(adopted September 2000)
I. Overall Mission
The overall mission of the Student Managed Investment Fund
(hereafter, SMIF) is to provide real-world portfolio management and
security analysis experience to graduate students of the Krannert
Graduate School of Management at Purdue University.
SMIF will provide additional teaching and research opportunities
for Krannert faculty. Further, SMIF will offer external visibility that
will enhance Krannertís recruitment, placement, and fundraising
The primary investment objective of SMIF is to preserve the capital that was contributed to establish SMIF, as well as additional capital that is contributed to the endeavor over time. The secondary investment objective of SMIF is to match or better hte achieved results of professional managers as measure by teh average risk-adjusted returns of those professionals that have investment objectives similar to that of SMIF.
Investment Decision-Making and Policies
Investment decisions will be made according to quantitative analysis performed by the quantitative teams. These methods shall be based on published and working paper academic research into empirical asset pricing models. These teams will be organized around differing investment methods such as the January effect or value/growth valuation methods. These methods will be thoroughly researched by the team members and presented to the entire SMIF organization. The organization will decide whether to adopt or reject the proposed analysis method. After gaining approval, the quantitative team will further research the strategy to determine the best criteria to be used in screening stocks. These criteria will be used in developing algorithms that will be used to determine the best values for filtering the current stocks. The algorithms will use data from past years to determine the best trading strategy. Once the filtering screen is determined, the quantitative team members will run the screen on current data to determine the list of stocks approved for the given trading strategy. Once the list has been determined, the team will be responsible for determining the share amounts. All activities will be reported to the rest of the SMIF organization to keep everyone informed and educated about the decisions.
Securities and Strategies
SMIF can only purchase securities that are available on the
U.S. organized exchanges and/or NASDAQ.
Bond investments will be in debt
instruments that are rated at least investment grade by Moodyís or
Standard & Poorís. If any fixed income position drops below
investment grade, it must be removed from the portfolio. Bonds plus cash
(i.e., fixed income investments) shall not exceed 20% of the entire
market value of the portfolio. Concentration of bond investments also
shall not exceed 10% in any single company or organization.
Common stock holdings will be made
based on the quantitative analysis.
Stocks must be listed on NYSE or NASDAQ to be included in the
portfolio. Common stock holdings in any single company shall not exceed
10% of the SMIF portfolio market value.
SMIF will, on occasion, utilize an agreed-upon equity index fund.
When determined to be necessary or prudent, the fund may be 100%
in the index fund.
Uses of margin purchases and/or
short selling are not permitted for SMIF.
Disbursement of Funds VI. Documentation, Review, and
Documentation, Review, and Reporting
On an ongoing basis, the activities of SMIF will be communicated on an informal basis to the entire Krannert community, as well as to interested outsiders, via the home page.