Shivi Sharma, a business student at Northeastern University in Boston, was committed to environmental and social causes, and had little interest in pursuing a career in finance until she enrolled in a programme last year that gave her practical experience with real money.
The NUImpact Fund is an example of a trend across business education. It deploys students to conduct due diligence on early-stage local “mission-driven” businesses, and invests up to $50,000 of donors’ money each semester in the project they consider has the greatest potential.
The portfolio includes EatWell, which prepares healthy food for poorer families in Boston; TRILLFIT, a black-owned fitness studio for marginalised groups; TOP, providing socially conscious menstrual hygiene products; and Imago Rehab, to help patients adhere to physical rehabilitation programmes.
“I have spoken to 24 entrepreneurs, and it has changed my idea of how impact can be blended with finance,” says Sharma. “We mirror what venture capital does. It’s really amazing to have that access to deploy capital. I have learnt more from NUImpact than in any single class: it teaches you more and you are able to be more confident.”
This article is part of a report on the FT Masters in Finance ranking for 2023, to be published on Sunday
Student-managed investment funds have a long history, dating back at least to a project launched by Lafayette College in Pennsylvania in 1946. There were roughly 600 collectively managing $750mn in assets in 2021, according to Scott College of Business.
The collective assets under management of roughly 600 student-manged funds in 2021
Those with a particular social impact focus have grown significantly in recent years. The SIILK Network, part of the US Intentional Endowments Network, which tracks and supports such student projects, has identified at least 40. The majority invest funds either from individual donors or carved out of their university’s endowment.
Georges Dyer, executive director of the network, says: “The importance of experiential learning is growing. We see demand from industry for talent that has exposure to sustainability and traditional investment techniques. A student-managed fund is one way to get that.” He points to rising demand from students for training and careers in sustainability, and broader growth in impact investing among fund managers.
Fund strategy varies widely. The David S. Kidwell Funds Enterprise at the Carlson School of Management at the University of Minnesota oversees $47mn in capital split between a fixed income and an equity-based growth fund, with money contributed by external institutions and a small share of the university’s own endowment.
“We are the BlackRock of student funds,” says Susanna Gibbons, the managing director, who previously worked in fund management. It is a standalone legal entity with the mantra: “This is not a project; this is an ongoing asset management business.” It aims to simulate an entire asset management operation rather than simply apply stock picking, and is a signatory to the Principles for Responsible Investment initiative.
The Haas School of Business at UC Berkeley claims to have launched the first student-managed socially responsible investment fund for students in 2008, since when its assets have grown from $1mn to $4.5mn. In 2019, it added a private equity impact investing unit alongside its public markets division.
Katherine Baird, associate director for sustainability, at Haas says: “We have really seen that, through careful asset allocation and understanding of risk, students can achieve equivalent or better than market returns.”
She says an important distinguishing characteristic of the funds she oversees is that they are fully integrated into teaching, and require applicants to have studied a course in financial information analysis the previous year. “We see these funds becoming less nice-to-have electives and more a core part of the education offered,” she says.
However, Lloyd Kurtz, senior portfolio manager at Wells Fargo Wealth and Investment Management, remains cautious over student funds. “I’m personally a little sceptical,” he says. “There are a lot of vanity projects. It’s great to get out and learn some respect for the markets. You can teach kids the basics about investing but there’s a level of reality below that. I’m worried we’re not looking hard enough at the complexities of the world, systemic analysis, labour contracts and externalities.”
To better train students and reward their ideas, there are a range of competitions they can enter, in addition to managing funds. For example, the Kellogg-Morgan Stanley Sustainable Investing Challenge asks students to pitch their ideas on how capital markets can address social or environmental challenges.
This year, it awarded $10,000 to kick-start the winning project: a crop insurance project for smallholders presented by students from Gulu University’s Faculty of Agriculture and Environment in Uganda. Lilian Kisebe, one of the team preparing to launch the project, says: “Many of us are from smallholder families. We’ve grown up seeing the life they live and the difficulties caused by climate change.” Her classmate Silver Tumwa adds: “The challenge guided us to improve our model and objectives and linked to us a network of mentors and professors.”