sealPurdue News

July 1997

Students play the market, benefit from profit

WEST LAFAYETTE, Ind. -- Students at universities around the country are learning money management and investment skills by making real-life stock market investments with donated money.

At Purdue University's Krannert School of Management, the beginning funds are $100,000, to be donated by alumnus and businessman Richard Hansen, president of the Pennsylvania Merchant Group in West Conshoshocken , Pa .

"An investment fund for students is an excellent way to establish a practical understanding of money management and its associated responsibilities," Hansen says. "This program will give students a complete perspective on capital formation and very real-world experience with the asset allocation procedures they will face as individuals, executives and perhaps as business owners."

The "Student Managed Investment Fund" was the idea of three graduate students in the spring of 1996 and will be led by Keith Smith, professor of finance at Purdue.

"It's a great way for students to manage real money and make real-life decisions about investing," Smith says. "This type of practical experience is gaining popularity around the country. It certainly makes students more marketable if they have a track record to talk about.

"One of the best parts of this program is that some of the money earned on the portfolio could be given back to Krannert students in the form of scholarships and other activities that would benefit the student community."

Other schools with investment programs include the University of California, Los Angeles; Ohio State University; the University of Texas; and the University of Notre Dame.

According to John Affleck-Graves, professor and chair in the finance department in the business school at Notre Dame, their fund has made a profit of about $100,000, and has grown from $100,000 to $400,000 in two years.

"The university kicks in $50,000 each semester, which has helped the fund grow," Affleck-Graves says. "Our kids tend to invest in companies with products they are familiar with, so we lean toward technology. When technology stocks have been up, so has the fund. And it's been a great success from an academic standpoint."

The program at Purdue will begin in August with the recruitment of six to eight masters students in the finance discipline. They will take a course in portfolio management in the fall and then in the spring semester will begin investing in an index fund, a mutual fund that invests in exactly the same companies that are used to calculate a market index such as the Dow Jones or Standard and Poor. Then they will begin to purchase common stocks in individual companies.

The "Student Managed Investment Fund" team will relay buy or sell decisions to the Purdue Research Foundation. A representative at the foundation then will conduct the transactions through a brokerage firm.

Sources: Keith Smith, (765) 494-7337; e-mail,
John Affleck-Graves, (219) 631-6760
Richard Hansen, (610) 260-6400
Writer: Kate Walker, (765) 494-2073; e-mail,
Purdue News Service: (765) 494-2096; e-mail,

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