As the rise of the popularity of Exchange Traded Funds (ETF) continues, Robins School of Business is taking a well-established business finance model and expanding it to the liberal arts. Student managed funds at the University of Richmond have been around since the 1990’s, but have been limited to finance students. This leaves out a large portion of the student population that could benefit from this experiential learning opportunity. ETFs are particularly well suited to economics majors, but based on the global analysis of social and political trends, demographics, and technological innovations they are beneficial to students of varied backgrounds.

The test run

In the spring of 2015, ten students were hired as research assistants to test a new top-down, economic model of constructing a portfolio. The students were tasked with monitoring the economy and rating the funds. Since ETF are an index, not individual stocks, no financial analysis is needed. The main factors that determine asset allocation and sector allocation are macroeconomic trends and event on a global level. Morningstar, a free online screener, allowed the students to sort more than 1700 ETFs by asset class, region, sector, and industry. 

Based on their criteria, between 10-15 ETFs are identified. These ETFs are compared against a wide range of additional investment criteria. After the ETFs are selected and the virtual investment is made, the students will continue to monitor the economy. Since the investment is fully diversified amongst all companies in the index, the poor performance of one company will not effect your investment as dramatically as with individual stocks. This allows for passive management of their investments.

BUAD 388

Under the supervision and guidance of Robert Dolan, Professor of Economics, and Jerry Stevens, Professor of Finance, qualified students were selected to enroll in BUAD 388 for the fall 2015 semester. The class is a fall-spring sequence comprised of six to eight students. One member of the team will be chosen as the General Manager to facilitate internal and external communications. Throughout the semester, the team identifies 20 ETFs. Weekly meetings are conducted where the team presents written reports and exhibits to support recommendations for each of the investment steps. By the end of November, everything should be in place.

The initial funding for the student managed ETF portfolio is $25,000 and will be invested using Scott Trade. During the spring semester, the students will produce a monthly update, which is the basis for any rebalancing that may occur.

The course proposal and request of funds for the Student Managed ETF Portfolio was approved in January 2016. The fall 2016 semester will be the first group of students to take the virtual investment to a Scott Trade investment. The Robins School will also be the first business school to offer a course where students identify only ETFs in which to invest, opening the door to students of diverse backgrounds.