August 28, 2019. By Anthony Norris:
With rising competition among higher education institutions, universities are under constant pressure to innovate and offer a unique experience for their students. Aesthetic enhancements are on the rise for many campuses, but at the heart of each student’s decision making comes the same concern: will I be prepared for a successful career after graduation? To enhance the experience for finance and economic students, hundreds of universities across the U.S. have established a unique course offering by way of a student-led investment fund. The true purpose of these programs is to offer a hands-on experience to students who are among the most determined in their class.
Widely unknown, these types of programs are relatively new and have only now starting to gain popularity despite their often-substantial values. Penn State’s Nittany Lion Fund has over $7 million in securities growing from just $3 million in 2005. Michigan State’s student led fund began with $750k in 2003 and is now valued at over $5million. Adding an element of competition, Ohio State has two student led equity funds. The equity funds compete against each other annually, totaling nearly $5million, in addition to Ohio State’s $3 million fixed income fund. Programs are generally funded by donors and university endowments, and although overseen by faculty and other authority figures, students are given a surprising amount of autonomy.
It is the program’s students who are ultimately responsible for researching and deciding investment positions for the fund portfolio. In addition to an interactive, and exhilarating experience, these programs also offer practical understanding that greatly bolster participants resumes. Working within the funds offers students the chance to apply classroom lessons and academic theory to real world investing.
I had the pleasure of being one of five students to participate in the inaugural course managing Bryant University’s first fixed income portfolio in 2017. The fund began with $500,000 of which $250,000 came from the University, and the other $250,000 was contributed from the student led equity portfolio. Bryant established the equity-focused Archway Investment Fund in 2005 with $200,000 which has grown to $1.8 million including the newly established fixed income fund. Admittance to the program is intensive as space is limited to ensure the best quality of learning for its participants. Applicants are required to successfully complete several related courses, prepare a formal application, and undergo an interview process. Although rigorous, students truly gain an understanding of the concepts taught in the classroom as they utilize them in portfolio construction, risk assessment, analysis, performance tracking, and so on. Both formal and informal presentations are also required, giving students the chance to defend investment theories and decisions.
Beyond stock selection, students learn the mechanics involved with investment management. These include compliance, performance reporting, following economic trends, trading, marketing, model construction, presentation skills, etc. As industry tools such as Bloomberg terminals and Morningstar programs make their way into schools, students are further developing the unique skills crucial to gaining a competitive edge.
High school junior and seniors evaluating the next step in their academic journey would be well-served by inquiring as to whether the institution offers a student led investment fund, especially if pursuing a career in investment management or financial services. Participating in such programs offers a better perspective on the industry and helps greatly in navigating career choices. Finally, employers appreciate that participants have an awareness of the responsibility and dedication that comes with managing real money in a professional setting.