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Faced with the eventual erosion of its $47 million endowment fund due to inflation, the University of Utah wants to take up to 80 percent of that fund out of safe, conservative certificates of deposit and invest in the uncertain stock market.

This change is allowed under a carefully guarded exception in Utah law, but the U. is to be the first of the state's colleges and universities to invest a major part of endowment funds in such a fashion.At first glance, that seems like a risky step. But there is much to recommend it - as long as the program is carefully controlled and the investment avoids highly speculative securities.

Over the years, the stock market has shown consistent growth despite ups and downs from year to year. For example, the collapse in October 1987 was quickly reversed and the market is now higher than it was before the 1987 debacle.

The state pension fund has about 50 percent of its holdings in the stock market and has enjoyed what State Treasurer Ed Alter calls an "incredible return" in the 1980s - an investment that the U. and other financially hard-pressed state schools have missed out on.

The idea of the university playing the stock market brings to mind the $2.5 million disaster at Utah State University in 1973 when a fiscal manager was fired after losing USU funds in speculative stocks.

In that case, a lack of internal controls led to abuses. In addition, the USU case involved the investment of taxpayer dollars in common stocks. State law - adopted in 1974 in the aftermath of the USU experience - now forbids such use of appropriated funds but allows for an exception when permanent endowment funds are involved.

The U. endowment fund does not contain tax dollars. The fund is made up of gifts and bequests. Yet if the endowment fund investments took a real beating in the stock market, the U. certainly could be expected to seek greater taxpayer support to make up for the loss of income.

But the risk is not great, although there is certainly an element of risk. Rather than picking and choosing its own stocks, the U. intends to invest its endowment money with the Common Fund, a national service similar to a mutual fund but designed to handle investments for institutions of higher learning.

The Common Fund has an excellent track record, is professionally managed and is considered one of the most stable and successful investment funds in the nation.

The U. already has sought and received permission from the Utah Money Management Council to invest in common stocks. The council is an oversight committee that examines all stock portfolios of state institutions and provides an ongoing review and scrutiny of investments.

By investing much of its endowment fund in common stocks, the U. can expect less certainty and predictability in its annual income from that source. But over the long haul, it may earn a great deal more money.

All things considered, the decision seems to be a logical move. But let's keep a close, continuous watch, not only on the return on investment, but also the adequacy of the guidelines to prevent excess risk.