Hedge-fund managers, watch your backs: Some college endowments are turning to their own undergraduates to help them invest their portfolios.
And some of them are doing quite well, thank you.
At the University of Dayton, the student-managed portfolio that began with $25,000 in 1994 and was supplemented with $1-million in 1999 is now worth $7-million.
David A. Sauer, founding director of the Davis Center for Portfolio Management at the university and an associate professor of finance, says the student-managed fund is one of the better-performing ones for Dayton, “so next semester we’re getting another $1-million infusion.”
The students have to follow all the same guidelines that the Board of Trustees has for the university’s money managers.
Dayton also plays host to the Redefining Investment Strategy Education symposium, which includes a competition for colleges and universities with student-managed investment funds. About 50 institutions participate, competing in categories like growth investing and fixed income.
In March students from Stetson University claimed first place for the seventh year in a row in the undergraduate fixed-income category.
“This program has generated a lot of recognition, especially in the Southeast,” says Larry Belcher, director of the Roland and Sarah George Investments Institute at Stetson.
The program at Stetson started in 1980, when Mr. George and his wife gave the university an endowment specifically to start a student-managed fund. They had tried doing so at several Georgia institutions, but none liked the idea of having undergraduates handling thousands of dollars. The students in the two classes in the program now manage more than $2.8-million.
They’re also much more independent than other groups. They pay the university a fixed amount every year and put the rest of the profits back into the market. “It’s all been a self-contained, self-perpetuating endowment fund,” Mr. Belcher says.
A program at Trinity University, in Texas, began in 1998 when three students asked the Board of Trustees for $1-million. The same day, the board gave them $500,000.
“I’ve always said it’s student powered, student founded, and student driven,” says Philip L. Cooley, a professor of business and the faculty member who sponsored the students.
Now the undergraduates in this yearlong course manage more than $1.3-million. They have shares in such corporate giants as Canon, McDonald’s, and Starbucks.
Perhaps the oldest of the student-managed funds is the one at the College of Wooster, which began in 1955 with $800 from fines collected from students who missed church services.
Wooster’s Jenny Investment Club, named in 1982 in honor of its founder, Hans Jenny, a former professor of economics, allows undergraduates to manage the fund during their free time. Students from various majors have joined the club.
John W. Sell, a professor of business economics and adviser to the club, says the years where students from many different specialties participate have better outcomes.
The students in the club manage two portfolios, totaling close to $1.4-million in assets, including shares in McDonald’s and Apple.
The Jenny Club gives between 4 percent to 7 percent of its yearly returns to a scholarship fund for international students.
And just as some university trustees are paying more attention to principles of social responsibility in choosing investments for their endowments, some of the newer student-run programs are, too.
For instance, St. Mary’s University. in San Antonio, and the University of California at Berkeley ask students to evaluate companies on such criteria as their environmental records or labor practices before investing in them.
“Ten percent of the market is socially responsible,” says Adrian Cowan, an assistant professor of finance at St. Mary’s. So, she says, it’s big enough for the students to work with.
http://chronicle.com Section: Money & Management Volume 54, Issue 16, Page A22