USC Marshall is a business school that strongly believes in experiential learning. The Seminar for Applied Portfolio Management Student Investment Fund (SIF) Program is a one-year commitment consisting of two three-unit courses. In these classes students learn the theory and practice of investment management through a merging of financial analysis, portfolio management and the actual management of the Student Investment Fund.
As a result of a $250,000 gift from Provident Investment Counsel, the Student Investment Fund Program (SIF) at the USC Marshall Center for Investment Studies (CIS) was established in 1986. In 1995, an additional $750,000 from alumni and friends of the USC Marshall School was raised. Three equity portfolios, including, Babcock California Fund, Provident Growth Fund, and Trojan Equity Fund, were introduced. Also, with a gift of $200,000 by Robert Rodriguez (BS ‘74, MBA ’75) and First Pacific Advisors, Inc., as well as a total contribution of $400,000 from various donors, a new Marshall Fixed-Income Fund was established in June 2004. Recently, with a gift of $750,000 by David and Nancy Iben, a new Global Equity Fund was established in March 2011. Today, 16 second-year MBA students are managing approximately $5 million in four equity and one fixed-income portfolios, each with unique investment discipline.
The purpose of this seminar is fourfold
- To provide a group of sixteen MBA students with hands-on experience in managing a portion of the University’s equity endowment;
- To provide through assigned and self-selected readings an academic background for an understanding of security analysis and portfolio management;
- To supplement that academic background by interaction with individuals and institutions engaged in the money management industry;
- To produce and present an Annual Report which will provide a record of SIF achievement.
Since the funds managed are part of the University’s endowment, there is a long-term, principal-conserving aspect to their management. However, because these funds are also intended to serve as a learning experience in a year-long seminar, there is also a shorter horizon in which the student managers are actively trying to beat their benchmark. This dichotomy is accepted and is part of the challenge of developing an appropriate performance attribution.
The primary constraint on this tax-exempt money is that it shall be fully invested in domestic equities with no more than 10% in ADR’s and no more than 10% in cash. The average size of the individual stock holdings should not exceed 5% of the total portfolio, and the largest holding should not exceed 10%. The minimum market cap should exceed $100 million.
The California Small Cap Fund is a small-cap stock fund with at least 50% invested in companies domiciled in California. The Global Equity Fund GEF is an all-cap global fund that will invest in the developed and emerging capital markets. The Provident Growth Fund seeks out mid-cap growth stocks while the Trojan Equity Fund is a large-cap value stock fund. Finally, the Marshall Fixed-Income Fund invests in at least 60% in corporates, and the remaining in treasuries, MBS, high yield, agencies, preferred stocks and ETFs. Beyond that, based on the investment guidelines recommended by the CIS Board of Advisors, each group of fund managers develops their own strategy for selecting securities, constructing their portfolio, monitoring their portfolio’s risk and reward, and evaluating their portfolio’s performance.
Student Managers Selection
Students who are interested in the program submit an application in January. The Selection Committee reviews the applications and makes recommendations for first round interviews. These 30-minute first round interviews are conducted by the current SIF managers; the second and final round interviews are conducted by SIF faculty in consultation with an ad hoc faculty committee. Prior to enrolling in SIF, graduate students are required to have completed Financial Analysis and Valuation (FBE 529) and complete or be concurrently enrolled in Investment Analysis and Portfolio Management (FBE 555).
SIF Student Managers are selected during the Spring term and assume full fund management responsibilities as of April 1st. They are selected based on their genuine interest in pursuing a career in the investment management field. The number of students allowed to enroll in this two-semester program is limited to 16 so that (a) each student may have direct experience in managing one of five portfolios and (b) the class as a group can visit with a variety of money managers. The class requires a daytime availability on Wednesdays and Fridays so that the student managers can meet with each other and make off-campus visits during normal business hours. The expected daytime commitment is 10-15 hours a week, which includes regular fund meetings outside of class.
The Capital Markets Training Room is located on the second floor of Bridge Hall and has all the elements of a state-of-the-art trading room with information screens, monitors, extensive software packages and research capabilities in real-time. These teaching/research tools and resources aide students in managing their funds. In addition to Barra (Portfolio Optimization and Performance Attribution) and Capital IQ and Morningstar, we also have a Bloomberg terminal. With Scott Johnston’s (MBA ’69) assistance, we have received a generous gift from William O’Neil of its (WONDA) Database for the students.
Suh-Pyng Ku, Professor of Clinical Finance & Business Economics.
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Student Investment Fund (SIF) | Undergraduate Student Investment Fund (USIF)