Student-Managed Investment Funds: A Framework for Regional Schools

Abstract

INTRODUCTION Student learning has always been the goal of education. The chalk and talk method has been the traditional technique of teaching, but this method may not mesh well with current students. Students who are used to video games and the Internet can become bored by the lecture format, especially since most of their classes use this method. Instead, students desire formats and techniques that are more engaging. Students who are more engaged do better in the classroom and retain more of the material (NSSE, 2006). While the National Survey of Student Engagement points out the importance of engaging students, the scores earned by the colleges and universities can be misleading. Chatman (2007) finds that students in similar disciplines report more similar gains in skills than students at the same institution but in a different major. Furthermore, the exams and surveys that institutions use do not adequately measure student learning because they don't assess critical thinking and communication skills. Employers seek graduates with higher-order skills along with the requisite discipline knowledge (Epstein, 2007). Communication skills is commonly mentioned as a skill business students lack (McWilliams, 1994). Students learn in a variety of ways but students who are active learners learn and retain more than more passive students. A question for finance programs is how to teach students to not only apply the concepts but also do so in way that allows students to demonstrate these skills for potential employers. As higher education becomes more focused on accountability of students learning, programs need to develop ways to meet this goal. One way is to let the students be portfolio managers including making the investment decisions and suffering any negative consequences. This allows finance programs to close the loop on curriculum and assessment. If the students are able to tangibly exhibit their skills gains to employers, the value added by the finance curriculum is clear and accountable. While there was research in the 1990s on the basic design of a student-managed investment fund, there has been a dearth of research on how to use the fund to assess the finance curriculum or how the fund can play a role in connecting the finance program with alumni. Furthermore, other than a cursory nod that challenges exist at smaller schools, there has been no research on tangible assistance to designing a fund and to fit it into the curriculum - assessment paradigm. The small amount of research or news articles has been on the performance and asset choices of student funds. This paper is unique in that it presents the role of the student fund in the finance program and, in particular, how it can be part of the assessment process for the major. The first sections present an overview of student funds and the role in of a fund in program assessment. Then the framework for how to design the fund, which can compensate for the initial constraints faced by smaller schools, is presented. The framework acts as a guidebook leading the students' decisionmaking process while recognizing the fund's role within the finance discipline. This is expanded in the section on learning objectives and ties the objectives to the curriculum of the CFA and CFP designations. Survey results from the portfolio fund students are presented in the sixth section followed by conclusions in the last section. OVERVIEW OF STUDENT-MANAGED INVESTMENT FUNDS Active learning has been shown to increase student involvement and retention of information (Kolb, 1981). However, the active learning is usually within the classroom as case studies (Carlson and Schodt, 1995; Palmini, 1996), team projects (Bartlett, 1996), or games (Angel, 1994; Gardner, 1994). Student-managed investment funds provide active learning but with the real-world conditions desired by today's employers. Student-managed investment funds are portfolios that are completely managed by student groups. …

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