RPI’s James Fund: ETFs, decision making, & manager transitions

Thomas Shohfi (Lally School of Management, Rensselaer Polytechnic Institute, Troy, New York, USA)

Managerial Finance

ISSN: 0307-4358

Publication date: 5 March 2019

Abstract

Purpose

The James Fund at Rensselaer Polytechnic Institute’s Lally School of Management is a small, recently established, course-driven student-managed investment fund (SMIF). The purpose of this paper is to provide insight to new and existing funds in improving individual fund operation and structure.

Design/methodology/approach

The James Fund seeks to outperform an 80/20 equity/fixed income benchmark by investing exclusively in exchange traded funds and to move primary emphasis away from idiosyncratic risk and individual equity valuation back toward asset allocation, the most significant driver of portfolio performance. Buy and sell decisions must receive a three-fifths majority in voting among students and adhere with the investment policy statement.

Findings

Groupthink, a common problem in student-managed funds, is observed in trade proposal and manager voting patterns.

Originality/value

Groupthink is partially addressed through the use of instructor feedback on individual student trade diaries. Student managers transition each semester; therefore, the portfolio must meet dormant period criteria limited to a specific list of broadly diversified ETFs, mitigating potential problems from knowledge transfer between management teams that are largely unexamined in the context of SMIFs.

Keywords

Citation

Shohfi, T. (2019), "RPI’s James Fund: ETFs, decision making, & manager transitions", Managerial Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MF-08-2018-0397

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Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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