UNC Charlotte’s Student Managed Investment Fund outperforms S&P 500 at mid-year

While Wall Street ended last year in the doldrums, the UNC Charlotte students administering the Student Managed Investment Fund (SMIF) in the Belk College of Business ended 2007 with a return that most investors would envy.

As of December 26, 2007 the SMIF had returned 8.725% since August 22, the start date for the current academic year. By comparison, the Standard & Poors 500, to which the fund is benchmarked, returned 4.147% in the same period.

Top individual stocks in the SMIF portfolio included: Apple (AAPL), with a return of 30 percent; Transocean (RIG), 24 percent; and Proctor and Gamble (PG), 15 percent.

In a highlight for the fall semester, students executed a key trade just before the Federal Open Market Committee’s September 18 interest-rate cut of 50 basis points. The student investors speculated that the financial sector of the SMIF would be positively affected by an interest rate cut and increased their holdings of Citigroup(C) to maximize returns. Financial stocks soared following the announcement of the rate cut, resulting in a gain for the SMIF.

The students later sold Citigroup prior to its current decline, lessening the impact of the recent deterioration of the financial sector in the market.

As the SMIF fund managers face the challenges of the volatile investment environment in 2008, they are not expecting to dramatically change their investment strategy.

“Since the start of the year, our strategy has been to seek out undervalued stocks,” said Jonathan Bui, who serves as public relations officer for the SMIF. “We will continue to do so, even in light of the recent dramatic downturn, with careful consideration on allocation of our portfolio to sectors of the market that perform well even in a recessionary period.”

Bui points to global and emerging market stocks and commodities such as gold as investments which the students believe will perform well this year. The students are bullish about healthcare, utilities and consumer staples, and are less optimistic about cyclical and financial sectors.

“For the new term, we are beginning to consider the use of ETF’s (exchange traded funds) to hedge our portfolio, especially in the financial sector,” Bui added. “And, of course, we will carefully monitor the Fed to see how they will act in light of the recent downturn.”

The Student Managed Investment Fund is a year-long finance course established at UNC Charlotte in 1997 to give students hands-on experience in investing and financial analysis. The program stresses core academic concepts of equity analysis, portfolio management and performance measurement, as well as intangible skills such as group decision-making and teamwork.

The SMIF is more than a stock-market simulation game: assets for the SMIF are provided by the UNC Charlotte Foundation and are real funds from the university endowment. The fund began the academic year with an approximate value of $240,000.

The current SMIF group consists of 11 students, four of whom are M.B.A. students. Each student acts an analyst for a specific sector of the fund with various management responsibilities for the entire fund as well. The student investors are advised by Chas Mansfield and Sam Kirkland, both Chartered Financial Analysts who teach part-time in the Belk College of Business.

The SMIF meets in a dedicated trading room in the Friday Building on campus, which contains state-of-the-art Sun workstations running on two dedicated Sun servers, a large ticker that tracks the fund’s investments, and a Bloomberg terminal to facilitate learning and research.

The student investors will release their final report for the academic year in May. For additional information on the Student Managed Investment Fund, visit smif.