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Florida's student-managed investment funds ...

University of Florida
Gainesville

  • Program: Gator Student Investment Fund
  • Faculty director: David T. Brown
  • Year started: 2012
  • Structure: About 45 members per semester are selected to participate. Students are divided into two groups: Risk management and research. The fund is led by two chief investment officers and two presidents. Students in the master of science in finance program can take a project course to improve the fund.
  • Board composition: Six members made up of alumni with experience in managing assets.
  • Fund: $500,000, invested in six sectors of the equities market. The fund will donate $20,000 to support the Florida Opportunity Scholars Program next year.
  • Decisionmaking: Students research and pitch stock in six sectors and present as a sector group to a student-elected CIO, who sizes and writes up trades if they are approved. A board of six directors comprised of faculty, alumni and students provide feedback on investment strategy.
  • How funds are used: The Gator Student Investment Fund makes annual distributions equal to 4% of total assets under management in March of the previous year to both the Machen Florida Opportunity Scholars (3%) and the Warrington College of Business (1%).
  • Perspective: “The students are not enrolled in a course. They recruit members to the fund, train new members and manage the entire investment fund. As a result, participants get hands-on investment experience and hands-on experience in leadership and working in teams,” says Brown.

STUDENT PERSPECTIVE

Patrick Bowling
University of Florida
Chief Investment Officer (2018), Gator Student Investment Fund

When Patrick Bowling graduates with a master’s in finance, he will have the hands-on experience of managing a real portfolio. As chief investment officer, Bowling met with group leaders from each of six sectors, considered their pitches and decided whether to make a trade and how large it would be. “I express my opinion and create discussion.”

Bowling says each sector group in the fund bought two to three new stocks each semester with a goal of outperforming their benchmarks. Collectively, the fund has a goal of outperforming the S&P 500. Its philosophy is to weight its holdings in each sector to reflect the S&P 500’s weightings and include passive holdings to limit tracking error volatility. In 2018, the volatility in the financial markets, particularly in the first and fourth quarters, affected the portfolio’s performance. “It resulted in the underperformance of our fund cumulatively, but our energy sector outperformed its benchmark.”

For 2019, students are paying more attention to portfolio construction. “For many sectors, we are interested in identifying names with compelling investment themes that also act as offsets to current factor exposures such as long and short-term volatility.” Each sector — consumer, energy, financial institutions, health care, industrials and technology — holds two to six stocks.

Bowling plans to work as an analyst for an investment bank in the mergers and acquisitions group in New York when he graduates.

University of Miami
Coral Gables

  • Program: Category 5 Student Managed Investment Fund
  • Faculty directors: Andrea Heuson and Brian Barrett
  • Year started: 2012
  • Structure: About 30 students per semester are selected to join the class and placed into one of seven groups. Chief investment officers are in charge of running the class, executing trades and overseeing sector weightings. Heuson, a finance professor, says her role is to ensure the students’ valuation work is objective and calculations are accurate, remind them to keep a balance across sectors and help them minimize risk when buying a stock.
  • Size of fund: $1.2 million
  • Decisionmaking: Students are divided into seven groups/sectors to research stocks. Each has a sector head. The entire class votes on whether to buy or sell a stock — 51% is needed for approval. When students bought MasTec last semester, they sold another stock in the industrials sector to keep a balance. “It’s hard to get them to make a sale decision,” Heuson says. The students are currently looking to buy a stock in the financial sector, where the fund is underweighted and they see opportunity.
  • Perspective: “Students learn valuation, get strong presentation and persuasive argument skills, gain an understanding of how to look at management and how adding a stock will impact the diversification of portfolio,” Heuson says.
  • Policy: UM’s current policy does not allow students to take short positions or trade options. However, Heuson says, students would like to change the policy to allow for more active management. “The university’s investment committee is thinking about it,” she says.
  • Profits: UM uses 3.5% of the fund’s closing balance to send students to a global asset management education conference in New York City (known as the GAME conference).

STUDENT PERSPECTIVE

Kyle Verduin
University of Miami
Co-Chief Investment Officer, Category 5 Student Managed Investment Fund

Kyle Verduin, a senior at UM, says he discovered investing real money requires a lot more than simply showing interest in a stock. As a member of UM’s student investment group, Verduin learned to do his research, put his findings into a presentation and persuade classmates. “Investing the school’s money makes you take the time to put in 30 to 40 hours of research and run financial models to make sure you are accurate in your view,” he says.

Verduin says he has learned how to find companies undervalued in relation to their peers. He made four pitches to classmates over the last year on stocks such as Everi Holdings, a gaming solutions company, which he considers “a strong value play.” Verduin says he wants to pursue a job in the industry. “Some students treat it as a class, and others, like me, treat it as an occupation.”

Verduin says for 2019, he and his classmates are looking at factors that could affect the markets. The U.S. trade war with China and possible actions by the Federal Reserve “are the two things we are looking at right now. Overall, though, we think it’s a safe environment to be in equities,” he says. As co-chief investment officer, Verduin keeps a close eye on high-performing sectors. “I think there is value to be had in industrials. Also, health care did well last year, and we think it will do well in 2019,” he says. When he graduates, Verduin hopes to get a job at a financial firm and says his involvement with the fund helped him find his future path.

Barry University
Miami Shores

  • Program: Barry University Student Managed Investment Fund
  • Faculty adviser: Stephen Morrell
  • Year started: 2012
  • Structure: About 20 to 25 students per year are selected to participate, mostly juniors and seniors.
  • Size of fund: $684,000. Barry University’s board of trustees established the fund with money from the university’s endowment.
  • Structure: Students make pitches. An investment committee of six makes final buying and selling decisions. Comanaging directors oversee all activity. The fund is governed by an advisory board of investment professionals, alumni, trustee members and business community members and faculty.
  • Perspective: “We have added depth to their education by giving students real-life practice in their field,” Morrell says.
  • Performance: “We recently had a cash injection, but that doesn’t come in every year. We are proud that we have outperformed our benchmarks over one year, three years and five years.”
  • Partnership: Now in its sixth year, the fund partners with William H. Turner Technical Arts High School to teach a yearlong course in financial literacy to high school students.

STUDENT PERSPECTIVE

Tomas Espinal

Barry University
Former Managing Director, Student Managed Investment Fund

Tomas Espinal became interested in participating in Barry University’s investment fund during his junior year. “One of the first things I learned is that because it’s real money, mistakes don’t go over well,” he says. Espinal started as a research analyst in the health care sector, and by the last semester of his senior year, he became managing director. “I had to prepare and present the reports the same way as when the professionals from a big bank report their performance to the university for the endowment funds they manage.”

Espinal says students who participate in the fund meet professionals at many of Miami’s financial firms who offer career and investment advice. “They are open to helping you, and that’s important when you are breaking into the industry from a small school,” he says. In 2018, Espinal says he and his classmates came to appreciate the impact of a sudden market decline on a portfolio. Though the overall value of the fund dropped, “we were probably down 2% or 3% compared to the market, so that’s pretty good.” Espinal says his personal investment philosophy mirrors Warren Buffett’s: Invest in businesses, not stocks. A year ago, Espinal says he would have invested in technology stocks, but today he prefers undervalued investments. Espinal graduated in December and is working part-time at a local financial firm while studying for the chartered financial analyst (CFA) exam. His goal is to become a financial analyst for a large investment firm.

Florida State University
Tallahassee

  • Program: FSU Student Investment Fund
  • Faculty director: Steven Perfect
  • Year started: 2008
  • Structure: The Student Investment Fund is managed by about 40 graduate students in the fall and spring and by about 20 undergraduates in the summer. The students are responsible for the management of the portfolio. Students perform research, pitch stocks to an advisory committee, make buy/sell decisions and develop routine reports.
  • Size of fund: $3.8 million
  • The fund: About 79% of the fund is equities, with the remainder invested in fixed-income securities and cash. One individual stock at time of purchase can not represent more than 5% of the fund.
  • Perspective: “The fund was long on tech stocks in 2018, which put us ahead of benchmark for most of the year, but then they fell more than other stocks at the end of the year, so we ended down,” Perfect says. “I don’t suggest stocks or strategies, but occasionally I say, ‘Geez I’m glad it’s not my money.’ ”

Rollins College
Winter Park

  • Program: Crummer SunTrust Portfolio
  • Faculty directors: J. Clay Singleton; Koray Simsek
  • Year started: 1999
  • Structure: Managed by Rollins College MBA students as part of the Portfolio Management Course offered each spring. The fund trades only once a year. At the end of the semester, students present their recommendations to a panel of investment professionals who review their work before they make their trades.
  • Size of fund: $1 million
  • Fund performance: The annual return was 13% vs. the S&P 500 index return of 15.7%.
  • Distributions: The portfolio funds scholarships to the Crummer Graduate School of Business. It has distributed more than $300,000 in scholarships and will give away $50,000 in 2019.
  • Allocation: 30% equity, 59% ETFs, 10% bonds and 1% cash
  • Perspective: “Our program is very different from others around the country. We are in portfolio management, not securities training,” Singleton says. “It is designed around the S&P’s 11 sectors, and each sector has its own student manager. 2018 was good until the end of year, when everyone took a dip. However, our historical performance is great. We started with a gift of $500,000, and since then the portfolio has grown to a million dollars.”
  • 2019 strategy: Singleton says the class is using two themes to guide its securities selection: The trend toward sustainability and sustainable products such as solar panels. And the trend toward a rise of the global middle class, placing a demand on health care, transportation and telecommunications. “We are positioning the portfolio to take long-term advantage of those trends because we only trade once a year.”

Stetson University
DeLand

  • Program: Roland George Investments Program
  • Faculty chair: K.C. Ma
  • Year started: 1980
  • Structure: Students research stocks and bonds. They make buy and sell recommendations to a seven-member board. The board accepts about 25% of the recommended stock buys (about six a semester) and approves one out of five bond picks. Students determine the investment strategy every semester by looking 12 to 18 months ahead.
  • Size of fund: $3.5 million
  • Requirements to participate: Finance and investment courses and a 3.0 GPA
  • Perspective: “I tell students, ‘this is your real job. Your decisions have consequences. Don’t get us sued.’ ” Although Ma has experience managing portfolios, his role is more that of a risk manager, he says. “I am there to make sure they run the portfolio legally and professionally.”
  • Performance in 2019: Stocks up 14%; bonds up 2.5%
  • Strategy for 2019: Move toward more blue-chip, dividend-paying stocks; concentrate fixed income in bonds with higher coupon rates.

University of North Florida
Jacksonville

  • Program: Osprey Financial Group
  • Faculty director: Reinhold Lamb
  • Year started: 2002
  • Structure: Student analysts pitch buy/sell recommendations to each other and need two-thirds agreement to make a change. Students are accountable to the UNF investment committee. The fund invests in equity and fixed-income securities.
  • Size of fund: $1.1 million
  • Perspective: “Our students are accountable to the client, which is the university foundation,” Lamb says. “If the portfolio is down 6%, the foundation doesn’t look at how we did against zero. The foundation will say, ‘how did the benchmark do?’ Over 17 years, the students have more than doubled the value of the portfolio. One fund just invests in sectors, another just invests in geography, another invests in individual stocks and another in fixed income. Each has a benchmark and is managed separately but within the larger portfolio.”

 

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