures of the hefty, six and seven-figure salaries paid him and other top HMC officials. Meyer did not return repeated phone calls requesting comment for this article.

Furthermore, Meyer's superiors may not havedealt with HMC's problems because they felt theirhands were tied. While some critics have blamedHMC's problems on its very structure--in-housemoney management is rare amonguniversities--observers suggest that theUniversity hasn't disbanded the two decade-oldinstitution because it can't without lookingfoolish for creating it in the first place.

And Harvard administrators can't really blameMeyer for all the trouble, either, since he onlyassumed his post in September 1990 (hispredecessor, HMC founder Walter M. Cabot '55,reportedly was eased out the door after returnsdeclined steadily since the mid-1980s).

Still, if fiscal 1993 really does represent thestart of a sustainable turnaround, drastic stepsmay not be necessary. Indeed, for Meyer, this yearcould possibly bring the vindication of a strategyhe implemented upon arriving at Harvard threeyears ago.

Then, the University was heavily invested insafe, but uninspiring domestic bonds, andunderweighted in foreign stocks, which took off inthe mid-1980s. Within nine months, Meyer reversedthat policy. By the close of fiscal 1991,Harvard's stake in U.S. bonds had been pared downby more than $500 million from a high of $1.3billion. Meanwhile, foreign stock holdings swelledby nearly $600 million, to $861 million.

But the dramatic shift came too late tojumpstart HMC's lagging returns--just as foreignstocks started to level off. In fiscal 1992,Harvard earned a paltry 1.3 percent on its foreignequity holdings, compared to 14.4 percent on U.S.stocks. Meanwhile, Harvard's holdings in thespeculative real estate and commodities sectors,staked out in the early 1980s under Cabot, werepummeled, the victim of depressed markets and poorinvestment choices.

Finally, in late fiscal 1993, foreign stockprices resumed their strong climb. For the year,the benchmark Morgan Stanley EAFE-Free Index,which measures foreign equity performance,returned 18.25 percent, nearly seven points higherthan the Standard & Poor's 500 index of domesticstocks.

Today, well into fiscal 1994, the news fromoverseas continues to be good, thanks in largepart to the performance of Japanese markets, saysJay O. Light, Baker professor of businessadministration at the Business School. "TheJapanese stock market has gone up a lot and theyen has gone up a lot relative to the dollar,"says Light, who sits on the management company'sboard of directors.