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considered to be quite conservative, it is suggested that the Committee now consider expanding them to add safeguards against possible decreases in "historic values" of the funds. A suggested detailed policy statement along these lines will be presented for Committee review within the near future.

Background

The publishing in 1969 of two reports to the Ford Foundation, The Law and the Lore of Endowment Funds and Managing Educational Endowments, set forth new views concerning legal concepts governing the investment of endowment funds of nonprofit organizations, together with a number of important recommendations for improvement of their investment performance. A summary of the conclusions of the latter report was sent to the Regents with Mr. Ripley's letter dated January 13, 1970 in which he asked the Board to consider a number of changes in investment policies of the Institution. This summary contained the following pertinent recommendations:

"The financial planning of the institution should be reorganized to eliminate all pressure on the endowment manager for interest and dividends. The manager must be free to select his securities for maximum total return rather than to help balance next year's operating budget.

"A specific plan for endowment support of operations . . . . is that each year transfers are made from endowment to operating funds in an aggregate amount equal to 5% of the three-year, moving - average market value of the fund - whether or not that amount is provided by interest and dividends."

Board discussion of Mr. Ripley's suggestions resulted in the appointment in May 1970 of the Smithsonian's Investment Policy Committee. In October 1970 the Board approved recommendations of this Committee for multiple management of the Institution's investment funds and also the adoption of the Total Return Concept of investment as a guiding policy for the investment of Smithsonian's quasi-endowment funds. At the May 1971 meeting, the Board approved the naming of three new investment advisory firms for management of the Institution's investment funds, with these firms assuming this responsibility as of July 1, 1971.

One firm, Davis, Palmer & Biggs, is now handling quasi-endowment and current fund investments under the policy goal of maximum total return. For the other two firms it was necessary to specify that they follow the policy of providing a current interest and dividend yield of no less than previously received on their share of the funds in order to maintain as well as possible the operations of the Freer Gallery and the various research efforts supported by the true