Kogod School of Business is giving students the opportunity to invest University money in stocks with its Student Managed Investment Fund.
Launched last fall semester, this 500-level class has invested in stocks ranging from corporate moguls to mid-cap companies, including Tiffany & Co., Coca-Cola, Dell, Diana Shipping, Goldman Sachs, Bemis Company Inc., Petrobras, Ford Motor Co., Peabody Energy Corp., McGraw Hill and WW Grainger Inc.
Kogod Assistant Professor Phil English previously taught at Texas Tech University and Virginia Tech, whose SMIFs run at about $5 million and $6 million respectively.
When English arrived at AU, there was an undergraduate and graduate student finance club. While the undergraduate club managed $20,000 and the graduate club managed $60,000, the individual amounts were not nearly enough to create a fund.
“To be able to do a lot of really interesting things, you’ve got to be at about a million bucks,” English said.
When former Kogod Dean Richard Durand carved out the original $200,000 for SMIF from Kogod’s operating budget, managing the fund become a class.
SMIF’s assets have since grown to $300,000 with help from alumni donors. For most SMIFs, money comes from the endowment, donors or both, according to English.
Any returns from stocks are invested back into the fund for more stock purchases.
Since Kogod SMIF’s money comes from the University, students are restricted as to what stocks they can buy. Students can only invest in stocks listed in the United States that have prices listed at more than $5 a share, and they must be careful not to invest in stocks that are too risky, such as currencies or commodities.
“They can’t go crazy and buy high-flying Chinese tech stocks,” English said.
However, students have free reign to invest in what are known as “sin stocks,” which include tobacco, firearms and alcohol.
Mark Kruzel, a senior in Kogod who is the SMIF fund manager, pitched stock investment in Altria Group, the parent company of the tobacco division Phillip Morris USA. Kruzel and other students agreed that the stock was stable and would provide great returns on investment.
“With the recession, unfortunately, people still smoke,” Kruzel said. “If a global downturn hits Europe, American cigarettes are not going to be affected.”
Kruzel said he does not worry about the stock tarnishing Kogod’s image since it only represents three percent of the funds in the SMIF.
“We’re not saying that cigarettes are good; we’re not endorsing it by any means,” he said. “We’re just saying right now as a financial instrument it makes sense for our return.”
In the future, both English and Kruzel said that they would like to see investments in a diversity of stocks, including socially responsible ones and Sharia-compliant stocks, which adhere to Muslim laws.
“Obviously given AU’s bent, a socially responsible one fits,” English said. “It’s also the case given our historic benefactors; a Sharia compliant one would fit.”
