New college try: no longer fettered to fixed income, endowments rush to run up their score with friskier, riskier investments.

• Author: Martin, Edward
• Position: Includes related article on university investor Eugene McDonald

College money managers no longer can play it safe and follow the herd. To beef up their endowments, they have to bear down and run with the bulls.

The dogwoods were blooming, but along Chapel Hill's Franklin Street the mood wasn't pretty. Duke, Wake Forest, Appalachian State and other universities had already sold their stock in companies doing business in South Africa, and UNC students were protesting that their school was bringing up the rear.

That was spring 1987. The world of college investing is much different now. Socially conscious investing is out. Making money is in. With the exception of perhaps tobacco stocks, there are no hot issues like apartheid to have to step around. So North Carolina universities have gotten serious about pumping up their endowments. Gone are the days when a school kept all its money in safe-but-sluggish fixed-return bonds - which Salem College in Winston-Salem did until only three years ago. Without exception, the major schools have gone pro, hiring armies of highly paid managers to invest in a variety of securities.

Wall Street has come to Franklin Street.

Some schools are taking risks and, at least for now, reaping the rewards. As a group Tar Heel universities earned a stellar 17.8% return in fiscal 1996. That beat the 17.2% national average for schools surveyed by the National Association of College and University Business Officers.

Duke University was tops with a 30% return, third-best in the country. "Thirty percent overall?" muses Dick Babcock, an institutional investment consultant in Charlotte. "That's extraordinary." Duke's secret? In the early '90s, it sank millions into some struggling, unknown companies that turned out to be some of the nation's hottest technology and health-care stocks. Second-best Wake Forest University put its chips on microchips and won big. Its $13 million in Intel Corp. rose 130.7% last year, helping the school to an overall 22.2% return. Fifth-place Davidson College put a quarter of its funds in international stocks and made 18.2%.

Guilford College, though, like most small colleges, played it "straight and narrow," says Chief Financial Officer Art Gillis. It put 65% of its $47 million in U.S. stocks. Still, with a 17.4% return, it also beat the national average, as did East Carolina University and Appalachian State.

"Any school whose endowment is turning out better investment returns than others has a competitive edge in the educational marketplace," says Babcock, a...