Accounting and finance students manage $250,000 fund

A team of students from the School of Accounting and Finance (SAF) are getting an opportunity to invest in the stock market after an anonymous donor committed $250,000 to the University of Waterloo for a student-run investment fund.

One student is chosen each term as the chief investment manager and compliance officer, two students are selected to be portfolio managers, and six to nine are appointed analysts. The first-installment of $50,000 arrived last January and the second this January. The student investment team invests in Canadian equities and has been managing the fund since the Spring 2012 term.

Members of the team get real-life experience in equity evaluation and portfolio management. After the teams conduct their evaluations and make their recommendations about stocks to invest, they face grueling questioning from fellow students, faculty advisors and mentors from the industry before they make their trading decisions

 After the first two terms the fund was up by 1.86 per cent.

Photo credit: Patty Mah

“Although the fund’s return was less than the market (TSX), largely due to substantial cash holdings as the portfolio is constructed, the reward-to-risk tradeoffs of the portfolio were favourable, says Ranjini Jha, associate professor in the School of Accounting and Finance. “Considering the economic uncertainty, the team chose a defensive strategy - they chose less risky stocks, particularly stocks that paid dividends, and remained partly invested in cash.”

Eventually, Jha expects that risk-adjusted returns will meet or exceed similarly measured performance of the market

National and International Competitions

While some SAF students are making their mark in the stock market others are getting noticed at national and international competitions.

A Waterloo team finished among the top four in the North American finals at the Chartered Financial Analyst (CFA) Institute’s Research Challenge after winning the Toronto round last year. The team went on to the final four in a North American competition in New York. Had they won that, they would have competed globally in New York. This year’s Waterloo team will be competing in the Toronto round, marking this year as the fourth consecutive year that Waterloo has been selected to compete in the Ontario finals.

Now, two teams are preparing for a competition organized by Manulife called Entry To Asia that offers prizes of $100,000, $50,000 and $20,000.  

Competitors have to develop a plan for a company with fewer than 500 employees that is considering entering the Asian market. 

Graduates of SAF programs can go into investment banking, asset management, sales and trading or risk management.

Craig Geoffrey, a faculty advisor, attributes the success of Waterloo students to mentoring and the rigorous preparation.

“Students who participate in extra-curricular activities stand out,” he says. “Whether it is the CFA Research Challenge, the Student Investment Fund, or other competitions, they speak better, are more confident and can handle being grilled on technical expertise and judgment.”