Leaders of the Radcliffe Union of Students (RUS) criticized the University's investment policies in a meeting last night after a revealing discovery: Harvard owns stock in Playboy Enterprises.

"If Harvard knowingly sanctioned a purchase of a stock whose sole profit making function is pornography, we certainly don't agree with that," said Melissa J. Gambol '99, treasurer of RUS and a spokesperson for the RUS board.

"Being an educational institution, they must scrutinize what they're investing in and must avoid things that could be so controversial for such a large portion of the student body."

The University owns 22,700 shares of class A stock in Playboy Enterprises, according to documents filed with the Securities and Exchange Commission (SEC) on June 30 and obtained by The Crimson.

At yesterday's closing price of $14.125, this holding is valued at about $320,600, far less than 1 percent of Harvard's $11 billion endowment.

In addition to its well known magazine, which contains a new "centerfold" each month of a naked woman, Playboy Enterprises also runs Playboy TV, markets a line of sex products and publishes material in five languages.

SEC documents also show that Harvard owns "short" another 21,300 shares of Playboy Enterprises class B stock.

Investors purchase stocks "short" when they believe the stock price is about to fall.

Harvard must disclose all its domestic stocks in a 13F form filed quarterly with the SEC.

The document lists more than 2,000 separate holdings with a total market value of about $5 billion.

Prominent female leaders on campus greeted news of the investment with surprise and disappointment.

"I am personally disappointed to find out that Harvard invests in Playboy," said Lamelle D. Rawlins '99, president of the Undergraduate Council. "It certainly casts a whole new light on Harvard's interest in Playboy's 'Women of the Ivy League' issue."

Provost Harvey V. Fineberg '67 said the University is receptive to criticisms about its investments and must weigh this critical input in deciding where to invest.

"One wants to be very measured in restraining [a certain investment] but also prepared to take head on questions about the propriety of an investment," he said.

Fineberg warned, however, that restrictions on where Harvard can invest must be made carefully because they can hurt the bottom line.

"People at the same time would be well served, as the Harvard community is well served, by an investment strategy that enables the investment company to do its best," he said.

Investors at Harvard Management Company (HMC) would not comment on why they choose to invest in this stock. President of HMC Jack R. Meyer said only that his investors consider ethical questions as well as potential profit when purchasing stock.

"Harvard Management is careful about the companies it takes key active positions in, but the final authority on these questions is the [Corporation] committee at the University that establishes the guidelines," he said.

Meyer confirmed Harvard's investment in Playboy and offered several caveats about the information contained in the 13F form.

He underscored that HMC does not consider all the stocks it owns--taken individually--to be solid investments.

Officials also note that Harvard's short and long investments nearly cancel each other out, making the University's net benefit negligible.

But those upset with the investment argue that the University--regardless of its particular strategy--has placed itself in a compromising position by investing in companies like Playboy.

HMC has almost universal discretion in determining Harvard's investments. Only in special cases does a committee of the Corporation--the Committee on Shareholder Responsibility--restrict HMC from certain industries for ethical reasons.

In these instances, HMC is not allowed to use any investment strategies which involve holding stocks in these companies.

Currently, there are only two sweeping guidelines restricting investment. The University does not invest in firms in the tobacco industry. In addition, Harvard has set guidelines about investment in companies that operate in South Africa.

Fineberg said that establishing similar restrictions for companies like Playboy is unlikely, but that the University must hear the community's reaction.

"It's exceptional to [set up restrictions] but there is a process to make decisions like that," he said. "I think we have to be open to the possibility that we want, for reasons of institutional policy, to refrain from certain investments.