Docstoc

Student Investment Fund Research - SMU

Document Sample
Student Investment Fund Research - SMU Powered By Docstoc
					St. Mary’s University – IMPACT Fund



   1.   Was there anyone in particular who may be accredited with recognizing the potential for a Student Investment Fund to
        be successful at SMU?

           As the result of a generous anonymous donation ($160,000) in 2004, the Sobey School of Business was able to establish
            the IMPACT Fund.
           More info shortly



   2.   Is there any advise you are able to offer to STFX students which may assist them as they seek to cultivate valuable
        relationships within the Investment Community?




   3.   What kind of fund (mutual fund, endowment, etc.) understand completely how this fund operates, could be unique, a
        hybrid fund of sorts?

           Endowment Fund




   4.   Do student members of the IMPACT program receive course credit for completion of the program?




   5.   The IMPACT Valuation Conference and “Kick-off Weekend” are two . Are there any areas where SIF students are able to
        assist you with your coordination responsibilities?




   6.   Are there any further safety/risk mitigation measures (which are not mentioned within the Investment Policy Statement
        (IPS), Annual Reports, or IMPACT Selling Policy) which have been valuable to your program?




   7.   Would it be possible for you to comment on the topic of any legal concerns which may be associated with operating a
        student investment program such as the IMPACT Fund?




   8.   Would you be able to provide an estimate of the weekly time involvement for students in the IMPACT fund, and also for
        Faculty and Mentors?
    The team members liaised weekly to receive specific training from the Academic Directors and investment professionals,
     and to present progress of the program.
    The FMs established a council and co-ordinated weekly meetings in order to execute business and make decisions. RAs
     formed teams to specialize in particular areas of economic analysis and to ensure adequate ongoing coverage of these
     areas.



9.   Have you had to address the unexpected turn-over of IMPACT members within the tenure of the IMPACT program?




10. It is noted from IMPACT annual reports, that a broad range of materials (transcript, resume, questionnaire) are taken
    into consideration when selecting amongst IMPACT applicants for entry to the program. Has it been observed that some
    of the criteria which you assess have been better predictors of IMPACT Student performance and success within the
    program more-so than others?




11. One of the obstacles anticipated with operating a Student Investment Program at STFX is that of continuity. Is there any
    advise you are able to offer which could assist us in establishing continuity with an investment program? Approximately
    how many applications for IMPACT does the fund receive from students on an annual basis?




12. Structure, including faculty members and professional advisors

        The IMPACT Program is a two year program. 1st year MBA/3rd year undergraduates who are accepted into the
         Program will begin as Research Associates and (subject to performance) advance to Fund Managers the next year. The
         Program is restricted to an elite group of no more than 10 students in each year of the Program. In all duties, students
         will be held to professional standards of conduct. In their first year, students are designated Research Associates (RAs).
         Their duties involve providing assistance to the more senior Fund Managers (FMs), who manage the Fund. Their duties
         include asset allocation decisions, security selection and preparation and presentation of professional reports. Each FM
         is assigned to one or more economic sectors for which they act as primary analyst. They make investment decisions as
         a team, with the guidance of industry mentors. In all decisions, FMs are faced with the same types of constraints
         regarding asset allocation and security selection decisions as those faced by real world money managers. In addition,
         FMs are expected to play a significant role in the training of the RAs.
        The Board of Directors which oversee the IMPACT Program include members from both the Sobey School of Business
         and individuals from the outside investment profession. In addition, a number of Mentors from outside the university
         are available to students to provide advice and guidance in their investment decisions
        The Board of Directors (2005-2006) is composed of six individuals having the following backgrounds: VP, Finance at
         SMU; Dean, Sobey School of Business; Prof Finance, SMU; Prof Finance, SMU; CEO, Seamark Asset Management;
         Investment Advisor and Portfolio Manager, BMO Nesbitt Burns.
        17 mentors receive special mention and thanks in the annual report (2005-2006).
        Impact Team consists of 7 MBA students and 8 BComm undergraduate students (2004-2005).
        IMPACT Team is composed of 10 Undergraduate Students and 2 MBA Students (2005-2006).
        IMPACT Team is composed of 11 Undergraduate Students and 5 MBA Students (2006-2007).
13. From an operational standpoint, every process that takes place. Tim exemplified trading, how many trades? 1 every 2-3
    months? Safety measures, amount of capital?

       The year typically begins with a review and update of the Investment Policy Statement (IPS), which essentially
        represents the blueprint for operation of the IMPACT Fund. The students then conduct a thorough economic analysis
        (Canadian, U.S. and Global) upon which to base their asset allocation decision. Based on extensive analyses of each of
        the Toronto Stock Exchange (TSX) sectors, the students then establish portfolio weights for each sector within the
        Canadian equity portion of the portfolio (which is the only “actively managed” portion of our portfolio at present).
        Throughout the year, the various sector teams make security selection recommendations concerning specific equities
        to be included in the portfolio. Going through the entire investment process, and doing so within the risk constraints
        placed on the Fund by its charter and with due consideration for the Fund’s IPS, is an intense and valuable learning
        experience for the students. They deal with many real-world issues which very often are not seen in the classroom.
       The Investment Policy Statement (IPS) essentially represents the blueprint of the IMPACT fund. The purpose of the IPS
        is to articulate the risk and return profile of the Fund and to specify certain investment decisions or restrictions that are
        mandated by this analysis, as well as by the IMPACT Charter.
       Specifically the IPS outlines the following:
             • Roles of key program participants
             • Investment objectives
             • Risk profile
             • Reporting requirements
             • Measurement metrics including benchmarks
             • Restrictions for risk management purposes
             • Asset allocation ranges and targets
       The IPS must be reviewed annually to ensure its appropriateness.
       Following the creation of the IPS, the students conducted a thorough economic analysis (Canadian, U.S. and Global)
        upon which to base their asset allocation decisions. Based on extensive analyses of each of the Toronto Stock Exchange
        (TSX) sectors, the students then established portfolio weights for each sector within the Canadian equity portion of the
        portfolio (the only “actively managed” portion of the portfolio at this time).
       Selling Policy – In 2005-2006, the IMPACT Fund established a Selling Policy to be included in the IPS. While termed a
        selling policy, it is really a set of criteria indicating under what conditions the current holdings of the Fund must be
        reviewed. If one of the criteria is met, the relevant Fund Manager and Research Associate must conduct an analysis of
        the security and inform the team about a decision to sell or continue to hold. In addition, the Selling Policy establishes
        that all securities should be re-evaluated by the end of October, January and March regardless of any of the criteria
        being met.
       The IPS also dictates the IMPACT Fund’s allowable asset allocation ranges as shown below. For several years, the
        Canadian Equity component represented the only “actively-managed” portion of the portfolio, with exposure to the
        remaining asset classes to be achieved by investment in the appropriate exchange-traded funds (ETF’s).
       In accordance with investment objectives and requirements of the charter, the IMPACT Fund is allocated among four
        asset classes, including cash and short-term securities, Canadian equity, Canadian bonds and International equity.
        Based on interpreted 2005 economic outlook and market analysis, Fund Managers first determined the performance
        potential for each asset class and then weighted each class relative to the benchmark allocation specified in the
        charter.
       10 Sectors are covered; Energy, Financials, Materials, Income Trusts, Industrials, Telecommunications, Consumer
        Staples, Consumer Discretionary, Information Technology, Real Estate, Health Care, Utilities
       Security selection process used by members of the IMPACT Program is based upon a top-down analysis, based on
        portfolio objectives and constraints specified in the IPS. All purchases and sales must made within constraints imposed
        by the IPS, and within the asset allocation and sector weight targets established by the Fund Managers. The Fund
            Managers and their RAs determine the best approach for analyzing their particular sector(s), but they all must begin by
            applying filters that are specified in the charter and/or IPS. For example, only Canadian stocks that have market
            capitalization of $500 million and a DBRS credit rating of at least B can be included in this portion of the portfolio.
           RAs combine their expertise and utilize their knowledge to forecast the Canadian and global macro economies. The
            product of this process is a polished Economic Forecast document entitled Economy Watch. The forecast was created
            to provide a reference for the FMs to utilize when working through the asset allocation and investment decision
            process. In addition to the formal forecast, economic research and internal reporting of new developments are both
            part of an ongoing process, with the RAs continuously scanning the financial press, news media, and business journals
            to ensure our members were up-to-date on the latest developments. Preparations for the formal document begin in
            mid-November and weekly meetings commence. Associates are initially assigned responsibilities for scanning various
            research sources. Formal specializations of select economic indicators quickly developed among teams of two
            associates. For example, two associates focused on the global economy, most notably the United States and China, and
            Canadian exchange rates. At each of the weekly meetings associates come prepared to present any news or
            developments that occurs relating to their respective responsibilities and received feedback and suggestions for further
            research from the team. Research is compiled, summarized, and edited into the final Economy Watch document.
           Investments are segmented into the following groups:
                               o Cash and Short Term Securities
                               o Fixed Income (ETF)
                               o International Equity (ETF)
                               o US Equity (ETF)
                               o Canadian Equity (Actively Managed)
                                                   -   Consumer Discretionary
                                                   -   Consumer Staples
                                                   -   Energy
                                                   -   Financial Services
                                                   -   Industrials
                                                   -   Information Technology
                                                   -   Materials
                                                   -   Real Estate
                                                   -   Telecommunication Services
                                                   -   Utilities
                                                   -   Canadian Index (ETF)
             Average Annual Compound Returns Since Inception (March 2005) is 12.52% vs. benchmark of 14.22%. Portfolio
                value at the end of 2007 was $184,086.98.



   14. How are IMPACT members selected?

        
             rd                            st
            3 year Undergraduate, and 1 year MBA Students apply for the IMPACT Fund via resume, transcript, and cover letter
            annually in September.




NOTES

   -    The primary purpose of the Investment Management of Portfolios in Atlantic Canada Training (IMPACT) Program is to
        provide an elite group of students from the Sobey School of Business at Saint Mary’s University with practical, real world
        experience in money management.
-   The IMPACT Program is a two year program. 1st year MBA/3rd year undergraduates who are accepted into the Program will
    begin as Research Associates and (subject to performance) advance to Fund Managers the next year. The Program is
    restricted to an elite group of no more than 10 students in each year of the Program. In all duties, students will be held to
    professional standards of conduct. In their first year, students are designated Research Associates (RAs). Their duties
    involve providing assistance to the more senior Fund Managers (FMs), who manage the Fund. Their duties include asset
    allocation decisions, security selection and preparation and presentation of professional reports. Each FM is assigned to one
    or more economic sectors for which they act as primary analyst. They make investment decisions as a team, with the
    guidance of industry mentors. In all decisions, FMs are faced with the same types of constraints regarding asset allocation
    and security selection decisions as those faced by real world money managers. In addition, FMs are expected to play a
    significant role in the training of the RAs.
      rd                                st
-   3 year Undergraduate, and 1 year MBA Students apply for the IMPACT Fund via resume, transcript, and cover letter
    annually in September.
-   As the result of a generous anonymous donation ($160,000), in 2004 the Sobey School of Business was able to establish the
    IMPACT Fund.
-   the Board of Directors which oversee the IMPACT Program include members from both the Sobey School of Business and
    individuals from the outside investment profession. In addition, a number of Mentors from outside the university are
    available to students to provide advice and guidance in their investment decisions. In fact, all trade decisions made by the
    students must receive approval by a mentor before being implemented. The purpose of this is not to second guess student
    decisions, but to make sure that their decisions have considered all possibilities, have been made logically, and are
    consistent with the investment profile and asset allocation constraints of the fund. Whenever possible, students are
    provided with internships in the financial industry for the summer months between their first and second year in the
    program.
-   The year typically begins with a review and update of the Investment Policy Statement (IPS), which essentially represents
    the blueprint for operation of the IMPACT Fund. The students then conduct a thorough economic analysis (Canadian, U.S.
    and Global) upon which to base their asset allocation decision. Based on extensive analyses of each of the Toronto Stock
    Exchange (TSX) sectors, the students then establish portfolio weights for each sector within the Canadian equity portion of
    the portfolio (which is the only “actively managed” portion of our portfolio at present). Throughout the year, the various
    sector teams make security selection recommendations concerning specific equities to be included in the portfolio. Going
    through the entire investment process, and doing so within the risk constraints placed on the Fund by its charter and with
    due consideration for the Fund’s IPS, is an intense and valuable learning experience for the students. They deal with many
    real-world issues which very often are not seen in the classroom.
-   Investment Policy Statement - Investment Policy Statement (IPS). The purpose of the IPS is to articulate the risk and return
    profile of the Fund and to specify certain investment decisions or restrictions that are mandated by this analysis, as well as
    by the IMPACT Charter. The IPS must be reviewed annually to ensure its appropriateness.
-   Selling Policy – In 2005-2006, the IMPACT Fund established a Selling Policy to be included in the IPS. While termed a selling
    policy, it is really a set of criteria indicating under what conditions the current holdings of the Fund must be reviewed. If one
    of the criteria is met, the relevant Fund Manager and Research Associate must conduct an analysis of the security and
    inform the team about a decision to sell or continue to hold. In addition, the Selling Policy establishes that all securities
    should be re-evaluated by the end of October, January and March regardless of any of the criteria being met.
-   The IPS also dictates the IMPACT Fund’s allowable asset allocation ranges as shown below. For several years, the Canadian
    Equity component represented the only “actively-managed” portion of the portfolio, with exposure to the remaining asset
    classes to be achieved by investment in the appropriate exchange-traded funds (ETF’s).

    Asset Class               Minimum (%)                     Midpoint (Benchmark) (%)                       Maximum (%)
    Cash and Short
                                     0                                     5                                       10
    Term Securities
    Canadian Equity                 60                                     70                                      80
    Bonds                            5                                    12.5                                     20
    International
                                     5                                    12.5                                     20
    Equity 1
-   1 The International Equity component shall be divided between a U.S. Equity portion and a non-U.S. Equity portion. The benchmark for international equity
    asset class is equally weighted between these two portions.



    Key Themes from 2004 – 2005 Annual Report

-   Impact Team consists of 7 MBA students and 8 BComm undergraduate student, one of whom is a CFA level 1 candidate
-    A great deal of time was devoted by the students to the preparation of the Investment Policy Statement (IPS), which
    essentially represents then blueprint for operation of the IMPACT Fund.
-   Following the creation of the IPS, the students conducted a thorough economic analysis (Canadian, U.S. and Global) upon
    which to base their asset allocation decisions. Based on extensive analyses of each of the Toronto Stock Exchange (TSX)
    sectors, the students then established portfolio weights for each sector within the Canadian equity portion of the portfolio
    (the only “actively managed” portion of the portfolio at this time).
-   Able to meet deadline of being fully invested by the end of the fiscal year (March 31).
-   In late March, four Research Associates attended the Redefining Investment Strategy Education (RISE) Symposium in
    Dayton, Ohio. Highlights of this conference include panel discussions and workshops led by high profile analysts, portfolio
    managers, and business leaders. Past speakers have included Ben Bernanke and Abbey Cohen.
-   An IMPACT member was part of the Sobey MBA Case Competition team that placed second at the Concordia International
    MBA Case Competition.
-   Two individuals from IMPACT represented SMU at Toronto’s Rotman Trading Competition in February.
-   Plans in motion for the creation of a well-developed summer internship program for students in place by the end of the
    year
-   Long-term goal is to have an extensive IMPACT alumni network throughout the world.
-   Encouragement provided for students to pursue their CFA designations.
-   The purpose of the IPS is to articulate the risk and return profile of the Fund and to specify certain investment decisions or
    restrictions that are mandated by this analysis, as well as by the IMPACT Charter.
-   Specifically the IPS outlines the following:
              • Roles of key program participants
              • Investment objectives
              • Risk profile
              • Reporting requirements
              • Measurement metrics including benchmarks
              • Restrictions for risk management purposes
              • Asset allocation ranges and targets
-   The team members liaised weekly to receive specific training from the Academic Directors and investment professionals,
    and to present progress of the program.
-   The FMs established a council and co-ordinated weekly meetings in order to execute business and make decisions. RAs
    formed teams to specialize in particular areas of economic analysis and to ensure adequate ongoing coverage of these
    areas.
-   RAs combined their expertise and utilized their knowledge to forecast the Canadian and global macro economies. The
    product of this process was a polished Economic Forecast document entitled Economy Watch. The forecast was created to
    provide a reference for the FMs to utilize when working through the asset allocation and investment decision process. In
    addition to the formal forecast, economic research and internal reporting of new developments were both part of an
    ongoing process, with the RAs continuously scanning the financial press, news media, and business journals to ensure our
    members were up-to-date on the latest developments. Preparations for the formal document began in mid-November and
    weekly meetings commenced. Associates were initially assigned responsibilities for scanning various research sources.
    Formal specializations of select economic indicators quickly developed among teams of two associates. For example, two
    associates focused on the global economy, most notably the United States and China, and Canadian exchange rates. At each
    of the weekly meetings associates came prepared to present any news or developments that occurred relating to their
    respective responsibilities and received feedback and suggestions for further research from the team. Research was
    compiled, summarized, and edited into the final Economy Watch document.
-   In accordance with investment objectives and requirements of the charter, the IMPACT Fund was allocated among four
    asset classes, including cash and short-term securities, Canadian equity, Canadian bonds and International equity. Based on
    interpreted 2005 economic outlook and market analysis, Fund Managers first determined the performance potential for
    each asset class and then weighted each class relative to the benchmark allocation specified in the charter.
-   10 Sectors are covered; Energy, Financials, Materials, Income Trusts, Industrials, Telecommunications, Consumer Staples,
    Consumer Discretionary, Information Technology, Real Estate, Health Care, Utilities
-   Security selection process used by members of the IMPACT Program is based upon a top-down analysis, based on portfolio
    objectives and constraints specified in the IPS. All purchases and sales must made within constraints imposed by the IPS,
    and within the asset allocation and sector weight targets established by the Fund Managers. The Fund Managers and their
    RAs determine the best approach for analyzing their particular sector(s), but they all must begin by applying filters that are
    specified in the charter and/or IPS. For example, only Canadian stocks that have market capitalization of $500 million and a
    DBRS credit rating of at least B can be included in this portion of the portfolio.

        -   2006 Schedule:

                  September
                  • Website launch (created by IMPACT Member)
                  • Information session for new Research Associate recruits
                  • Selection of new Research Associates

                  October
                  • Reception with Mentors
                  • “Teams” meet with mentors individually
                  • 2005/2006 Program Kick-Off Weekend “Portfolio Management” Workshop – hosted by investment
                  professionals
                  • Review of IPS completed

                  November
                  • Economy Watch publication

                  February
                  • Trip to Toronto
                      o Visit TSX and meet with investment professionals
                      o Attend Rotman International Trading Competition

                  March
                  • Prepare for RISE portfolio competition
                  • Prepare Economic Forecast for Forecast Dinner
                  • Trip to United States
                      o Visit New York and NYSE, meet with investment professionals
                      o Attend RISE conference and present results in team competition results

                  April
                  • Annual Reports
                  • Information booth at Canadian CFA Society (ACFA) Forecast Dinner
                  • Economic Forecast for ACFA Dinner

                  May
                  • Research Associate succession to Fund Manager position




    Key Themes from 2005 – 2006 Annual Report


-   IMPACT Team is composed of 10 Undergraduate Students and 2 MBA Students.
-   Quote from Annual Report “We feel comfortable in stating that the students in the IMPACT Program are as well trained in
    capital markets theory and practice as students from any program in the world.”
-   Applications are submitted and interviews conducted once again at the beginning of the year
-   In February Four Students attended the Rotman International Trading Competition in Toronto, and also toured the trading
    floor at BMO Nesbitt Burns.
-   In March four students represented IMPACT at the RISE (Redefining Investment Strategy Education) symposium in Dayton
    Ohio. Risk adjusted returns for calendar 2005 were the best in North America in division (Graduate Division: Equity Value
    Portfolio)
-   Four Students attended the Dalhousie University Credit Risk Competition where they were required to analyze a case on
    credit risk and present recommendations to a panel of experts.
-   This year, the RAs combined their expertise and utilized their knowledge to forecast the Canadian and global macro
    economies, including specific forecasts of interest rates, inflation, GDP growth, the CAD/USD exchange rate and oil prices.
-   In October 2005, the IMPACT Program hosted a two-day seminar on portfolio management (Kick-Off Weekend) at St.
    Mary’s University. Topics include, the Portfolio Management Process, calculation and presentation of returns and risk
    measurements, the importance of stock selection strategies, ethics, relative and fundamental evaluation basics, passive
    and active investment strategies, role of the Bank of Canada, Economic Forecasting. Additional seminars include: Global
    Technology, Behavioral Finance
-   Several keynote speaker events hosted throughout the year by the Atlantic Canada CFA (ACFA) society
-   2005-2006 portfolio achieved 13.65% compared to a benchmark of 14.86%
-   Board of Directors is composed of six individuals having the following backgrounds: VP, Finance at SMU; Dean, Sobey School
    of Business; Prof Finance, SMU; Prof Finance, SMU; CEO, Seamark Asset Management; Investment Advisor and Portfolio
    Manager, BMO Nesbitt Burns.
-   Initiated ‘Mentor of the Year Award’, to be awarded annually to an IMPACT Mentor. 17 mentors receive special mention
    and thanks in the annual report.


    Key Themes from 2006 – 2007 Annual Report

-   IMPACT Team is composed of 11 Undergraduate Students and 5 MBA Students.
-   Expanded the format of SMU hosted IMPACT conference, and renamed the IMPACT valuation conference. Conference was
    held in November. A key highlight was the first annual ACFA society valuation competition.
-   In February a team of four students participated in the Rotman International Trading Competition.
-   In March attended the RISE Symposium, achieved Best Risk Adjusted Returns for a student managed fund international
    portfolio – Undergraduate Division RISE Conference, Dayton-Ohio
-   IMPACT ranks amongst the top 5% Canadian Balanced Equity-Focused Funds on the Globe & Mail’s globefund.com tracking
    report for 2007
-   17 Mentors were once again recognized, and the mentor of the year distinction awarded.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:6
posted:9/28/2011
language:English
pages:8