UNC business students invest foundation’s funds

GREELEY – A pioneering finance class at the University of Northern Colorado lets students experience first-hand what it’s like to be responsible for handling someone else’s investments.Their client? UNC itself.
The Student Alumni Foundation Fund has a handful of students – most seniors and finance majors – managing a portion of the university foundation’s portfolio.
Typically, foundations hire professional money managers to seek safe havens for university funds.
But in 1992, finance department chair John Clinebell petitioned the UNC Foundation to let his students have a small percentage of its money for a real-life investment experience. The foundation is entrusted to manage about $20 million of the university’s money.
“At that time, there were 20 to 25 student-managed funds across the country,” Clinebell said, noting that most were at the graduate level.
Initially capitalized at $200,000, the class was so successful that the foundation later authorized another $100,000 for the students to invest. Now, the fund stands at about $391,000.
“The students are held to the same guidelines as other money managers at the university,” Clinebell said.
That means, said Jim Basey, president of the foundation and head of its investment committee, that they have to deliver presentations every semester to the foundation’s investment committee and justify their strategy.
Within the class itself, students are given the freedom to do asset allocations as they see fit. Both fixed income, or investing in bonds, and equity investing, such as playing the stock market, methods are used.
Approximately 60 percent of the portfolio is held in stocks, primarily high-tech and health care, as well as industrial commodities. Thirty-five percent is in bonds, and the remainder cash.
The instructor is there only to provide a framework and answer questions, not to actively take part in the actual investments.
The class, which first attracted 20 to 25 students, is so popular that Clinebell now has to interview those who sign up for the course and decide who gets in. It’s a semester-long class that offers three credits, but can be taken twice for six credits.
It meets just once a week for three hours, at which point the portfolio is examined and a long-term strategy is discussed.
“The foundation at first was concerned that it be carefully managed,” Clinebell said. “Now, they’re crazy about it. They’ve been very pleased.”
Basey concurs.
“As chair of the investment committee, I’m not going to give money to someone who can’t do the job,” he said.
And, Clinebell now is a member of the foundation’s investment committee.
Clinebell noted that last year, the average professional portfolio manager provided an 18.07 percent return. The class, on the other hand, returned 19.97 percent on the university’s investment.
“There’s obviously been quarters where they dropped,” Clinebell said. “Then they get very concerned. But generally, they have performed at or above professional managers.”
Basey said he sees this program as one that should continue, although there could be some question as to how much money the foundation wants to allocate.
“I’m very comfortable with the amount now,” he said. “We have not had any real tough markets. It might be interesting to see how the students are challenged in a more aberrant market and economy.
“Not that I want that,” Basey added with a laugh.
The class also creates a special kind of camaraderie among the student finance majors.
Each semester, they publish a newsletter for alumni of the class and for foundation members. It’s a way for graduates to keep up with the fund they helped manage.
“We’re trying to get a database of alums and find out what they’re doing,” Clinebell said.
Some of the original class members are in jobs where they now can recruit current graduates of the class.
Now, there are perhaps 30 to 35 programs like this at universities around the country, but UNC’s is one of the largest funds managed by undergraduate students.
Some profits from the fund are folded back into the program for student scholarships and other support for the class.
“From our standpoint, we’re trying to address real-world applications,” Clinebell said.
“It’s a real, live process for very talented and deserving students,” Basey said. “He has the cream of the crop in that class.
“My philosophy is to treat them like others – very professionally and ask them tough questions,” he said. “I think it is so positive that we can bring a real, live exercise to the students.”
It’s a class UNC should be proud of, he added.
“The university can walk its talk,” Basey said. “We have a superb business school, and evidence of that is that we let the students from it manage our money.”
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