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Students to Manage New
$1 Million Investment Fund
February 28, 2000

Move over, Beardstown Ladies. The UConn Student Managed Investment Fund will not be your grandmother's investment club.

Unlike that now-famous Illinois club of small-town salt-of-the-earth-in vestors, two select groups of UConn Finance students are being staked with $1 million to begin buying and selling stocks and bonds, and manage the new Student Investment Fund being launched by the School of Business.

In launching the Student Managed Fund, UConn joins a select group of business schools across the country. By allowing students to invest real money, educators say, schools gain an advantage in recruiting the most gifted students. And the students, in turn, can tout real-life investing experience to prospective employers, improving their chances for placement with the prestigious financial institutions in Wall Street.

The UConn students executed their first stock buys on Feb. 11 and began the process of building their portfolios, using monies provided by the UConn Foundation. The Foundation's Board of Directors recently agreed to allow a portion of its endowment funds to be managed by the students, with guidance from faculty and an Investment Advisory Board.

The Foundation has made available $500,000 for the start-up phase. Another $500,000 will be gradually added by the Foundation as the students gain experience with the management and mechanics of the fund.

"Starting with a fund this size will not only help participating students pursue lucrative careers in the financial sector, but also enhance the School of Business' image as the only public research university in New England with a student-managed fund," says Chinmoy Ghosh, an associate professor in the Department of Finance, and the fund's faculty advisor.

"Our goal is to provide students valuable hands on experience in security research, valuation of risky assets, asset allocation and portfolio management," adds Ghosh. "While performance will remain the primary focus, and will be reviewed at regular intervals, we realize that no investment manager can beat the market on a consistent basis. Rather this is an effort to deliver high quality practical education in an area of considerable interest to students and employers alike. We expect the fund will increase the marketability of our students in industries such as equity research, investment banking, commercial banking and corporate finance."

Independent Team
The investment fund is being managed by two groups of students - one group includes 11 MBA students; the other is comprised of 8 undergraduate business majors. Each group began by investing $150,000 and will ultimately have the responsibility for managing $500,000. The two groups will operate independent of each other.

"The decision to create two different groups was motivated primarily by the idea of studying whether, and why, two groups of student managers, with similar background preparation and training, come up with different choices of risky assets," says Ghosh.

To start the new investment fund, Ghosh chose mostly second-year MBA students who will participate in the management of the portfolio for a year.

The undergraduate team, which includes both juniors and seniors in order to ensure continuity from year to year, was chosen and is advised by David Fricke, a lecturer and Ph.D candidate in the Finance Department, who teaches an undergraduate course on investments and has developed a stockbroker training program that is offered through the School of Extended and Continuing Education.

Students must do all the required analysis for investing decisions, researching the investment information available at the library, and on the World Wide Web and using various analytical software provided by the School of Business. Although the final trading decision rests with students, no trades are allowed until full analysts' reports are submitted to the faculty adviser for review at least 24 hours in advance.

In weekly meetings, individual students pitch and defend their investment ideas to their fellow members, who vote on all stock sales and purchases. Individual members of each group have been assigned responsibilities for trading, and for preparing reports for submission to the Foundation.

Being Accountable
Like money managers elsewhere, the students have to answer to their "clients," in this case The UConn Foundation, and a five-member Investment Advisory Board, composed of professional money managers who are all School of Business alumni.

Along with monthly reports on the performance of the fund, the students must produce two in-depth reports on their portfolio's performance for the advisory board. The board has set up ground rules for the selection of stock classes and the amount that can be invested in any class. The students are responsible, however, for setting the price range for buying and the price triggers at which the fund will sell the stocks to take a profit or stem losses.

The students do not receive academic credit for participating in the investment fund. Ghosh anticipates, however, that by the time the next group of managers is chosen, students will be competing to be chosen.

Ghosh and Fricke say the initial selections made by the students reflect diligent research and analysis by both groups.

The undergraduate managers decided to allocate $150,000 equally among six stocks, including EMC Corp. and Exodus Communications. The MBA group allocated funds among 12 stocks, including popular stocks such as Microsoft and Intel. Both teams independently chose Qualcomm and JDS Uniphase Corp.

David Bauman