MBA students: Head of the (asset) class

Academia can be filled with hypotheticals and theoreticals. To make it real, just add money. A growing number of Canadian business schools are implementing investing programs that buy and sell with real dollars, blurring—or eliminating— the divide between campus and Bay Street.

… Many North American business schools have student-managed funds mandated to invest a portion of the school’s endowment. Desautels is one of the few with an incorporated investment company authorized to attract outside money. Desautels Capital Management accepts external clients—and charges them for the privilege.

… “Truth is, the best thing I can do is stay out of their way,” says Ken Lester, a McGill investing professor who serves as the fund’s CEO. “I want them to try out their own ideas.” The program came into being in 2010 while the trauma of the financial crisis was still fresh. The inaugural cohort was in no rush to plow all of their available funds into uncertain and volatile markets. “We did not feel pressure to instantaneously deploy our cash,” says John Tarraf, MBA’11, a recent McGill MBA graduate. “We took our time to look for good ideas.” Even with large cash holdings, the students have managed to match index fund performance since inception, Lester says.

Read full article: Canadian Business, November 10, 2012