by Melba Newsome,
Some business schools are offering direct experience in financial investing by putting students at the helm of million-dollar funds.
LIKE MANY BUSINESS school applicants, Brian Purcell, 35, had a specific goal in mind when he quit his day job to get an MBA degree at the University of North Carolina—Chapel Hill’s Kenan-Flagler Business School. After graduating from Davidson College, Purcell spent six years handling real estate sales and development in Charlotte, North Carolina. He wanted to stay in the industry but move into more of an institutional investing role. “I wanted an MBA program that would help me do that,” he explains.
Kenan-Flagler’s MBA real estate concentration is well-regarded. But Purcell was particularly intrigued by the chance to get experience helping manage a student-run multimillion-dollar real estate fund with a portfolio of investments ranging from multifamily properties to office space, senior housing and retail.
“Our students are responsible for every single thing a private equity fund does, such as running models and dealing with the nitty-gritty of how the assets will perform under different circumstances,” says David Hartzell, a real estate professor who serves as faculty adviser.
Purcell quickly found that to be true. He joined in the second semester of his first year and worked as a lead fund manager until graduation. He and his fellow students met as a class with Hartzell at least twice a week to discuss every aspect of managing the fund and received credit for two semester courses.
When classes were out of session they met via conference call. The year-round commitment required Purcell and his team of managers to meet with real estate developers, visit properties, analyze investments, source deals and report to investors, among other tasks.
Kenan-Flagler is not the only business school offering this kind of direct experience in financial investing. In fact, a growing number of B-schools offer students a chance to manage actual rather than simulated investment portfolios generally combined with for-credit classes that teach investment strategy and offer the guidance of faculty or professional financial advisors.
Once an innovation, says Michael D. Wiemer, senior vice president and chief officer Americas for business school accreditation organization AACSB International, “it didn’t take long for these programs to catch fire because they give the school a big competitive advantage.”
The fund experience clearly paid off for Purcell, who landed a job as director of portfolio management for a real estate investment company after graduation. Two years later, he became managing director of acquisitions for Asana Partners, a Charlotte-based private equity real estate investment firm focused on retail assets in walkable urban areas around the country. Purcell notes that his work with the fund “uniquely prepared me to perform well in my current position.”
Student-led investment funds vary widely from school to school in terms of assets, portfolio composition, investment guidelines and who is eligible to participate. The University of Colorado—Boulder‘s Deming Center Venture Fund is generally managed by about 15 graduate students from the university’s business, law and engineering schools and overseen by an advisory board comprised of faculty members and leaders from the local venture capital and angel investing sector.
Investments typically range from $25,000 to $50,000 and can be in any sector but must be tied to the university or the surrounding community. Classroom learning is enhanced by the students’ access to angel investors, entrepreneurs and industry partners who help them identify opportunities, negotiate the terms of investment and execute the deals.
The fund recently invested in The Food Corridor, a platform that connects chefs and food entrepreneurs with restaurants that have underused space and equipment.
“A big part is not only investing in the now but investing in what you envision the enterprise can be with your support,” says Carlos E. Peña, 30, managing director and MBA candidate.
The Green and Gold Fund at the University of Alabama—Birmingham’s Collat School of Business is open to both graduate and undergraduate students. Each semester, generally more than 30 students help manage roughly $550,000 in equity and fixed-income securities by applying professional investment strategies and established risk management principles studied in class.
David Lutomski, 26, completed his Collat MBA in 2018 and now works as an analyst for a wealth management firm in Birmingham. The hours he logged with the Green and Gold Fund as chief investment officer and the research tools he used have come in handy. “We used the Bloomberg terminals to look at financial statements and news about the companies to run them through different models,” Lutomski says. In addition, “I established guidelines for allocation and made sure we followed the investment policy statement.”
The University of Minnesota—Twin Cities’ Carlson School of Management considers hands-on experience so important that all full-time MBA students are required to participate in one of four enterprises – investment, brand marketing, consulting or ventures.
Rebecca Blumenshine, 36, chose the student-led Carlson Funds Enterprise, which oversees approximately $35 million in equity and fixed assets. The Minnesota native had earned a sociology degree and worked in the nonprofit sector for years when she decided to head to graduate school.
While pursuing her master’s in public policy at the Humphrey School of Public Affairs, Blumenshine learned about the university’s dual-degree programs that allowed her to earn an MBA simultaneously.
“I saw it as an opportunity to start building out my quantitative skills, which I wanted to use more in my (public policy) career,” she says. The coursework and the fund experience were eye-opening for her, and the latter gave her valuable exposure to managing investments primarily from large financial services firms.
Blumenshine also aided the successful effort to make the Funds Enterprise a signatory to the Principles for Responsible Investment, which requires it to consider environmental, social and governance factors in its investments. “It is part of our fiscal responsibility to our investors to use all data available and consider all risk factors in our investment decision-making,” Blumenshine says.
The Foster MBA Investment Fund at the University of Washington’s Foster School of Businessappeals to many participants by teaching not just trading and investing, but also by involving students in assessing the value of every component of a business. In their yearlong class, student fund managers learn how to recognize and get ahead of marketplace changes and determine whether the business is following or leading industry trends impacting its bottom line. The fund is divided into various business sectors including grocery, pharmaceuticals, and hotels and leisure.
Working with the faculty adviser and instructor, MBA student Levi Stewart Zurbrugg, 29, manages the grocery retail portfolio. “We start at the industry level and build a hypothesis around what we think will build value. For the grocery sector, that’s convenience, product selection and customer experience.”
When Zurbrugg graduates in June, he will join a mutual fund as a senior investment analyst, thanks in part to his hands-on Foster experience. “Many of our students will never work on Wall Street and don’t want to,” says Lance Young, faculty adviser and principal lecturer of finance and business economics. “When they get jobs, even if it’s at places like Amazon and Microsoft, they have the analytical skills they can take to their jobs and succeed.”
Rachel Curry, 32, is a case in point. She wanted to switch from a career in food service management to something in consulting, strategic planning or finance. Unsure of which path to take, Curry believed Foster would provide the broadest course of study.
“Lance hammered home the importance of looking at an industry’s value proposition and understanding the whole story, how relationships work and what pillars could crumble if there’s a big shock to the economy,” she says.
As a senior financial analyst now for Amazon’s Kindle eBooks team in Seattle, Curry assesses and provides accurate financial data to help prioritize new initiatives. She says the fund helped her focus on the rationale or “story” behind a proposed initiative and then to model financial data to see if it supports the new theory. The process “comes into play with every new model I develop,” Curry says. She believes these skills have been key to her success at Amazon.