When the idea of setting aside real money for business students at the University of New Brunswick (UNB) to invest in capital markets was first proposed to the New Brunswick Investment Management Corporation (NBIMC), the firm naturally wanted to ensure the program was well thought out and properly controlled.

If the firm decided to move forward on this idea, NBIMC would allocate $1 million of the approximately $5 billion of pension assets under their management, to develop an investment management program in the faculty of business administration.  Carefully selected students would have the experience of learning asset management by investing real money in the capital markets.  Graduates of the program might even fill positions at the Crown corporation.

As you may be aware, the concept became a reality in September 1998.  The Student Investment Fund (SIF) program has exceeded all expectations by many measures of success.  The student-managed fund peaked at roughly $2.5 million during the summer of 2008 from its initial $1 million strictly from investment returns.  There was no additional injection of funds that would account for any of the fund’s growth.  The risk of student investments is mitigated by their requirement to operate within the parameters of NBIMC’s investment policy statement and with careful oversight at many levels.

The SIF was the first student-managed fund in Atlantic Canada, one of a few in the country, and unique in North America.  Its market neutral equity portfolio construction approach combined with an integrated study program for the Chartered Financial Analyst (CFA) Level I exam made it leading edge.

The first cohort of SIF students entered the program in September 1998 during turbulent times in financial markets stemming from the collapse of Long Term Capital Management.  With Nobel Prize winners Myron Scholes and Robert Merton heading up the failed firm, its demise illustrated the humbling power of the market.  Over the subsequent ten-year period, the students made their investment decisions during the technology bubble and bust, US$120 oil prices, the subprime crisis and, as at today (Dec. 4, 2008), crude oil prices fell below US$44 a barrel amidst a sagging global economy.  It’s safe to say that the market is the students’ real teacher.

The SIF program founder and current professor, Glenn Cleland, came to UNB as director of the Centre for Financial Studies (CFS) in 2002.  He consistently stretches the limits of the possible to “raise the program to a higher level”.  And the next year to yet a higher level.  In the spirit of lighthearted competition, each successive class of high-performing student investors stretches their capabilities to outperform their predecessors.

In the SIF program students apply investment theory using real money in real time to achieve real financial performance.  The program’s mantra affirms our commitment to experiential learning.

Tell me, I will hear

Show me, I will see

Let me experience, I will learn

- Lao Tzu

A decision to enter an international investment competition in 2003, and our students’ accompanying success, was instrumental in spawning greater interest in business competitions.  Some of their accomplishments include:

• first Canadian university to win an investment category at the prestigious Redefining Investment Strategy Education (R.I.S.E.) competition (2003)
• placed 2nd overall at R.I.S.E. out of a field of 160 student-managed funds from around the world (2003)
• more success at R.I.S.E. (2004, 2007)
• inaugural winner of  RBC/Dalhousie University’s Credit Risk competition (2005)
• winner of inaugural Atlantic Canada CFA Society Valuation competition (2007)
• winner of North American CFA Institute Valuation competition (New York City, April 2008)
• 2nd place in CFA Institute’s Global Investment Research Challenge (New York City, May 2008)
• 68% pass rate on the CFA Level I exam compared to an industry average of 38% over the past 3 years

Our many achievements are attributable, in part, to the financial support and mentorship of donors to the SIF program.

• our partnership with NBIMC is multi-faceted and drives the program
• Phillips, Hager & North Investment Management supports the cost associated with the students’ participation in business competitions
• the Boardroom is the focus of the SIF program and bears the name of its sponsor, the TMX Group
• software supplied by Applied Finance Group, CPMS, etc. offer students the advantage of using research tools used by investment professionals

Another term is drawing to a close.  SIF students reconvene in January 2009 with no time wasted; an exam based on CFA Level I material during the first week of the new year followed by the annual trek to the Toronto investment community.

Looking ahead, with new funds in hand, Student Investment Fund program director, Prof. Glenn Cleland, is preparing to develop a fund which would allow students to invest in the international markets.