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A SURVEY OF STUDENT-MANAGED FUNDS: THE WAY THEY WORK

Student managed funds (SMF) provide special opportunities for student learning and

teaching. Outside of the individual colleges and universities involved, these programs are not

widely known, and little is known of the varieties of structures employed. The paper will

describe how SMFs originate and operate, and how students manage the portfolios. This new

survey provides new detailed information on this increasingly important aspect of financial

education.

This research presents the results of a new survey that examines the functioning of SMF

funds. SMFs are individually different, but are all vehicles aimed at student learning through the

experience of managing investment portfolios composed of actual dollars, not artificial

portfolios. These investment portfolios offer students the real world experience of portfolio

management, and this experiential approach should provide for a superior learning process and

outcomes in the teaching of investments and portfolio management.

For several reasons, we do not deal with the investment performance of SMFs.

Adherence to the AIMR (Association of Investment Management and Research) Performance

and Presentation Standards (1999) should be required of all SMFs. These standards provide for

accurate performance measurement and presentation, but calculation of performance may vary

from SMF to SMF requiring the auditing of performance data. Such a requirement would have

reduced the response rate on the survey. The most important purpose or goal of most SMFs is

improved educational outcomes, with performance of the fund secondary.

The use of attitudinal data has not been applied to examine the effectiveness of SMF-

based education. This survey paper seeks to provide a current description of the SMFs in the

US, and the survey will provide new evidence of the educational effectiveness of SMFs. This

paper deals with the ways SMFs are funded, how the educational processes work, and the ways

SMFs manage money. Evidence is provided of differences in SMF models and how these

differences result in different SMF attributes. Finally, the effectiveness of SMF-based education

is examined from the viewpoints of faculty advisors.

Literature Review

There have been several studies of SMFs over the last 12 years. Lawrence (1994)

surveyed 34 SMFs in 1993 (although others existed). There are 104 institutions included on the

recently formed Association of Student Managed Investment Programs’ (ASMIP) Survey (Lerro

and Mallett, 2001). These and other surveys of SMFs examined their funding, performance,

investment policies, and educational models used.

As illustrated by Block and French (1991), by Lawrence (1994), SMF funding comes

from various sources: large specific gifts from one or several individuals, gifts from corporations

or from corporate foundations, gifts from many small donors, gifts from university or other

foundations, and from carve-outs from endowment or university foundation assets. Some SMFs,

such as the University of Texas at Austin as reported in Business Week, manage funds for

private clients, accredited investors under U.S securities laws. Another special case is the loan

that provides SMF funding at Cameron University (Bhattacharya and McClung (1994)). The

variety of funding methods suggests that no one source is optimal, and that each situation

required individual funding based on the situation. Most SMFs manage funds that are part of a

university’s endowment fund or foundation. Disadvantages of using endowment money cited

by Lawrence include university investment restrictions (such as not allowing investment in

foreign securities) and the risk that SMF underperformance will jeopardize the fund’s

independence of operating strategy. Presumably, persistent underperformance could cause the

university to redirect the fund management. These restrictions resulting from university

oversight may seem onerous, but, also provide learning tools for students who want to become

investment professionals who must manage money according to the objectives of their clients,

not their own objectives (Grinder, Cooper, and Britt, 1999).

Block and French (1991) elaborate on the organizational structure of the TCU fund.

There is a student administrator, portfolio managers, and operations managers. A survey by

Ary and Webster (1998) found that some SMFs use a committee structure, others used

functional (accounting, public relations, etc.) organization structure, and others organized by

economic sectors. Lawrence (1994) found that most SMFs operate as parts of required

investments courses, both graduate and undergraduate. Some courses are open to students from

across the university with or without prerequisites. Ary and Webster (1998) found that while all

allowed common stocks, only 16 of 28 allowed bonds, and 14 allowed mutual funds. Three of

24 allowed futures, short selling, and covered calls, and only two allowed put options. Only four

invested in foreign securities. The maximum allowed to be invested in one security was 3% to

25%, with 15 SMFs allowing an average maximum of 13% in one stock.

Methodology

An Internet/fax survey was sent by E-mail to faculty advisors of the SMFs included on

the ASMIP survey and to other institutions’ faculty advisors not included on the ASMIP list. A

total of 124 SMFs were surveyed with 61 usable responses. Of those surveyed, some were not

currently operating funds (with actual money). Only operating funds are included, and only one

fund per university location is included in detail. For cases of multiple funds at a university, the

second and third funds were reported, but detailed questions asked apply only to the largest fund

at the university.

Survey questions include descriptive and attitudinal questions about the funding,

operation, investment practices, and governance by university and advisory boards. The results

of the survey include descriptive information and analyses of mean differences between various

attributes defining the SMFs. The sample is divided into subgroups to examine differences

between subgroups. A t-test for equality of means of subgroups is used to find statistical

differences between the subgroups. Levene’s test for equality of variances is used to determine

the particular t-test to be used for each case.

Funding of SMFs

Current SMFs initial funding comes from many sources as shown in Table 1. In some

cases initial funding came from more than one source, hence, the number of sources is greater

than the number of respondents. The largest number, 21 of the 61 responding SMFs, obtained

initial funds from gifts from individuals or families who designated their gifts to universities for

the purpose of helping students learn investing by practice. Universities have designated (carved-

out) funds from their endowments and restricted use to SMF purposes. Fifteen of the 61 SMFs

surveyed were formed as care-outs from the university endowments. Foundations provided

SMF funding in 6 instances and corporations in 7 cases according to the survey. Four

respondents include SMFs that manage funds for private clients.

There is usually some oversight from a committee of the board of trustees. This

ownership structure simplifies accounting, control, and tax filing for the SMFs. Disadvantages

of using endowment money cited by Lawrence include investment restrictions, such as not

allowing investment in foreign securities, and the risk that SMF underperformance will

jeopardize the fund’s independence of operating strategy. Presumably, persistent

underperformance could cause the university to redirect the fund management. These

restrictions resulting from university oversight may seem onerous, but, also, provide learning

tools for students who want to become investment professionals who must manage money

according to the objectives of their clients, not their own objectives (Grinder, Cooper, and Britt,

1999).

The Tennessee Valley Authority’s Investment Challenge Program funds 9 of the SMFs

surveyed. The Tennessee Valley Authority Investment Challenge program involves 19

participant universities in its service area with each university managing $100,000 of the Nuclear

Decommissioning Trust Fund. The universities compete for monetary prizes but do not retain

ownership of the funds; instead they act as money managers for the TVA Trust (2002).

SMFs vary in size from well over $3 million in assets to less than $50,000. One of the 61 survey

respondents has assets of over $3 million, while the median and modal category is a size range

of $200,000 to $500,000. Business Week reports a university has assets of over $12 million.

The sizes of SMFs for the date December 31, 2001 vary as Shown in Table 2.

Educational Models

Regardless of the source of initial funding, size, and ownership, there are differences in

fund operating structures. There may be more than one SMF at a single university. Funds may

be structured as a part of a class or not and the students may be undergraduates, MBAs, or a

combination. Forty-seven of the 61 responding SMFs offer only one fund, 11 have two funds

and 3 offer three funds. Block and French (1991) discuss the two-fund approach that is followed

at some universities with the advantage of allowing more students to assume leadership

positions. Another university SMF fund also has two sub-funds; one which growth follows a

growth style and another follows a value style. That approach allows students to choose

according to their investing style preferences. There are two funds at another university, one

associated with a class and another that is voluntary. Another university has two classes and two

funds, one managed by undergraduates and another by MBA students. Another program offers

both equity and fixed income portfolios.

Some SMFs involve many students, each with their specific jobs in highly structured

organizations. The programs may revolve around courses, while others may purely voluntary

for students. Eighteen percent of the responding SMFs are voluntary and 73 percent operate

within a one or two-semester class as shown in Table 3. For those operating a part of a class, 30

percent of the responding SMFs are run in a two-semester class, while an equal proportion

operate in a one-semester class. Within courses or outside of courses, it is important to

understand how the investment strategies employed and, the SMF experience relates to finance

course work. The time horizon of investments varies from a long-term horizon consistent with a

typical endowment horizon to a short-term horizon corresponding to a semester or less. Some

SMFs are aimed at MBAs and others at undergraduates and still others mixed.

The open-course model allows students outside of business schools to pursue their

interests while majoring in areas like biology or engineering. Such majors offer direct

application to analysis of healthcare or technology firms. Courses may be one or two semesters

in length. Two-semester courses address the problem of lack continuity of student portfolio

managers. A drawback of a one-semester course is that portfolio managers may tend to have a

four-month investment horizon instead of a longer run horizon, which is normally desirable for

most SMFs. A third alternative used at many programs is to encourage students to continue to be

involved after an initial course period through directed studies or special research projects and

voluntary student participation

There are a number of advantages of structuring the SMF as a part of a course. The

advantages are: (1) students may devote more effort and their work may be more productive and

organized, (2) faculty advisors can devote a part of their teaching loads to the SMF class rather

than as an add-on extra-curricular faculty responsibility, and most important (3) the educational

class experience is made richer due to the students’ added motivation gained from managing real

money within the course context.

Advantages of extracurricular, non-course-based, SMF programs include (1) access to

students from across the university since there are often no course prerequisites, (2) attraction of

students who choose to become involved in portfolio management, not to satisfy courses which

satisfy graduation requirements, and (3) the involvement of potentially more students.

Sixty percent of the SMF programs select the best student candidates and limit the course

enrollment utilizing student application processes as shown in Table 4. At a typical program

there is an application and interview process in January with the newly selected students taking

over the following March. Many other SMFs, 40% of the respondents do not require

application, and are open to qualified students. These courses may be available on a “first come,

first served” basis or simply available to all interested students. The group not requiring an

application may also include voluntary non-course programs open to all qualified students.

Most SMFs use the class model with all but the open model SMFs requiring a variety of

courses prior to the SMF courses. In addition to the ubiquitous junior level corporate finance

course (or its MBA counterpart), some SMF courses have no other prerequisites while some

have two investments courses required prior to enrolling in the SMF course.

There is a wide variety of texts mentioned by survey respondents with over 38 books

receiving mention to the question, “what are the best textbooks or readings that you use?” The

most frequently mentioned books are shown in Table 5.

When asked about special facilities and data available to the SMF, 10 funds mentioned

having a special trading room dedicated to the SMF. Eight have special subscriptions to Value

Line, six have Bloomberg terminals, five have access to Bridge stations, and three have access to

First Call. When asked about special features of the SMFs, a variety of responses were offered.

One SMF course is taught by the donor, another university’s SMF course is taught by

videoconference by a visiting portfolio manager. Another SMF’s advisor has made extensive

and successful use of special student projects such as publicity, SMF brochures, special research

projects, performance attribution, etc. Several SMFs have mentioned special trips to money

center cities with speakers and visits to financial sites. Other special features mentioned include

the management of funds for clients, not the college endowments, etc. Finally, when asked

whether the SMF maintains a web page, 33 SMFs said that their students or the university

supports the SMF webpage.

Investment Policies

SMFs should have an Investment Policy Statement (IPS) aimed at directing the students

in managing the fund and at controlling the fund investments. Forty-nine of the responding

SMFs report that they have their own fund-specific IPS, while three use the university’s

endowment IPS. Three report that they do not have an IPS, and six report that they use some

other type of IPS. Not only is the IPS important, but the process of writing an IPS is a good

exercise in defining risk and return objectives and the constraints, such as time horizon,

allowable securities, liquidity needs, spending policy, etc. The IPS should define the types of

assets allowable for investment and should act to provide policies and guidelines for managers of

the fund.

In the current survey 57 of the 61 funds’ IPSs allow for investment in US equities as shown in

Table 6. The only ones not allowed to invest in equities were the four bond-oriented SMFs.

The survey instructions asked respondents to describe their largest fund, hence, multiple fund

programs provide additional opportunities not fully explored by the survey. Seventeen funds are

allowed only to invest in US equities. Of the 40 remaining equity funds, 27 could also invest in

bonds, 12 in options, 4 in futures, and 18 could invest in open-end mutual funds. Twenty,

almost half, are allowed to invest in foreign market securities. There has been an increase from

the Ary and Webster (1998) survey of SMFs investing in foreign securities from 4 of 28 (14%)

funds, to 20 of 61 funds (33%) in the current survey.

Since almost all funds are equity oriented, it is not surprising that most investment

strategies are equity strategies. Within the equity strategy, active equity is followed by 73% of

the SMFs, while only two funds follow a pure passive equity strategy as shown in Table 7.

Twenty two percent report a mix between active and passive equity. The mix between active

and passive includes SMFs that invest proceeds from security sales into index funds while

waiting to invest in other individual securities.

Since most SMFs follow the active equity strategy, it is important to examine the strategy

and styles followed by actively managed funds. The equity styles reported are shown in Table 8.

Twice as many SMF advisors report that their largest funds follow a value style relative to those

reporting a growth style. The value tilt is interesting given the author’s observation that students

prefer the growth style rather than the value style.

The equity strategy is further examined regarding the methods of security analysis

as shown in Table 9. Top-down (economy-industry-company) is the textbook-approach to

investing, and a large proportion (32%) follows this approach. An even larger group uses

bottom-up or picking a security without initial focus on industry and economy. A combination

of approaches is used by 22%. Three funds use a quantitative approach. No funds report an

emphasis on market timing or moving between asset classes based on differential prospects.

Table 10 shows that four funds did respond that market timing was “very important” and

10 reported that market timing was an “important factor.” Thirty-five SMFs report market

timing to be of “little importance” in carrying out the goals and strategy of the fund. In response

to a related question, two SMFs considered asset allocation to be “very important” and 12 called

it “important.” Forty SMFs called asset allocation either “not important” or of “little

importance.”

There is a general agreement among most SMFs that the focus should be on individual

security analysis with little emphasis on market timing or technical analysis. While most SMFs

share common characteristics, there are some differences, which are explored in the next section.

Effects of Size, Ownership, and Course Differences

Size seems to matter in some respects, although by most measures from the survey there

are few differentiating factors according to asset value of the fund. To test whether size matters,

the SMFs were divided into two asset size groups, $200,000 and above and smaller than

$200,000. An independent samples t-test for equality of means (with equality of variances tested

with Levene’s test) is conducted, and the following factors were different based on a two-tailed

test at the following significance levels as shown in Table 11. Larger funds tend to be older as

might be expected, and larger funds tend to require students to submit applications compared to

smaller funds which tend not to require applications. Advisors of smaller funds are more prone

to feel that student skills and confidence and their job prospects are enhanced as a result of the

SMF experience. Advisors of smaller funds are more likely to feel that they themselves as well

as their students spend more time on the SMF course/experience than do advisors of larger

funds.

The next test considers whether course-based SMFs differ from voluntary SMFs. When

the course model is used as opposed to a voluntary (or less than a full course) model, there are

three differentiating factors. For those funds which operate with either one or two classes,

written analysis of individual securities is required and is considered more important (at the 5%

significance level). Hence formal documentation of student security analysis seems to be more

likely to occur in the class context compared non-class based SMFs. In addition, oral

communication skills and the self-confidence of students is considered superior (at the 5%

significance level) at programs which require classes as part of the SMF experience. Finally,

professors, not unexpectedly, commit more time (at the 10% significance level) when there is a

class versus no class.

One of the most significant areas of differentiation in survey responses occurs between

one special group of SMFs and the others. Nine of the respondents represent the TVA

Investment Challenge, a rather new and one not focused as an owner of the funds, but the TVA

conducts a challenge to find the best money managers and they present awards to the ones with

the highest returns. The factors differentiating TVA SMFs from all others and the significance

levels are shown in Table 12.

As expected, the newer and smaller TVA SMFs represent two of the differentiating factors. The

TVA Investment Challenge Program was begun during the late 90s with $100,000 provided to

each participating university. It is not surprising to find that a special investment policy

statement required for the special situation of the TVA funds. Most other SMFs use the

endowments’ or fund specific policy statements. The time horizons of the TVA funds are

shorter than most SMFs, because TVA has the annual investment challenge contest, and other

SMFs’ time horizons are bounded by the endowment’s long horizons and the student managers’

short horizons. Therefore, the survey question deals with how the time horizons of students

affect the strategy of the SMF. Finally, advisors (professors) of traditional SMFs reported that

more time was required to teach SMF courses than is required of a regular course. Faculty

advisors of TVA SMFs report that they too spend more time, but the time required is

significantly less than that required at non-TVA programs. Of the 7 TVA advisors responding to

the question, 3 (43%) did not view the SMF as part of their compensated course load, hence,

they directed the SMF as an overload. Nine of the 43 non-TVA respondents to the question

(21%) administer the SMF as an overload. Most SMF faculty advisors administer the fund as

part of their teaching or chair-holder loads.

Advisory Boards

Advisory boards are common in businesses and in various university programs.

According to Carlyle (1995), business advisory boards provide expertise and act a “sounding

board” with knowledgeable and frank advice on specific topics where the organization is

lacking, Advisory boards play a role in corporate governance. The goal is to create a variety of

ideas from enthusiastic board members. Advisory boards are used by business and non-profit

organizations to improve information and to assist in managing the organization. Advisory

boards provide advice, feedback, and overall direction. Lessons from other literature on

advisory boards can prove valuable for boards of student-managed funds.

SMF advisory boards often include professors of finance, and, generally, the business

dean is a member of the advisory board. Since SMFs are often a part of the endowment,

university administrators and / or board of trustee members are natural members of any

governing and/or advisory board to SMFs. Advisory boards often include investment

professionals from the nearby geographic area as well as interested professionals who work in

money centers and travel or call in for meetings. In some cases the professional members of the

advisory board are graduates of the university and are former student managers of the SMF.

These board members are valuable because they understand the students’ decision making

process.

Of the 61 respondents, 37 SMFs (61 percent) have advisory boards. The table below

shows the backgrounds of the members of the 37 SMFs’ advisory boards. Since membership

may include a variety of members, the number of types of members is not as important as the

percentage in each background category. Professors are mentioned most frequently (29 percent)

as advisory board members, while industry professionals are included for 22 percent of the SMF

advisory boards. It is interesting to note the lack of significant participation by stakeholders like

university board of trustee or administration members, or donors. While there is certainly a

variety of membership backgrounds as shown in Table 13, the natural participants, finance

professors, are joined by industry professionals who are often not alumni of the SMF.

Effectiveness of the SMF Model

The question of effectiveness of the SMF compared to other courses taught is addressed

by responses to several survey questions. Advisors were asked to respond to a Likert type scale

ranging from “much more to much less” in describing their responses, which most closely match

their feelings. For each question given shown on Table 14 the percent of all responses is for

each scale category. More than half of the respondents felt that the SMF program was either

“much more” or “more” effective than is true of similar courses not part of an SMF. The first

question asked whether employers would be more likely to hire a student who had participated

in an SMF program, and 93% felt that the SMF program helped students in getting jobs.

Advisors were asked whether students were required to commit more time to an SMF based

course, and 79% of the respondents agreed. Two questions dealt with professors and the time

commitment required of them, and another question asks whether the professor was more of less

personally challenged by teaching an SMF based course. Seventy percent of the professors felt

more challenged, and 60% spent more time teaching the course. There are three questions aimed

at feelings about how the advisors viewed students and student skills. Seventy seven percent

said that students felt more self-confident as a result of the SMF course. Almost all, 98% said

that students were provided more skills than in another course. Similarly, almost all respondents

felt that students are more confident in their oral communication abilities as a result of the SMF

experience.

Summary and Conclusions

SMFs have grown in number, diversity and size over the last decade. The initial funding

for the SMFs comes from a variety of sources, but most of the individual SMF funding comes

from gifts from individuals, families, and the endowment. Asset sizes range from less than

$50,000 to more than $3 million, with the average between $200,000 and $500,000.

Seventy-three percent operate as part of a one or two semester class, but 18 percent are

voluntary for student participation. Students typically are required to apply for participation,

with a minority reporting open class enrollment, perhaps depending on class prerequisites.

Almost all funds invest in US equities, although four of the respondents invest only in

fixed income. One third of the SMFs allow investment in foreign market securities, in addition

to American Depository Receipts. Almost all equity SMFs follow an active, sometimes

combined with a passive, investment strategy. The active equity strategies are further reported

to predominately follow the value style as opposed to the growth or blend style.

Thirty-five of the SMFs report that market timing is of “little importance,” and 58 said

that security selection is “important” or “very important.” Only 11 report technical analysis to

be “very important.” Hence, most SMFs focus on individual securities rather than focusing on

the market as a whole. Written fundamental analyses are noted by 41 SMF advisors as being

“very important,” confirming the SMF focus on individual security analysis, rather than market

and technical analysis.

While most SMFs share many common attributes, there are several attributes that seem

to vary according to factors such as: asset size, class or voluntary SMF, and whether a TVA-

sponsored or a traditional SMF. The larger funds tend to be more established (older) and tend to

require the students to apply to participate in the management of the fund. Smaller funds’

advisors are more likely to feel that students’ skills, self-confidence, and job prospects are

enhanced by their SMF experiences. Smaller (more than larger) fund professors and students are

felt to devote more time than they would to a normal course.

Course-based SMFs differ from voluntary SMFs in the sense that course based funds

tend to require greater emphasis on written fundamental analysis. Other factors that are

considered more effective by course-based advisors are student skills and student self-

confidence. However, some of the advantages of voluntary programs, such as individual

initiative and openness to all students, are not included in the survey questions.

TVA Investment Challenge (2002) SMFs differ not only in the asset ownership and asset

size differences, but also because professor time and class-based courses are less important at

TVA SMF programs compared to other SMFs. As well, time horizon seems more focused on

the annual contest at TVA programs, whereas other SMFs have time horizons in concert with

their clients, usually the university endowments.

The SMF model is viewed by the SMF faculty advisors as superior to a normal course

model. Students of SMFs are more attractive job candidates, and they are more confident, have

superior skills, and are better at oral communication, compared to students not associated with

SMFs. Professors and students devote more time and feel more challenged by the SMF

experience. Hence we conclude that SMF advisors feel that the SMF model is a more effective

teaching and learning model the alternative.

In sum, while there is a variety of SMFs according to size, ownership, and class

structure, there are many more common characteristics than differences. These differences and

the various strengths of the SMF Programs across the country help make the SMF model more

effective in delivering superior education.

REFERENCES

AIMR Performance Presentation Standards, A Practitioner's Workbook, Charlottesville, VA, 1999.

Ary, Eddie J. and Robert L. Webster, "Survey of University Student Investment Funds," (unpublished paper, 1998).

Bhattacharya, T.K. and Jacquetta J. McClung, Cameron University's Unique Student-Managed Investment Portfolios," Financial Practice and Education, Spring / Summer 1994, pp. 55-60.

Block Stanley B., and Dan W. French, "The Student-Managed Investment Fund: A Special Opportunity in Learning," Financial Practice and Education, Spring 1991, 1,1, pp. 35-40.

Grinder, Brian, Dan W. Cooper, and Michael Britt, "An Integrative Approach to Student Investment Clubs and Student Investment Funds in the Finance Curriculum," Financial Services Review, 8 (1999), pp. 211-221.

Johnson, David W., Joe F. Alexander and Garth H. Allen, "Student-Managed Investment Funds: A Comparison of Alternative Decision-Making Environments," Financial Practice and Education, Spring / Summer 1996, 6, 1, pp. 97-101.

Lawrence, Edward C., "Financial Innovation: The Case of Student Investment Funds at United States Universities," Financial Practice and Education, 4, 1 Spring / Summer 1994, pp. 47-53. Lerro, Anthony and James E. Mallett, "Establishing and Running a Student Managed Investment Program," manuscript, 2001.

Merritt, Jennifer, “Fund Managers Before They Graduate,” Business Week, March 25, 2002, p. 106E2.

TVA Investment Challenge, “Trading in Futures,” http://www.tva.gov/invchallenge/, July 15, 2002.

A SURVEY OF STUDENT-MANAGED FUNDS: THE WAY THEY WORK

For presentation to

Financial Management Association

By

Walter P. NeelyProfessor of Finance

Else School of ManagementMillsaps College

Jackson, MS 39210

601-974-1263601-974-1260 (fax)

[email protected]

October 17, 2002

The author thanks Ray Phelps and Penelope Prenshaw of Millsaps College and Phil Cooley of Trinity University for their help with this paper.

ABSTRACT

A SURVEY OF STUDENT-MANAGED FUNDS: THE WAY THEY WORK

Student managed funds (SMF) provide opportunities for innovative educational opportunities, and this article provides evidence from a recent survey of advisors of SMFs. While there are many more similarities than differences in funds around the country, there are differences that are explored in the paper. Funds differ in sizes and sources of funding, and they differ in the educational models employed and in the approaches to investing funds. Some funds involve many students, each with their specific jobs in highly structured organizations. Some SMFs revolve around courses, while others are purely voluntary for students. Within courses or out, it is important to understand how the investment strategies employed and, the SMF experience relates to finance course work. The time horizon of investments varies from long to a semester or less. Some SMFs are aimed at MBAs and others at undergraduates and still others mixed. For faculty, the roles played and the effects on teaching, service and research.

One almost universal opinion shared by faculty advisors is that SMFs provide a very effective way of educating students in the field of investments. Analytical skills, oral skills, self-confidence, and job prospects of students are enhanced by the process of participation. Professors and students seem to allocate more time to the SMF and to the associated course than they do for other courses. By these measures, the SMF model is shown to be superior to other, more traditional methods of business education.

Table 1

Sources of Initial Funding

NumberMentioning Percent

Endowment 15 20%Individuals/Families 21 28%Foundations 6 8%TVA 9 12%Corporations 7 9%Manage Funds for clients 4 5%Other 12 16%Total 74N=61

Table 2

Market Values of SMFs

(000$) Number 1-50 3 5% 50-100 12 20% 100-200 11 18% 200-500 14 23% 500-1000 12 20% 1000-3000 7 11% Over 3000 1 2%No Response

1

61

Table 3

Class Structure

Two-semester class 18 30%One-semester class 18 30%One or Two semester classes 8 13%Voluntary-no class 11 18%Other 6 10%

61

Table 4

SMF Application Requirements

No Application required

23 38%

Competitive 34 56%Non-competitive application

3 5%

Other 1 2%61

Table 5Books/Publications

Mentioned

Course Alternatives/Number of semesters

Total Two One or Two One Other Voluntary

Reilly-Brown-Investment Analysis 7 4 1 2 0 0Wall Street Journal 4 0 0 2 2 0Lynch-One Up on Wall Street 3 0 1 0 1 1Damodaran-Valuation 3 1 0 2 0 0Bodie, Kane, Marcus 3 1 1 0 0 1Strong 3 1 0 1 0 1Hooke 2 1 0 1 0 0Malkiel-Random Walk 2 1 0 0 0 1AIMR Publications 2 1 0 1 0 0AAII Publications 2 0 0 0 1 1

Table 6

Security Types Allowed by SMFs

US Equities only 17US Bonds only 3US Equities 57In Combination with EquitiesUS Bonds 27Foreign Market Securities 20Options (Hedging and naked) 12

Futures 4Open End Mutual Funds 18

Table 7

SMF Investment Strategy

Active Equity 43 73%Passive Equity 2 3%Active and Passive 13 22%Active Fixed Income 0 0%Other 1 2%

59

Table 8Equity Styles of

SMFs

Growth 14 28%Value 31 62%Blend 1 2%Quantitative 3 6%Other 1 2%

50

Table 9

Equity Strategy

Top-Down 19 32%Bottom-up 22 37%Market Timing 0 0%Quantitative Model 3 5%Combination 13 22%Other 2 3%

59

Table 10

Levels of Importance Ascribed to Investment Management Methods

Importance of:Very

ImportantImportan

tNeutral Little

Importance

NotImportant

Asset Allocation 2 12 7 13 26Individual security selection 48 10 1 1 0Market timing 4 10 12 14 20Technical Analysis 4 11 10 15 20

Table 11

Attributes of Fund Differing by SMF Size

Asset SizeAttributes below $200 Above $200

Average Response Level Greater Age of fund 2.24 2.86*

Application Required 1.54 1.86*

Opinions that:

Oral Skills enhanced 1.81** 1.47

Confidence of Student 2.15**

1.75

Student Job prospects enhanced 1.65* 1.36

More Student time required 2.27* 1.83

More Professor time required 2.53* 2.00

(Significance levels 5%**, 10%*)

Table 12

Attributes of Funds Differing According to SMF Funding Source: TVA or All Others

Attributes TVA All Others Average Response Level

Greater Age of fund 1.62 2.79**

Greater Asset Size 2.67 3.94**

Special Investment Policy Statement 2.89* 2.09

Opinions that:

Importance of Time Horizon 1.78 3.03**

Importance of Security Selection 1.00 1.29**

More Professor time required 2.77 2.12**

(significance levels 5%**)

Table 13Backgrounds of Advisory Board members

Board of Trustees 11 10%Donors 8 7%VP Finance 5 5%Alumni of SMF 8 7%Industry Professionals 24 22%Professors 32 29%Dean of Business unit 11 10%Other 3 3%No response/blank 9 8%

111

Table 14

Measures of Effectiveness According to Attitudes of SMF Advisors

Scale HIRE STUDENT TIME

PROF CHAL

PROF TIME

CONFI-DENCE

SKILLS ORAL

Much More 1 59% 36% 27% 33% 41% 64% 48%More 2 34% 43% 57% 27% 36% 34% 44%the same 3 7% 11% 13% 28% 16% 2% 8%Less 4 0% 7% 3% 8% 7% 0% 0%Much Less 5 0% 3% 0% 3% 0% 0% 0%N 100% 100% 100% 100% 100% 100% 100%