Corporate Education Trends: Student-Managed Funds
As students pursue higher education and prepare themselves for the workforce, many universities are starting programs that allow their students to get hands-on experience in real-world settings. One such example of these programs is student-managed funds – programs that allow students to manage financial investments or donate funds to local organizations. These programs range from financial management, private equity impact investing, socially responsible investment, and the like. In this article, we will explore student-managed funds, their significance in the corporate world, and the learning experience they provide for students.
The Growing Trend of Student-Managed Funds
Student-managed funds, where students can manage real-world investments, have always been an essential part of finance education, enabling students to learn how to manage portfolios, conduct research, and make investment decisions in real-world settings. Many student-run groups now focus on impact investing and sustainability, a trend that is fast gaining traction. These student-managed funds allow students to combine their academic knowledge with practical experience in investment decision-making.
According to the Scott College of Business, there were about 600 funds, collectively managing $750 million in funds as of 2021. The increasing number of student-managed funds reflects the growing importance of experiential learning in academia. Organizations specializing in impact investing, such as the SILK network, have identified at least 40 impact investing projects initiated by student-run funds across universities in the US.
The Importance of Student-Managed Funds
Student-managed funds offer education in finance and investment management beyond traditional lecture-based teaching. These funds provide real-world exposure to the workings of investment activities, allowing students to make real-life decisions on where to put money. These programs develop students’ analytical and decision-making skills and help them understand asset allocation, portfolio management, and risk diversification.
Unlike traditional finance classes, where students learn about theories and principles, managing money in student-led funds requires students to apply the same concepts practically. The experience also requires students to work as a team, teach each other, and collaborate to achieve the fund’s objectives. Collaborating with multiple organizations and entrepreneurs, students develop a deep understanding of the needs of different communities and vital social issues.
Examples of Student-Managed Funds
Northeastern University: NUImpact Fund
NUImpact fund is an example of a trend in corporate education. This fund is managed entirely by Northeastern University students and invests up to $50,000 in local “mission-driven” businesses. The portfolio companies include EatWell, TRILLFIT, TOP, and Imago Rehab, all aimed at providing assistance to marginalized groups.
Haas School of Business at UC Berkeley
The first student-run socially responsible investment fund for students was launched by the Haas School of Business at UC Berkeley in 2008. The fund’s assets have grown from $1 million to $4.5 million since its launch. In 2019, the school added a private equity impact investing unit alongside its public markets division.
University of Minnesota: David S. Kidwell Funds
The University of Minnesota’s Carlson School of Management oversees $47 million in capital split between a fixed income and equity-based growth fund, with money provided by outside institutions and a small share of the university’s endowment.
Rewards and Challenges of Student-Managed Funds
While student-led funds offer practical exposure to finance and investment, these funds also pose potential risks associated with real money investments. Students must manage the ethical implications, including the responsibility that comes with managing other people’s money and making responsible investment decisions aligned with each organization’s goals. Nevertheless, the chance to integrate finance into philanthropic decision-making provides students with a unique opportunity to develop essential skills such as ethical analysis, critical thinking and decision-making in real-world scenarios.
Student-Managed Funds Competitions
To recognize students’ innovative ideas in student-managed funds further, several competitions allow students to submit their ideas and compete for awards. The Kellogg-Morgan Stanley Sustainable Investing Challenge is one such initiative where students can submit ideas about how capital markets can address social or environmental issues. This year, a crop insurance project for smallholder farmers submitted by students from Gulu University’s Faculty of Agriculture and Environment in Uganda was the winner, receiving $10,000 in initial funding.
Summary
Student-managed funds have become popular in recent years, mainly because they offer practical experience and prepare students for the real world of finance. These programs combine academic knowledge with practical investment experience, enabling students to develop relevant skills and apply their learning in real-world scenarios. Student-led funds exploring impact investing and sustainability have grown significantly in recent years, reflecting the growing importance of experiential learning in academia. While managing money comes with ethical implications, these programs provide students with a unique opportunity to develop critical thinking skills, ethical analysis, and decision-making in real-world scenarios. As students continue to learn through practical experiences, student-managed funds will play an essential role in educating the next generation of finance professionals.
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Shivi Sharma, an economics student at Northeastern University in Boston, was involved in environmental and social causes and had little interest in pursuing a career in finance until she enrolled in a program last year that gave her hands-on experience with real money.
The NUImpact Fund is an example of a trend in corporate education. It will employ students to conduct due diligence on local “mission-driven” businesses early on, and invest up to $50,000 of donor money each semester in the project they believe has the greatest potential.
The portfolio includes EatWell, which prepares healthy food for Boston’s poorest families; TRILLFIT, a black-owned gym for marginalized groups; TOP, which provides socially conscious menstrual hygiene products; and Imago Rehab, to help patients join physical rehabilitation programs.
“I spoke to 24 entrepreneurs and it changed my understanding of how impact can be combined with finance,” says Sharma. “We mirror what venture capital does. It’s really amazing to have that access to deploy capital. I learned more from NUImpact than in any single class – it teaches you more and you are able to be more confident.
This article is part of a report on the FT Masters in Finance rankings for 2023, due out on Sunday
Student-managed investment funds have a long history, dating back at least to a project launched by Lafayette College in Pennsylvania in 1946. There were about 600 collectively managing $750 million in business in 2021, according to the Scott College of Business.
$750 million
The collective assets under management of approximately 600 student-managed funds in 2021
Those with a focus on social impact have grown significantly in recent years. The SILK network, part of the US Intentional Endowments network, which monitors and supports such student projects, has identified at least 40. Most invest funds from individual donors or from their university’s endowment.
Georges Dyer, executive director of the network, says: “The importance of experiential learning is growing. We see a demand from the industry for talent who have exposure to sustainability and traditional investment techniques. A student-managed fund is one way to achieve this. It points to growing student demand for education and careers in sustainability and broader growth impact investing among fund managers.
The fund’s strategy varies widely. David S. Kidwell funds the venture al Carlson School of Management at the University of Minnesota oversees $47 million in capital split between a fixed income and equity-based growth fund, with money provided by outside institutions and a small share of the university’s endowment.
“We’re the BlackRock of student funds,” says Susanna Gibbons, the chief executive officer, who previously worked in fund management. It is an autonomous legal entity with the mantra: “This is not a project; this is an ongoing wealth management business. It aims to simulate an entire wealth management operation rather than simply applying stock picking and is a signatory to the Principles for Responsible Investment initiative.
THE Haas School of Business at UC Berkeley says it launched the first student-run socially responsible investment fund for students in 2008, since its assets have grown from $1 million to $4.5 million. In 2019, she added a private equity impact investing unit alongside its public markets division.
Katherine Baird, associate director for sustainability, at Haas, says, “We’ve really seen that, through careful asset allocation and an understanding of risk, students can achieve equivalent or better returns than the market.”
He says an important distinguishing feature of the funds he oversees is that they are fully integrated into teaching and require applicants to have studied a financial information analysis course in the previous year. “We see these funds electives becoming less nice to have and more a core part of the education on offer,” she says.
However, Lloyd Kurtz, senior portfolio manager at Wells Fargo Wealth and Investment Management, remains cautious about student funds. “Personally I’m a bit skeptical,” he says. “There are a lot of vanity projects. It’s good to go out and learn some respect for the markets. You can teach kids the basics about investing, but there’s a level of reality underneath that. I am concerned that we are not looking closely enough into the complexities of the world, systems analysis, labor contracts and externalities.”
To better educate students and reward their ideas, there are a number of competitions they can enter, as well as fund management. For example, the Kellogg-Morgan Stanley Sustainable Investing Challenge asks students to submit their ideas about how capital markets can address social or environmental challenges.
This year, it awarded $10,000 to kick off the winning project: a crop insurance project for smallholders submitted by students from Gulu University’s Faculty of Agriculture and Environment in Uganda. Lilian Kisebe, one of the team preparing to launch the project, says: “Many of us come from smallholder families. We grew up seeing the life they live and the hardships caused by climate change.” Adds her classmate Silver Tumwa, “The challenge has guided us to improve our model and goals, and has connected us to a network of mentors and professors.”
https://www.ft.com/content/8cd02f04-f0bd-4764-aa17-14c81db0bc01
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