Economics & Finance

Perdue School Student Investment Fund

See performance of the fund

Starting the Fall 2000 semester, the Perdue School joined a growing number of Business Schools which offer students an opportunity to manage and administer an investment portfolio.

The Perdue School of Business at Salisbury University has long been a strong proponent of experiential learning, and is widely recognized as a leader in the state and region in providing experiential learning opportunities for its students, primarily through its Applied Business Learning Experience (ABLE) program.  The student managed investment portfolio is an excellent addition to the range of experiential learning opportunities at the Perdue School.

Typically student managed investment portfolios are funded from private sources, and are designed to provide students with an opportunity to conduct security analysis and research, and make investment decisions in a realistic environment.  Careful structuring and design of the program can help students experience life as security analysts and portfolio managers, and provide an experience that is sure to be a valuable tool in advancing career opportunities and employment options in the investments field.  

While there has been a rapid increase in the number of Universities that have implemented student managed investment portfolios in the last decade, this type of opportunity is still quite rare in business education, with approximately 100 such programs in existence nationwide.  The Perdue School portfolio is the first and only student managed portfolio managed by undergraduate students within the University System of Maryland.

Funding
The Perdue School Student Investment Fund is 100% privately funded.  Funding sources include the Judkins Family (Wayne Judkins is an alumnus of the Perdue School and  Executive Director of European Government Bond Trading at Goldman Sachs International),  the Perdue School Margin account funds and SU Foundation Margin account funds.

Implementation
In order to implement the Perdue School Student Investment Fund, a new 3 hour course (Practicum in Portfolio Management - FINA 449) was developed, and offered during the Fall 2000 semester for the first time.   The course is staffed by Finance faculty, and is offered each Fall and Spring semester, with a possibility of an expansion to Summer term offering in the future.  Enrollment in the course is limited to 20 students, and admission to the course is by application.  Applications are reviewed by the Department Chair, in conjunction with the course instructor, prior to the pre-registration period during each semester.  Students are allowed (and sometimes encouraged) to repeat the course for credit, to facilitate continuity in the management of the portfolio.  Course requirements include designing a long-term investment strategy, preparing and presenting security research reports, implementing investment decisions, monitoring portfolio performance and compliance with investment guidelines, making decisions regarding portfolio adjustments, record keeping, portfolio performance evaluations, preparing regular account statements, and making presentations to faculty and/or Department of Economics and Finance Advisory council.

Investment Policy Statement
The investment goal of the portfolio is a strategic core-oriented allocation to the overall domestic equity market.  The investment objective of the portfolio is to achieve long-term capital growth by investing in marketable U.S. equities with a risk profile that is similar to that of the market benchmark (defined as the S&P 500 Index).  The portfolio’s performance objective is to generate a total return in excess of the benchmark in each 1-year, 3-year and 5-year period.

Investment Guidelines

Asset Allocation:
The portfolio shall be invested exclusively in U.S. listed (including NASDAQ) equity securities.  Any cash equivalent investments shall represent transactional amounts, and not strategic allocations.  Therefore, cash equivalents shall not exceed 5% of the portfolio at any time.  Any deviations from this requirement shall be corrected by the end of each month.

Diversification:
Portfolio performance is expected to achieve value-added results through active management decisions.  However, the portfolio is expected to be diversified with respect to exposure to different economic sectors, industry segments, and individual stocks.  The portfolio shall observe the following diversification guidelines:

· The maximum allocation to any economic sector (as defined by Standard and Poor's) shall be 40% (at market value) of portfolio assets.
· The maximum allocation to any single issue shall be 10% (at market value) of portfolio assets.
· The minimum number of securities in the portfolio shall be 15.
· The portfolio may include American Depository Receipts (ADRs). However, the combined investments in ADRs and other foreign securities traded on US exchanges that are not ADRs may not exceed 20% of the portfolio’s market value.
· Any violations of the diversification guidelines shall be corrected by the end of each calendar quarter.


Market Capitalization:
The majority of the portfolio is expected to be invested in well established, large market capitalization companies.  The portfolio may also invest in less established, small market capitalization companies.  However,
· No more than 40% of the portfolio may be invested in companies with market capitalization below $1 Billion.
· Investment in companies with market capitalization below $100 Million (at the time of investment) are prohibited. Positions that drift below $100 Million in market capitalization after purchase shall not exceed 5% of the portfolio value.
· Any violations of the market capitalization guidelines shall be corrected by the end of each calendar quarter.

Prohibited Transactions:
The portfolio may not invest in the following:
· Fixed income securities
· Non-marketable securities (including private debt securities and/or direct placements)
· Non-dollar denominated securities
· Convertible or Preferred securities
· Warrants
· Commodities
· Mutual Funds
· Real Estate investments (Including Real Estate Investment Trusts)
· Short Sales
· Margin Purchases
· Swaps (Index or rate of return)
· Securities Lending
· Use of derivative securities or other methods of leveraging the portfolio.

Trade Execution:
All investment decisions shall be made by a majority of students in the class.  Students will be assigned to teams, and each team will be charged with the responsibility of conducting research in one or more economic sectors.  Each team shall bring forth recommendations for investment (or divestment), and present research and recommendations to the class.  The class would then vote on each recommended transaction.

Once a decision is reached by the students, the instructor would than make the necessary arrangements to execute the transaction.  Trading authority shall rest with the chair of the Department of Economics and Finance and any other faculty members designated by the chair.  The Dean and Associate Dean of the Perdue School shall have trading authority, to be used in emergency situations.  No students shall have trading authority.

Rendine Financial Group has agreed to provide trade execution at a significantly discounted rate.

Reporting:
· The student managers, under faculty supervision, shall prepare monthly statements detailing account activity and balances.
· The student managers, under faculty supervision, shall reconcile all account statements generated by the fund’s broker.
· Copies of all reports shall be provided to the Dean of the Perdue School, and the Executive Director of the SU Foundation.
· During each semester the student managers should make a presentation to the Economics and Finance Advisory Council, detailing the status of the portfolio and the semester’s activities.