David Schumacher is an Associate Professor in the Finance Area at the Desautels Faculty of Management. Professor Schumacher teaches in the Master of Management in Finance (MMF) program.
Tell me a little bit about what you’re currently researching and the most significant discovery that has come of it so far...
I’m really interested in doing research on institutional investment and the investment behaviour of institutions. One of the big trends that we’ve noticed over the last five or ten years is that exchange trade funds, or ETFs, have become very large and pose a new competitive force for asset managers. We recently released a study showing that many individual ETF managers oversee both ETFs and the traditional mutual funds in parallel; funds that we consider as competitive. We found that 60-70% of these managers will manage both in parallel and we’re trying to understand why this is. We find that it’s sort of an effort by these traditional fund families to manage the rising threat from ETFs by assigning the same fund manager to both products because the traditional products are experiencing a lot of outflows and investors are pulling their money out of the traditional mutual funds which are more expensive. Rather than lose that money to other asset managers, fund families are trying to use their managers and the relationships that managers have with clients to exploit the loyalty of clients and move that money over to the newly created ETFs. The managers are used almost as a vehicle to make sure the clients actually stay with the company and that they don’t go to competing companies.
With COVID-19, there have been changes brought forth in many industries. Can you speak to how COVID-19 has impacted the portfolio choices of international institutional investors?
One thing that we’ve seen is that there was a general market panic, so people were withdrawing their money from institutional investors but there’s one group of funds that has done relatively better and were more resilient because investors did not necessarily withdraw all that much money from, and these were environmental, social and governance funds. I found this interesting because we speak a lot about the importance of ESG investing and how investors really care about ESG based investment approaches. In challenging times, you realize what people really believe.
How would you describe your teaching methods and philosophies?
I am quite interested in and a champion of experiential learning. There’s a really strong experiential component to the more traditional concept or theory-based learning where we do a lot of case-based learning. We collaborate with industry leaders who come to the class to provide feedback and help the students with their analysis, creating a bridge between the theory and how these concepts apply to the real world. This is very important to my teaching.
How do you manage to incorporate your own research into your course curriculum?
There are two instances where I try to bring my research into the course material. Sometimes I teach topics that I have done research on in the context of institutional investors, such as mergers between institutions. The second thing is that I don’t think there’s a way to look at the world as a researcher and as a teacher [independently], they’re not fundamentally different. I don’t have two personalities, one side that’s a researcher and one that’s a teacher and I jump between them. So, for example, I am an empirical researcher, I do a lot empirical work and I work with data. I like to analyze and interpret data, and I do the same thing in class when I make statements about whatever I’m teaching. I give students the big picture overview of “this is where the tension is and there’s a question, the answer could be A and the answer could be B and this research we have indicates that it’s B.” I basically incorporate research in general when I talk about these larger questions in my teaching.
Are any of your MMF students working on anything innovative this year?
One project that comes to mind involved looking at a growing phenomenon in mergers and acquisitions which is called special purpose acquisition companies; it’s a type of acquisition that has exploded in the last two years and one MMF student was looking into it—why it happens, what’s good about it, what are the alternatives. [The student] had so many questions and did so much work and research, and then wrote a final thesis. I enjoyed working with the students on their theses and their own ideas because if it’s their own idea, ultimately, they’re much more invested in it because they’re studying what they’re really interested in.
What’s the most impressive thing that you’ve seen from your students?
I was extremely impressed with how the cohort embraced all the challenges and handled the difficulties during the pandemic with the program going fully online and having to deal with all of this. This is a challenging program going through an extreme change in the way it was delivered. Given how uncertain everything was, I just want to give a huge compliment to the students for having this kind of attitude.
What is something you hope to leave with each of the students who come through your classroom? If they could leave with any attitude or approach or mindset, what would it be?
I hope my students leave with a guiding framework of how to think about corporate finance. When a new situation hits them, they can actually go back to that framework and see where that new situation can somewhat fit in. With this, I feel like I’ve had some moderate success in teaching something useful to students because then they know where to get started even though they might not understand what’s actually going on.
Outside of teaching and research, what is one thing that you’re passionate about?
There’s one thing I started in the last year—road biking. It’s a lot of fun, a great work-out and also, I got to know the city a lot better on a road bike. Even though I’ve lived here for several years, it’s just made me like the city of Montreal so much more because we really have an amazing place and a road bike is a tremendous way to explore. We can do hills, flat surfaces, races—we can go on a Formula1 track to ride a bike; in how many other cities in the world can you do that?
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