The University of Texas at Austin formed the first-ever private investment fund under student management managing assets from outside investors.
The MBA Investment Fund L.L.C. entered the market on Jan. 17 with $1.6 million of private sector capital from 37 outside investors. The fund is managed by 15 second-year MBA students at the university. They make all investment decisions under the guidance of a professional investment counselor.
The growth fund was developed by George Grau, professor and chairman of the Department of Finance.
Assets came from alumni and business supporters centered in the Dallas, New York, Houston and Chicago areas.
Other investment funds run by students usually manage a portion of the school endowment or other school funds.
The University of Texas investment fund is separated into three portfolios managed by five students each. Portfolios consist of stocks from the Standard & Poor's 500 Stock Index, divided into three groups - consumer durables, interest-sensitive companies and technology and basic materials.
The objective of the MBA fund is to earn a higher return than the index with less risk.
The fund is governed by a management group consisting of professional investment managers and corporate finance executives. In addition there is a 25-person advisory committee with representatives from Wall Street firms, investment and corporate finance personnel.
Students conduct their own research, using standard Wall Street research reports.
To make the experience more realistic, said Mr. Grau, students will be required to make periodic presentations to investors in each of the four cities.