There was the story, probably apocryphal, about an Oxford college bursar who summoned a forester from a distant woodland to tell him the sad news of woodworm in the great hall rafters. "I've been wondering when you would call," said the forester. "You see, when the college was built 400 years ago the founder foresaw this event and planted a spinney of oaks. They are just about ready for harvesting now."

The moral of the story for bursars is: think long term. A bursar of one of Oxford's richest colleges once explained to me that a college, unlike an individual, or even successive owners of great estates, never dies.

I thought of this little exchange when chatting to Karl Sternberg, former chief investment officer at Deutsche Asset Management and now director and institutional fund manager at Oxford Investment Partners (OXIP).

Balliol College has now joined Christ Church and St Catherine's College in employing OXIP to manage its financial portfolio. OXIP only opened for business on May 2 this year but its £100m assets have already put it in the UK's top 40 charity asset managers.

Perhaps OXIP has hit a money spinner here, one from which everyone concerned could benefit not least OXIP, of course.

The company is owned 60 per cent by the three colleges, with the other 40 per cent owned by the management team. The so-called unique selling points that the managers have brought to bear on the colleges are that by pooling resources they will each benefit from economies of scale, lower charges, and greater diversification of assets.

Mr Sternberg said: "While some of their US equivalents have enjoyed impressive returns on their investments in recent years through diversified, active management, UK institutions have largely pursued their own, independent investment arrangements built around more traditional strategies.

"By pioneering a new, co-operative approach, pooling funds, pursuing an active management approach, diversifying assets and harnessing new return drivers, OXIP aims to deliver real returns in excess of five per cent on a long-term basis."

Former Chancellor of the Exchequer Lord Lawson, a graduate at Christ Church, is chairman of the new company. He said: "This is a unique new venture which is structured to reflect the particular investment objectives of charities and endowments, and I am looking forward to playing a part.

"In a shifting global investment landscape, it is vital that academic and charity institutions in the UK are equipped to take advantage of diversified sources of return. I am convinced the OXIP team has the expertise and resources to achieve this, and am confident that other endowments will come to share that view."

The company aims to produce steady and reliable returns of more than five per cent, thereby enabling colleges to plan ahead with more certainty.

Mr Sternberg said: "We are hoping to join up with two more Oxford colleges who are interested in becoming shareholders soon, but I cannot yet say which ones they are."

The best news for shareholder colleges is that the company offers its management skills free to them. It will make its money out of third-party clients who will, typically, be charities or rich individuals.

Mr Sternberg added: "Some more colleges, including one or two in Cambridge, could become clients. The point here is that we cannot have a free rider, as we would have if we allowed a college to wait, see if we do well, and then come on board if we do."

The company has come into being with its impressive management team which also includes Paul Berriman, former UK chief chief executive at Deutsche Asset Management in response to the fast-changing requirements of colleges.

Mr Sternberg said: "The focus is really on endowments now, because of lack of funding from anywhere else much, not least from the Government. Older colleges are having problems just keeping up their ancient monuments and then they have to pay VAT, too."

Now OXIP is in the process of moving into one of those ancient monuments; its Oxford office is being set up in Tom Quad, Christ Church. The move represents a sort of return to base for Mr Sternberg, who was also an undergraduate there.

He added: "Even a comparatively rich college like Christ Church needs to achieve a steady income. That can only be achieved by diversifying the holdings, and diversifying is hard work. It makes for a more stable return; half the volatility."

"By diversifying I mean, perhaps, investing in oil at one end of the scale, as well as, say, French residential property, at the other."

As for colleges living for ever, Mr Sternberg said: "It is true that there is probably only one institution that exists in even greater perpetuity: the Church. However, you have to remember that although a college goes on and on, the governing bodies and individuals concerned come and go."