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  • Financial Management Association at The University of Texas at Dallas Analysis Report for Student Managed Investment Fund October 17th, 2004 Strictly Private & Confidential Financial Management Association Office: SM 2.204, 972-883-5959 The University of Texas at Dallas P.O. Box 830688, SU21, Richardson, TX 75083 http://www.utdallas.edu/orgs/fma Prepared by President: Houston Yuen Associate VP: Patricia Cao Associate VP: John Chung Associate VP: Rudy Gunawan Associate VP: Milli Hirpara Associate VP: Smitha Raphael
  • Financial Management Association @ The University of Texas at Dallas Executive Summary  Financial Management Association is an organization whereby we try to develop a continuing relationship between finance practitioners and academicians and to facilitate the transfer of ideas, techniques, and advances in the field of finance between universities, businesses, and other institutions.  Dr. Mary Chaffin, Assistant Dean & College Master of Undergraduate Programs, is the current advisor of FMA at the University of Texas at Dallas. Through the past years of effort, the organization has established its credit and profound reputation in bridging the gap between students and the professionals in the financial services business.  We are planning to establish a Student Managed Investment Fund and Trading Floor in SOM. The purpose of the combination of the fund and trading floor is to give the students the opportunities to learn the real-world operation of fund management, and to establish a connection and reputation between financial investment institution and UTD. Private and Confidential. 2
  • Financial Management Association @ The University of Texas at Dallas Table of Contents Executive Summary..................................................................................................................2 Table of Contents......................................................................................................................3 Introduction...............................................................................................................................4 Objectives.................................................................................................................................4 Situation Analysis......................................................................................................................5 Benefits To The University of Texas at Dallas..........................................................................5 Survey for Student Managed Investment Fund in SOM............................................................6 Proposal Items and Timeline ...................................................................................................7 Additional Information...............................................................................................................8 Situation Analysis Comparison Table.....................................................................................10 Important Information: This document does not constitute a final decision. Private and Confidential. 3
  • Financial Management Association @ The University of Texas at Dallas Introduction The Student Managed Investment Fund (SMIF) is a portfolio, structured as a distinct brokerage account with investments. Funding from the donors recognize that the students involved with the management of this fund are not professional managers and are given this opportunity so as to have students to gain personal "hands on" experience. It is managed by the student fund managers. Student fund managers are responsible for continuously monitoring portfolio investments and ensuring that the fund's security selection discipline is maintained. Part of this discipline is an emphasis on investing for the long term, and avoiding excessive trading. The trading floor is a replica facility of Wall Street investment/brokerage firm providing trading, research, and teaching environment and tools specifically to the SMIF. Objectives  The objective of the SMIF is to enrich student education through active participation in financial markets. Students assist in stock selection and management of a real portfolio, thus gaining hands-on money management experience. They learn to deal with the uncertainty inherent in the process of estimating stock value and contrasting it to stock price. The process effectively couples intensive study of theory and practice in the investment management area with the first-class facility.  Educate and prepare students for the finance/investment career path.  Enhance the reputation of UTD. Private and Confidential. 4
  • Financial Management Association @ The University of Texas at Dallas Situation Analysis This analysis starts with a snapshot of the current student investment environment in which we layout structure used by various student funds. As our current timeframe is urgent, we will focus on the larger regional and more prestigious national programs. * Please see the comparison table on the last two pages for references: The four largest funds in the survey (UT Austin, USC, Cornell, Univ. of Houston) all received startup funding through outside donations for the investment fund, trading center and trading classes to be started simultaneously. These four also are formed as totally independent organizations/LLC residing in each respective college to shield school from liability, retain autonomy and provide return to investors. Rest of the smaller funds is dedicated to provide training and some measure of return back to the school. Most schools have a formal BoD or committee in place to authorize individual trades, with some subtle differences. Membership structure is usually open or through open competition selection for some undergraduate and most graduate positions. All schools with two exceptions adhere to a classical growth and/or value portfolio strategy. Cornell is a market neutral hedge fund and UNT is risk-averse conservative income fund. Benefits To The University of Texas at Dallas Student Managed Investment Fund (SMIF) provides students the unparalleled opportunity to gain "real world" experience in managing an investment portfolio using actual monetary assets rather than the "paper" transactions that are commonly utilized in investment courses. The aim of the program is to generate a wide variety of benefits including:  Introducing "real world" applications to academic programs.  Providing "hands-on" training in securities analysis and portfolio management utilizing computerized methodology. Students assist in stock selection and management of a real portfolio, thus gaining hands-on money management experience.  Developing skills fundamental to the investments industry.  Increasing exposure to career opportunities within the investments industry.  Providing a more meaningful and valuable learning experience.  Educate students about equity valuation. Students learn to deal with the uncertainty inherent in the process of estimating stock value and contrasting it to stock price. Private and Confidential. 5
  • Financial Management Association @ The University of Texas at Dallas Survey for Student Managed Investment Fund in SOM  Q1. Would you like to see FMA initiate a student managed investment fund?  Q2. Would you be interested in managing a Student Investment Fund?  Q3. Would you be able to commit for two consecutive semesters?  Q4. Would you be able to volunteer and help start this program? Undergraduate 50 41 40 31 30 28 Response 23 20 18 Yes 13 No 10 10 0 0 Q1 Q2 Q3 Q4 Question Graduate 100 94 80 65 60 Response 49 54 5053 40 38 Yes No 20 9 0 Q1 Q2 Q3 Q4 Question Total Response: 144 Private and Confidential. 6
  • Financial Management Association @ The University of Texas at Dallas Proposal Items and Timeline  Proposal: Entity / Structure, Facility, Source of Funding, People / Administrator, Accounting, Attorney, Staff, etc., Governing Policies / Operation, Budgeting, Finance Faculties.  Sponsor Companies: Brokerage Firms, Investment Banks, Mutual Fund Companies, Software / Hardware Companies.  Schools: UT Austin, UNT, TCU, SMU.  Timeline: Now – 11/7: Finishing Proposal. Now – 11/30: Contacting Schools. 11/1 – 12/31: Contacting Companies. Private and Confidential. 7
  • Financial Management Association @ The University of Texas at Dallas Additional Information  Number of activities hosted by FMA in year 2003 – 2004: 21 • October 22, 2004: Event – UBS Capabilities • September 17, 2004: Field Trip – First Southwest Company • August 4-11, 2004: Wall Street Trip – NASD, LaBranche, Investment Technology Group (ITG), New York Mercantile Exchange, New York Life Investment Management, JP Morgan, Morgan Stanley, NASDAQ, Bloomberg, Alliance Capital Management • July 16, 2004: Field Trip – Austin Ventures, EDS Financial Trading and Technology Center in UT Austin, Dell, and Applied Materials • June 28, 2004: Event – Marketing and Portfolio Analyzation by Morgan Stanley • April 6, 2004: Finance Career Forum • March 23, 2004: Event – Your Future in the Investment Banking by Jefferies • February 18, 2004: Field Trip – The Hodges Fund – First Dallas Securities • February 5, 2004: Event – Your Challenge to Ride the Bull Seminar by Merrill Lynch • November 13, 2003: Event – The Scene Behind Mergers & Acquisitions by Houlihan Lokey Howard & Zukin • October 8, 2003: Event – Trends in Finance Today by Northwestern Mutual Financial Network • October 4, 2003: On Site Meeting – Meeting Financial Business by World Financial Group • September 11, 2003: Event – Business Performance Management Seminar by Hyperion • July 24, 2003: Dance Party • July 17, 2003: Event – Banking Risk Management Workshop by Federal Reserve Bank of Dallas • June 10, 2003: Tour – The Dallas Federal Reserve Bank • April 19, 2003: Event – The State of Venture Capital Seminar by Genesis Campus, L.P. • April 2, 2003: Event – Financial Products Seminar • March 29, 2003: Event – Business Strategy Seminar – No Man’s Land by Tatum CFO Partners, LLP • February 17, 2003: General Meeting – Mind Your Money, Mind Your Future • February 3, 2003: General Meeting Private and Confidential. 8
  • Financial Management Association @ The University of Texas at Dallas  Average number of attendants: 30  Current registered members: 100 Private and Confidential. 9
  • Financial Management Association @ The University of Texas at Dallas Situation Analysis Comparison Table * * Baylor California California Cornell London Northern Purdue University Institute of State University Business Arizona University Institution Technology University, School University Name Long Beach Date Established 1978 1995 2000 2000 Initial Fund School School Source Finance Private + Alumni + Foundatio Dept Investors Companies n Private NAU Source Cayuga Foundatio Name MBA Fund n Initial Amount $50,000 $200,000 $250,000 Additional Funding $250,000 Hedge Purpose School School Fund School School Number of Funds 1 1 Present $1,000,00 $5,000,00 Amount 0 $50,000 0 $200,000 2003 Performance -5.18% 20.00% 1.00% Management Structure Classified Committee Committee Committee Investment Growth Market Strategy Index Neutral Growth Portfolio Portfolio Trading Center Lab Yes Yes Yes Trading / Investment Class Yes Yes Yes Yes Yes Note: 1. Information is based from source in 2003. 2. Click respective school name to go to its web site. Private and Confidential. 10
  • Financial Management Association @ The University of Texas at Dallas * * * Tennessee University University of University University University Institution Tech of Houston of North of South of Texas at Name University California, Texas California Austin Berkeley Date Established 1998 1999 2000 2002 1987 1994 Initial Fund School + School + Company + Source Private Private Private Individual Company Company Source AIM AIM Name TVA + Management Provident Management Individual Group Investment Group Initial Amount 400k+100k $125,000 $1,000,000+? $285,000 $250,000 $1,600,000 Additional Funding $750,000 Purpose School School Scholarship School LLC Number of Funds 4 4 4 Present $6,000,00 Amount $500,000 $125,000 $3,000,000 $285,000 0 $20,000,000 2003 Performance 12.00% 0.23% -16.00% -20.00% Management Competition BoD + Structure + Invest Committee Advisors BoD Committee Committee Investment Growth / Conservative Active Strategy Portfolio Portfolio Value lines Income Growth Portfolio Trading Center No Yes Yes Yes Yes Trading / Investment Class Yes Yes Yes Yes Yes Yes Note: 1. Information is based from source in 2003. 2. Click respective school name to go to its web site. Private and Confidential. 11