CSULB’s Student-Managed Investment Fund (SMIF) Program began operations in Fall 1995 with a single portfolio, the Seegers Fund, valued at $50,000. Over the following two decades, SMIF’s responsibilities grew to include two additional portfolios. First, in 2005, was a portfolio on behalf of the CFA Society of Orange County. Then at the end of 2010, after having successfully navigating the two older portfolios through the volatile markets of the Great Recession, a third portfolio, the “49er SMIF Fund,” was provided by CSULB’s Forty-Niner Shops.
The Forty-Niner Shops is the non-profit corporation that runs CSULB’s bookstore and on-campus concessions, and its mission is “to enhance and support the educational process of California State University, Long Beach.” Its board of directors, spurred on by board member and CBA alumnus Alvaro Castillo, believed that allowing SMIF students to manage a portion of the Forty-Niner Shops’ capital investment portfolio would be help fulfill this mission. As a result, the 49er SMIF Fund was launched on December 31, 2010, with an initial value of $100,000. Under the careful and responsible stewardship of succeeding classes of SMIF students, the 49er SMIF Fund grew steadily over the following years, reaching a value of $166,875.66, or a 66.87% cumulative return, by the end of last year (December 31, 2017).
Given the record of responsible management by SMIF students in helping to achieve both the financial and mission goals of the Forty-Niner Shops, SMIF students and Forty-Niner Shops leadership decided at their annual review in January 2018 to explore the possibility of expanding the scope and depth of their collaboration. This led to a series of meetings over the course of the spring 2018 semester (which, in and of itself, provided a unique educational experience for the students!) that culminated on April 20 with a meeting with the Forty-Niner Shops’ full board of directors. The board approved a number of changes to their Memorandum of Understanding with the SMIF Program that will expand Forty-Niner Shops’ commitment to SMIF and help SMIF maintain its position as one of the premier SMIF-type programs within the country.
The items approved included: 1) increasing the size of the 49er SMIF Fund to $500,000, 2) increasing the scope of the students’ socially responsible investing mandate for managing this portfolio, 3) providing ongoing funding (~$26,000/year) for a second Bloomberg terminal for CBA, and 4) allowing the use of conservative derivatives strategies to enhance the risk-versus-return profile of the portfolio. The first item more than doubles the size of the Program’s assets under management, while the second requires the students to delve more deeply into an important and growing area within the investment-management industry.
Bloomberg, which is the premier information provider and analytical service for the investment industry, has a unique university pricing structure in which the purchase of three terminals leads to receiving another nine terminals at no additional charge. Thus, the Forty-Niner Shops investment moves CBA much closer to obtaining a Bloomberg laboratory while showing a commitment that gives CBA more leverage to seek funding for the critical third Bloomberg terminal. A donor, who is also a CBA alum, has stepped up to graciously support the third Bloomberg terminal.
Of all the changes, probably the most notable is the fourth one – its approval makes CSULB’s SMIF Program one of only a handful of such programs throughout the country that allows the use of derivatives. Our students will have the opportunity to gain a unique experience that they could obtain in few other places. Moreover, two Finance majors within CSULB’s University Honors Program, Sierra Lippold and Ronnie Williams, are also looking forward to the research opportunities this development provide. As part of the research projects for their respective Honors theses, they are anticipating exploring different facets of an asset allocation approach that incorporates some basic derivative trading strategies. Thus, getting back to the mission of the Forty-Niner Shops and the purpose underlying the SMIF Program, permitting the use of derivatives will also provide for an enhanced and unique learning experience for our students, and this ultimately is what we are here for!