Structuring stock investment funds with a limited number of qualified students

Abstract

Purpose

The purpose of this paper is to outline the problems encountered by a student-managed investment program (SMIP) when the pool of qualified finance majors is limited in number. Restructuring the program to a single-semester course and opening the class to motivated/intelligent non-finance majors increased the number of applicants, but resulted in alternative difficulties, particularly time constraints and inadequate student preparedness. A prerequisite exam and regimented classroom structure were the solutions.

Design/methodology/approach

The paper discusses the problems encountered and solutions devised to address the early year difficulties experienced by a newly developed SMIP at a relatively small university. The core of the paper chronicles the classroom approach to solving the main problem of a single-semester portfolio management course, the handling of an investment learning curve in a short period of time.

Findings

Though empirically limited due to the program’s infancy, portfolio performance has been encouraging and student feedback exceptional. Regarding the former, stocks purchased by the fund have created greater wealth in total than that of equal dollar investments in an S&P500 index fund.

Practical implications

Universities interested in running a student-managed fund should feel secure in a one-semester approach, regardless of talent pool size, as measured by the number of motivated, intelligent finance majors.

Originality/value

Aside from the uniqueness of requiring a mastery of entrance exam investing materials prior to the first class, this paper’s outline of core portfolio management activities includes several strategies and methods meant to streamline the process within a groupthink design.

Citation

DeBoeuf, D.A. (2020), "Structuring stock investment funds with a limited number of qualified students", Managerial Finance, Vol. 46 No. 4, pp. 499-512. https://doi.org/10.1108/MF-05-2018-0240