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Business Officer Magazine

Student Investors Gain Returns and Experience

Spotlight: Small Institutions, from "Business Briefs" department in July-August 2010 issue of Business Officer

By George Herbst

READ AN ONLINE EXTRA, “In the Market for Student Investors,” in Business Officer Plus.

First impressions of the student-managed investment program at Stetson University, DeLand, Florida, can be misleading. That’s because the Roland George Investments Program is unlike most other student-managed programs in the nation. The rules are different here. Students truly manage the investments.

No one from the business office or administration approves their investments; we aren’t even consulted in the management of the portfolio, now worth almost $2.54 million. Few universities would allow such a program. That is precisely why few universities have experienced the consistent success of student-managed investments that we have here at Stetson.

Competing With Confidence

In 2009, a dreadful economic year, the George fixed income portfolio gained 12 percent in value and won first place at the Redefining Investment Strategy Education (RISE) Forum, the world’s largest competition of student-managed investments, hosted by the University of Dayton earlier this year. Even more impressive, George Program students have won eight first-place awards in the 10 years of RISE competitions.

These student managers, who are not paid, are already pros when they graduate. One student manager said he is at least two years ahead of his peers in the marketplace. Stetson’s program set him apart from other job seekers because he’s experienced and confident.

Preparing the Portfolio

A board of seven trustees, three of whom are finance department faculty, is involved in all investment decisions. The other four trustees are finance students, usually seniors, who are thoroughly screened and approved by faculty and elected by classmates. The student trustee majority controls investments. Faculty trustees argue their points, as do others, but the students ultimately decide how funds are invested.

After detailed research and analysis of financial ratios, performance, management, insider activity, and other factors, students make their choices and present their recommendations to program trustees.

Trustee meetings are held throughout the semester as part of a portfolio management class. Classmates question the presenters. Often there’s debate and sometimes sharp disagreements over wisdom and ethics, before a majority vote of trustees decides whether the investment is executed.

Endowing Education

The portfolio’s growth is proof that students make money, but Larry Belcher, director of the George Program, is candid about students losing money, too. But at Stetson, that is not a bad thing. The goal is education, which was the vision of the George family who endowed the program in 1980, when it was considered a risky concept and there were only a handful of student-managed funds in the nation.

The George endowment is part of the university’s main endowment, but conditions of the gift require absolute separation. It’s for students to manage, win or lose, no matter what Stetson does with the rest of its endowment. Because of its nature, the George endowment’s performance sparks no negative perceptions among those who oversee the university’s investments, not even when it lost ground during the worst of the economic downturn.

The Stetson model of investment education will grow as other schools catch on that the best way to teach students to be investment fiduciaries is to give them the money—and the responsibility. When the risk is real, genuine learning occurs. That’s the big difference.

The numbers bear Belcher out, both in the portfolio’s performance and in the stellar record of these students’ postgraduation performance with the nation’s most reputable financial institutions.

SUBMITTED BY George Herbst, vice president for business and CFO, Stetson University, DeLand, Florida

Business Officer Plus