In an era of changing job markets and increasing demands for practical skills, universities are continuously seeking innovative solutions to prepare students for future careers. One solution is the implementation of student-managed investment funds. These funds provide experiential learning opportunities and help student develop valuable professional skills useful across many sectors.
Through these funds, students manage real-world portfolios in industries including real estate, stocks and venture capital. Students from diverse majors gain first-hand experience in finance, entrepreneurship and innovation – the building blocks of a thriving economy. Furthermore, these funds support local community development by investing in start-ups and businesses connected to the university. Successful examples such as the University of Michigan’s Wolverine Venture Fund, or the Montano Student Investment Fund at George Mason University have proven to be beneficial for all stakeholders.
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To effectively implement and manage student-managed investment funds, universities must focus on practicalities related to managing the fund efficiently. This article will look at requirements for guiding students, sensible fund management, checks and balances, tangible learning benefits, collaboration and networking, the importance of a strong advisory board, licensing and compliance, and financial infrastructure. By addressing these elements, higher education institutions can maximise the usefulness of student-managed investment funds.
1. Guiding students: The success of a student-managed fund is closely linked to proper guidance from experienced professionals. The lead faculty adviser plays a pivotal role in steering students and providing indispensable mentorship to support their learning journeys. This includes collaborating with fellow faculty members, staff and industry professionals such as venture capitalists and financial experts. By fostering these connections, the faculty adviser ensures that students receive valuable mentorship and training opportunities from a diverse network of experts. Universities can facilitate this process by hosting workshops, seminars and regular meetings with advisers.
2. Sensible fund management: The lead faculty adviser collaborates with students to design investment strategies, including portfolio diversification and risk management. They encourage students to research and analyse multiple investment opportunities to minimise risk and maximise potential returns, incorporating the venture investor model for forecasting portfolio performance. For the most part, students should find investment opportunities themselves, with guidance from faculty, mentors and industry partners. To ensure sensible decisions and analysis, a system of checks and balances should be put in place. The faculty, mentors and industry partners review students’ research, analysis and recommendations, providing constructive feedback and helping to refine decision-making processes.
3. Checks and balances: For accountability and transparency, it is crucial to have a governance framework with clear roles and duties for advisers and students. To track the fund’s success and guarantee compliance with rules, students should undertake annual performance assessments and audits. The fund should have a succession plan and contingencies to ensure a smooth transfer of responsibilities when students graduate.
4. Tangible learning benefits: To maximise the educational value of participating in a student-managed fund, universities should integrate the experience into curricula. Students can be required to complete relevant coursework, engage in case studies and present their findings and recommendations to a panel of experts.
5. Recruitment and networking: There must be a transparent selection process to identify and recruit motivated and capable student fund managers. Hosting a campus-wide recruitment event attracts diverse students from different disciplines with analytical skills, interest in finance, entrepreneurship and strong communication skills. The faculty adviser appoints a president and vice-president for the fund, who then recruit for positions in marketing, fundraising and deal procurement. New students assume a six-month analyst role, learning the fund’s workings and determining if the opportunity suits them. The lead faculty adviser conducts regular meetings and training sessions, fostering a structured learning environment. Mentorship and networking opportunities with industry experts enable students to build valuable future career connections.
6. Strong advisory board: An advisory board, composed of finance professionals, entrepreneurs and academics, can provide valuable advice, guidance and oversight to the student-managed fund. This board can help to identify potential investment opportunities, navigate legal and regulatory issues, and ensure overall success.
7. Licensing and compliance: Student-managed funds, often established as separate non-profit entities, need proper licensing and compliance with financial regulations. Universities should engage legal and financial experts to determine the fund’s appropriate structure and ensure they adhere to all relevant laws. Typically, investment funds reinvest the profits they generate, supporting the fund’s growth and educational mission. As a non-profit entity, the fund uses any surplus revenue to further its objectives, rather than distributing it to shareholders or owners. If losses occur, the fund absorbs the impact, making a risk management strategy essential to mitigate such situations. Initial funding can come from the university itself, alumni donations, grants or even external investors supporting the educational mission. Having a clear plan for sourcing the initial capital, as well as a strategy for maintaining and growing the fund in the long term, is crucial.
8. Financial infrastructure: A bank account and financial management system are crucial. Universities should work with banking institutions to set up accounts with appropriate controls and permissions, allowing students to manage the fund’s finances effectively. Having two bank accounts to separate investment capital from working capital ensures a clear division of funds, allowing for better management and tracking of resources.
By focusing on practical aspects of setting up and supporting such funds, universities can create a win-win situation for all stakeholders. Sharing best practice and lessons from successful student-managed funds can help other institutions develop their own funds and contribute to the advancement of experiential learning in higher education.
Ahmad Al Asady is an assistant professor of management, Challey Institute faculty scholar, research fellow at the Center for Entrepreneurship and Family Business and faculty adviser to Pathway Ventures at North Dakota State University.
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