In this game of community chests and chance, the money is real, and everyone gets to be the banker.
Students enrolled in one University of Wisconsin Oshkosh course are tasked with a considerable undertaking: Invest specific funds that were donated to the University’s Foundation so that the profits can be used to fuel scholarships and keep the project going for future students.
UW Oshkosh’s Student-Managed Endowment Fund (SMEF) isn’t the only one of its kind in higher education, but what makes the program unique is that the undergraduate students — typically from College of Business — have complete control over the portfolio.
“Their decisions are not edited by professors or an advisory board,” said Kristine Beck, an associate finance professor at the University and the director of the Wisconsin Financial Services Institute. Beck and finance professor Stephen Huffman serve as faculty advisers.
The SMEF certainly is not a lecture course. Beck describes it as applied learning.
“It’s all learn by doing. We coach them, and we teach them and give them the tools, but we do not control which stocks they buy, sell or hold,” she said.
Investing in education
Plans for the SMEF started in 1999. Professor Emeritus Larry Lang established the fund, with support from then-chancellor John Kerrigan. The program has been running since fall 2000, thanks to an initial donation by Thomas ’65, and Antoinette Candela Brinkman.
In the past decade, more community members, companies, UW Oshkosh faculty and alumni have donated to the SMEF. Traditionally, five to seven students comprised the class, but today a dozen or so students manage the portfolios that span 12 sectors, including energy, healthcare, consumer goods and software.
Each portfolio analyst researches their own sector across the six SMEF funds and proposes what to sell, what to hold and what to buy. Managers — usually students who have served as portfolio analysts in past semesters — calculate, evaluate and make recommendations for the asset allocation of funds and track the performance of each fund.
The students vote once a week on anywhere from one to six proposals.
“It’s not day trading. We make informed, deliberate decisions,” Beck said.
The fund, which started at $25,000, now is valued at more than $300,000. In addition to bringing in money for scholarships — including those sponsored by the Anne Burns Hillenbrand Family, Brinkman and College of Business Alumni Association chapter funds — SMEF students also make investments for the College of Business. From the beginning, strategic asset allocations were set up to keep the SMEF self-sufficient.
“I am often asked why the students comply with rather than determine the asset allocation,” Beck said. “I tell them that experience mirrors the real world. They have to work within the portfolio constraints, and that experience will better prepare them for their careers.”
SMEF as a stepping stone
Jordan Michalkiewicz, a senior finance major from Menasha, enrolled in the SMEF course because he wanted to know more about investing money for his future.
“The SMEF is a hands-on experience, and I wanted to be a part of that,” he said.
In spring 2009, Michalkiewicz served as analyst for the energy sector. As a stock manager this summer, he is helping to manage the portfolio and train the new alaysts while continuing to maintain the energy sector. He also has more voting power.
“We have it set up so that everyone has input on everything, so it’s hard to make a bad decision when you have 12 people analyzing your proposal,” he said, adding that personal drive, as opposed to fear over making a mistake, is what motivates him to make sound decisions.
In addition to reaping real-world experience, Michalkiewicz said the SMEF has taught him how to communicate with colleagues with different personalities and styles.
“People have their own sectors, so you do have to take more of a professional approach to what you are saying, since they know the most about it from reading and researching,” he said.
Each year, SMEF students also attend RISE, a national conference focusing on student-managed endowment funds and featuring professional bankers as keynote speakers.
Melissa Pezzuto ’04, credits the SMEF for teaching her how to analyze data and ask questions. She has worked with Principal Financial Group in Appleton since graduating with a bachelor’s in business administration, first as a client service associate and then as a senior client service associate.
“The way SMEF was structured allowed for a lot more independent work and research than a normal class,” said Pezzuto, who has re-enrolled at UW Oshkosh as an MBA student. “Being a manager in the SMEF helped me learn how to deal with the different personalities and knowledge levels.”
Learning from the recession
While the market took a hit in the past year, the SMEF came nowhere close to going bankrupt.
“The recession makes the course more valuable than ever,” Beck said. “It gives the students exposure to market volatility.”
The SMEF took a loss in 2008, but it still held up better than the market as a whole. The students have been buying stocks since October because of the low prices.
“You have to stick to the asset allocation of each fund. If we had sold everything and gone back to cash, we’d be much worse off,” Beck said.
Michalkiewicz pointed out that as of 2009, the SMEF have outperformed their benchmark and are on the positive side, year to date.
“We’ve been gaining back some of what we lost,” he said. “Now is the perfect time to start the new semester and have a good opportunity for buying.”
Michalkiewicz recommends the course to anyone interested in finance and is grateful for everyone who makes the SMEF possible.
“I am thankful for all of the donors who have created the different funds and for Dr. Beck and Dr. Huffman for sharing their wealth of knowledge,” he said.
Support the SMEF
While the SMEF itself is self-sustaining, the program depends on donors for expansion. For instance, there is a need for a Bloomberg terminal for up-to-the-minute marketing information and a desire to establish a sustainability fund.
To make a donation, contact Kathy Fredrickson at (920) 424-3270 or firstname.lastname@example.org.