RPI’s James Fund: ETFs, Decision Making, and Manager Transitions
Managerial Finance – Special Issue: Student Managed Investment Programs, Part 2: Innovative Developments for SMI Programs (2019) Vol. 46, No. 5, pp. 662-674
24 Pages Posted: 25 Oct 2018 Last revised: 30 Jun 2020
Date Written: September 25, 2018
The James Fund at Rensselaer Polytechnic Institute’s Lally School of Management is a small, recently established, course-driven student managed investment fund. The findings of this case study seek to provide insight to new and existing funds in improving individual fund operation and structure. The James Fund seeks to outperform an 80/20 equity/fixed income benchmark by investing exclusively in Exchange Traded Funds (ETFs) and to move primary emphasis away from idiosyncratic risk and individual equity valuation back towards asset allocation, the most significant driver of portfolio performance. Buy and sell decisions must receive a 3/5ths majority in voting among students and adhere with the investment policy statement. Groupthink, a common problem in student managed funds, is observed in trade proposal and manager voting patterns. It is partially addressed through the use of instructor feedback on individual student trade diaries. Student managers transition each semester therefore the portfolio must meet dormant period criteria limited to a specific list of broadly diversified ETFs, mitigating potential problems from knowledge transfer between management teams that are largely unexamined in the context of student managed investment funds.
Keywords: Student Managed Funds, Student Managed Investment Programs, ETFs, Groupthink, Knowledge Transfer, Manager Turnover
JEL Classification: A22, A23, G11, G41
Suggested Citation: Suggested Citation