USING BOARDS OF ADVISORS OF STUDENT MANAGED FUNDS
For presentation to
Financial Education Association
Walter P. Neely
Professor of Finance
Else School of Management
Jackson, MS 39210
USING BOARDS OF ADVISORS OF STUDENT MANAGED FUNDS
Through their participation in student-managed funds (SMFs), students gain practical
experience in formulating investment strategies through their management of an actual securities
portfolio. Advisory boards, comprised of knowledgeable alumni and investment professionals,
enhance the educational benefits of the program. SMF boards of advisors serve as mentors who
guide students throughout the investment process and who introduce them to real-world
investment management issues. A recent survey, cited in a Neely and Cooley (2004) paper,
indicates that approximately eighty percent of the SMF faculty utilize advisory boards. Neely
and Cooley (2004) provide a list of 128 SMFs (some of which are not operational) which have
grown in number from less than 35 in 1988. Their popularity stems largely from the benefits of
experiential learning. Students gain real-world, hands-on experience in the management of
relatively large sums of money. Students develop an in-depth understanding of securities
markets and the analysis of securities. In many cases, they interact with members of the
financial community and become more attractive prospective employees.
The paper will describe how boards of advisors are effectively used to in enhancing the
already rich experiences enabled by SMFs. We will first examine the literature on corporate
and non-profit boards of directors and university advisory boards. Next the literature relating to
SMF boards of advisors will be examined. Then results of our recent survey will be reviewed.
Finally conclusions are drawn.
Literature on Boards
The advisory board is an integral part of most organizational structures. According to
Carlyle (1995), a business advisory board provides expertise and acts as a “sounding board,”
offering knowledgeable and frank advice on specific areas in which an organization needs
improvement. A board, comprised of dedicated, enthusiastic and innovative members,
contributes new ideas, feedback, and overall direction to an organization’s management team.
In an article dealing with corporate boards of directors, Thain and Leighton (1995)
suggest that successful boards have in common the following factors: (1) a sense of legitimacy
and power; (2) a clear definition of their jobs and some guides to how to succeed; (3) a sense of
“board culture” derived from common board experiences, values, and relationships that subtly
guides what directors do; (4) a variety of competencies on the board keyed to the needs of the
organization; (5) effective administration of the board including well organized meetings; and
(6) effective leadership by (a) certain member(s) of the board. College boards of trustees, SMF
boards, and college advisory boards may be improved if they are guided by these factors.
The Conroy, Lefever, and Glenn (1996) survey, conducted on college advisory boards of
four-year hotel administration programs, provides valuable insight for SMF boards. The survey
results indicate that 90 percent of board members work in the hotel industry, with the most
important board component being that of the alumni membership. The authors’ consensus is
that current students should have a representation on the advisory board, while departmental
faculty should not play a significant role in program governance. The hotel industry boards
provide advice on special projects and offer valuable insight on matters concerning program
curriculum and facilities. Relating the survey results to SMFs, the advisory board’s role would
likely include offering students and departmental faculty advice on appropriate trading rooms,
research and data resources, and software needs.
SMF Boards and the University
According to Neely and Cooley (2004) 34% of SMF initial funding comes from
individuals and families. Donors may designate gifts to universities for the purpose of
encouraging learning about investing. University endowments fund twenty-five percent of
SMFs. Regardless of the initial source of funds, the ultimate ownership and responsibility for
the oversight of the university endowment, which often includes the SMF, often lies with the
university administration’s financial executive or with a committee of university’s board of
trustees. Since most SMFs are considered endowments or quaisi endowments, the university
ownership structure simplifies accounting, control, and tax preparation for the SMFs. However,
as cited by Lawrence (1994), the use of endowment resources can limit the fund’s flexibility.
Often investment restrictions imposed on SMFs, such as those prohibiting foreign security
investments, limit the fund’s available diversification options and can inhibit optimal fund
performance. SMF underperformance will jeopardize the fund’s independent operating strategy,
and continued underperformance can result in the redirection of fund management. While these
restrictions may seem onerous, they do serve as learning tools for students interested in
investment professions, as practitioners must successfully manage investments according to the
objectives and limitations imposed by their clients (Grinder, Cooper, and Britt, 1999).
Donors of gifts that comprise the initial funding of SMFs often provide additional
informal oversight of the fund. In many instances, individuals representing these interests are
members of or ex-officio members of advisory boards, or they may be university board
members. Grinder, Cooper, and Britt (1999) suggest that “it is essential” for living donors and
donors’ families, or the representatives of donor organizations, to be a regular part of classes and
to “discuss their goals and objectives for the portfolio with the students.” This open line of
communication facilitates the students’ thorough understanding of the risk and return objectives
desired by the donors. Original donors may seek memberships on the advisory board, or they
may want to serve only in occasional roles, such as attending luncheons with student managers
and/or hearing student presentations of fund performance and future investment strategies.
Many SMF programs today follow a model that stipulates quarterly advisory board
meetings in which the students present written and oral reports and field “tough and challenging
questions” from board members. Block and French (1991) refer to these meetings as “the most
valuable experience for the students.” Following the AIMR Performance Presentation Standards
(1992), participants begin the meetings with the introduction of board members and student
managers, and proceed with the student presentations of reports regarding the fund performance
over the last five years and the transactions occurring since the last meeting. Students then
present the economic forecast as it relates to the holdings and proposed security sales and
additions, and follow with presentations of individual company stock and bond research. Board
members frequently ask questions and often present alternative viewpoints from their personal
perspectives on the markets. Finally, the students and the board review the effects of
restructuring the portfolio and formulate plans for executing their decisions. In addition, they
make provisions for monitoring the fund’s status during the transition period preceding the next
team of SMF managers.
Most programs meet formally with the board at least once and often twice a year. This
meeting includes the presentation of a student-prepared document that introduces the students
and the board and that informs the board of the students’ past actions and future plans. The
report includes dialogue on the economic outlook, the fund’s performance, the transactions
initiated by the student managers, the reviews and/or the research reports on current holdings,
and the detail of prospective purchases and sales. Two excellent examples of comprehensive
reports to the board are The Wright Fund (Rice) 2002 Report
(http://www.ruf.rice.edu/~admn543/ Misc_PDF/wright_board_meeting_spring_02.pdf ) and
Stetson’s "George Investments View," (2004). While SMF students and college staff develop
these reports, the format and the quality are of the same professional nature as that of official
corporate and/or university reports.
Survey Method and Results
The faculty advisors of 124 faculty advisors of 124 member SMFs of the Association of
Student Managed Investment Programs (Lerro and Mallett 2001) along with other instructors of
known programs not included in the ASMIP list were sent a survey. Only respondents in
operation with funding are included in the results, and only one fund per institution is included
in the 61 respondents. The survey was sent by E-mail with follow-up by fax when requested by
respondents. (A copy of the questionnaire is available from the author.)
One series of survey questions queried SMF advisors on the extent of their advisory
boards’ involvement in overall fund and program management. Only ten of forty-eight SMF
faculty advisors responded that their advisory boards participate in the approval of transactions.
The lack of positive responses to this question indicates that while many advisory boards offer
guidance and suggestions, they leave the final investment decisions to the discretion of the
students. With regard to effective investment advice, twenty-eight of the thirty-nine usable
responses indicated that the advisory boards’ investment advice was effective, while ten
responses revealed that the boards’ advice had little effect on the success of investment
decisions. One response revealed poor investment advice from the board. When queried about
the board’s input relative to technologies and facilities, only twenty of the forty-eight faculty
advisors revealed that their boards actively participate in decisions regarding program facilities
and technologies. In contrast, the study of hotel administration advisory boards by Conroy,
Lefever, and Glenn (1996) revealed that board advisors provide significant input on facility and
technology decisions. This finding is indicative of the varying degrees to which advisory
boards serve their organizations, the extent to which is dictated by the industries in which they
Another series of survey questions pertained to the relevance of the board with regard to
the perceived quality of the SMF by the community and from within the university. Thirty of
the forty-two respondents indicated that their advisory boards enhance the community’s and the
university’s perceptions of the viability of their SMF program. Advisory boards can act as an
advocate for the program within the university, and thirty-three of forty-three indicated that their
boards were effective in this capacity. Some advisory boards, especially those composed of
donors, provide funding for SMF programs. Nine of the twenty-seven SMFs responding to the
question indicated that their boards are effective in providing funding for investment purposes,
and eleven of twenty-seven indicated that their boards provide some funding for student needs.
The boards of SMFs seem more effective with advice and advocacy than with funding.
Advisory boards can and do work directly with students and provide SMF students with
analytical advice and job opportunities. When asked whether board members were effective in
mentoring students, thirty-two of forty-four agreed, with ten stating that the board had little
effect on mentoring students. In addition to mentoring, enhanced opportunities for student
learning comes from internship experiences. Twenty-one of 39 respondents indicated that their
boards were effective at providing internship opportunities and post-graduate job for their
Of the forty-eight SMF respondents with advisory boards, forty-four listed the
backgrounds of its members. Advisory boards often include investment professionals from the
local area, interested professionals who work in money centers and travel or attend meetings via
teleconferencing, and alumni who previously served as student managers of the SMF. These
board members are valuable because they understand the students’ decision making process. Of
the forty-four SMFs listing their board members’ backgrounds, twenty-three have boards that
include investment professionals, the largest single category of membership, eighteen have
faculty and business deans on the board, while only seven indicated that trustees or non-finance-
professional alumni are board members. An interesting fact to note is the lack of significant
participation by stakeholders such as university board of trustee or administration members, or
donors, although university oversight beyond the advisory board level is likely.
Communications with the Advisory Board
Internet communication including e-mail, Yahoo Groups (http://groups.yahoo.com/),
chat room, and web broadcasting can streamline communication, not only among students, but
also between students, faculty advisors, and advisory board members. Early each semester
Millsaps College SMF advisory board members are queried by e-mail for their
recommendations, including specific stocks for student research. Students select for research
companies recommended by board members as well as the students' own selections. The two
companies selected are often in the same industry or economic sector.
SMF web sites enhance resource availability among students, faculty advisors, the
advisory board, and other SMF students. For a list of web sites see Trinity's SMF web site
http://www.trinity.edu/smf/links.htm. The use of web portals such as Yahoo allows students
and advisors access to real-time stock pricing. (see
http://www.millsaps.edu/esom/wilfund/yahoo login.html). In addition, Internet web casts
facilitate video and audio broadcasts of board meetings, allowing board members to participate
remotely, if necessary.
SMF students often take field trips to visit brokerage offices, money center sites, or to
participate in competitions such as the Dayton RISE competition (http://www.udayton.edu/news/
nr/041202.html). These events allow the students to visit with other students in the competition
or to visit with professionals many of whom may be members of the advisory boards. These
opportunities give SMF students better ideas of what other SMFs are doing and to learn more
about the professions of finance.
Advisory boards can and do enhance the educational process for SMFs across the
country. Student learning, internship, and placement opportunities are improved as a direct
result of advisory board relationships. Just having an advisory board can improve the image of a
SMF both on the campus and to outside constituencies. Relationships between investment
professionals and alumni are improved as a result of their participation as members of the
advisory board. However, it is obvious that these advisory boards can be time consuming and
require diligent efforts to maintain and enhance the relationships. It is vital to define and expand
the roles of advisory boards to promote student interaction with the board. Boards can do more
in the areas of curriculum advice, fund-raising activities, promotion, and advocacy within the
university, and special projects. Using boards can and should enhance the experiences of student
participants of the expanding list of SMFs.
Mentor programs can be a natural outgrowth of SMF boards. Boards act as a stimulus for
performance, both investment and academic. Boards provide important investment guidance
and also become mentors for students. As a mentor, the board member may talk with the
student about the field or discuss the student’s project, which may involve specific company
security analysis. There are formal mentor programs that match a mentor with a particular
student, and informal programs that Board members provide internship and placement
opportunities for students. One-on-one communication using e-mail and telephone allows
distant or busy board members to provide mentoring and student contact on varying levels of
frequency depending of the student and the mentor. Because board members have contact with
students, opportunities are enhanced for placement in the investments field. Mentor programs
exist at many universities and future research should enumerate the benefits of these programs.
AIMR Performance Presentation Standards, A Practitioner's Workbook, Charlottesville, VA,
Ary, Eddie J. and Robert L. Webster, "Survey of University Student Investment Funds,"
(unpublished paper, 1998).
Bhattacharya, T.K. and Jacquetta J. McClung, Cameron University's Unique Student-Managed
Investment Portfolios," Financial Practice and Education, Spring / Summer 1994, pp. 55-60.
Block Stanley B., and Dan W. French, "The Student-Managed Investment Fund: A Special
Opportunity in Learning," Financial Practice and Education, Spring 1991, 1,1, pp. 35-40.
Carlyle, Nathalie B., "Expert Advice: A Look at Advisory Boards," Canadian Business Review,
Ottawa, 22,3, Autumn 1995, p. 27+.
Conroy, Phillip A., Michael M. Lefever, and Withiam Glenn, "The Value of College Advisory
Boards," Cornell Hotel and Restaurant Administration Quarterly, Ithaca, 37, 4, August 1996, p.
"George Investments View," Stetson University, Fall 2003.
Grinder, Brian, Dan W. Cooper, and Michael Britt, "An Integrative Approach to Student
Investment Clubs and Student Investment Funds in the Finance Curriculum," Financial Services
Review, 8 (1999), pp. 211-221.
Johnson, David W., Joe F. Alexander and Garth H. Allen, "Student-Managed Investment Funds:
A Comparison of Alternative Decision-Making Environments," Financial Practice and
Education, Spring / Summer 1996, 6, 1, pp. 97-101.
Lawrence, Edward C., "Financial Innovation: The Case of Student Investment Funds at United
States Universities," Financial Practice and Education, 4, 1 Spring / Summer 1994, pp. 47-53.
Lerro, Anthony and James E. Mallett, "Establishing and Running a Student Managed Investment
Program," unpublished manuscript, 2001.
Neely, Walter P. and Phillip L. Cooley, "A Survey of Student Managed Funds," to appear
Advances in Financial Education, 2004.
Thain, Donald H. and David H. Leighton, "Why Boards Fail," Ivey Business Quarterly, London,
Spring 1995, 59, 3, p 71+.
USING BOARDS OF ADVISORS OF STUDENT MANAGED FUNDS
Student-managed funds (SMF) provide opportunities for innovative educational
opportunities, and boards of advisors can offer even more richness to the educational process.
The survey results suggest that boards of advisors are effective and do enhance the educational
process for SMFs across the country. Student learning, internship, and placement opportunities
are improved as a direct result of advisory board relationships. Just having an advisory board
can improve the image of a SMF both on the campus and to outside constituencies.
Relationships between investment professionals and alumni are improved as a result of their
participation as members of the advisory board.