Harvard has come under fire in recent months over the military stocks that comprise a portion of its endowment, raising ethical questions about the university’s ability to prosper from the war with Iraq.

Harvard faculty members discovered that roughly half a percent of its endowment is invested in stocks that stand to prosper from government defense contracts, a portion that represents $87 million. In the weeks leading up to the war, The Harvard Crimson reported that the military ventures such as Boeing and Lockheid-Martin may already have increased the endowment by approximately $4.5 million.

The University of Chicago’s ties to military stocks remain unknown because the majority of its equity is controlled through a variety of external investment firms, making it very difficult to track the nature of all its current holdings.

While the University’s Office of Investments handles 15 percent of the endowment–mostly in government securities–the investment strategy for the remaining holdings is, for the most part, outside the University’s control, according to Steven Klimkowski, associate vice president and chief operating officer of the investment office. “We go out and try to find the most talented people we can find, but in almost every case they have full discretion to generate excess return, which is what they are hired to do,” Klimkowski said, adding that the University has strict guidelines about the people it selects to manage its investments.

University investment officials said there is no specific ethical policy restricting the University’s financial investments, adding that they view the war as simply another variable to judge an already complex economy. Instead of predicting macroeconomic shocks, officials said, their job is to respond appropriately to such trends and weigh the relevant risks in the context of the market. “We believe the business of portfolio management is business.

Resources are deployed in those areas where return on management is highest. Thus, the effort is minimized in areas where return is low,” states the Governance and Investment Philosophy of the Office of Investments, posted on the University’s Web site.

According to officials, most firms don’t make investment decisions that aim to anticipate market fluctuations by forecasting current events, especially in long term investments like academic endowments, because it is seen as an unsound long-term strategy. “Up until the days when the first shots were fired, we didn’t really know if there was going to be a war,” Klimkowski said. “If you position yourself for something that doesn’t happen, you will not be in a place you should be.”

According to economists, however, paying attention to longer-term patterns in world events can often be a helpful tool in providing insight into economic performance.

“War creates uncertainty, and uncertainty is bad for the economy,” said Erik Hurst, assistant professor of economics at the Graduate School of Business. “The economy has been slowed in the past few years, partly because people show concern over current events like terrorism or war in the Middle East.”

The Kalven report, a document adopted in the late 1960s, dictates the financial conduct of the University. The report forbids the administration from making business decisions based on social or political concerns unless the issue in question fundamentally challenges the mission of the University. The content of the report makes it unlikely that the University would manipulate its portfolio in response to popular sentiment for or against the war.

To date, though faculty and the administration have opened discussion on the topic, Harvard has yet to take any significant action to sell any of its holdings with military connections.