Ideas with Impact
UNB Faculty of Management

SIF Students Succeed During Great Recession

Author: Liz Lemon-Mitchell

Posted on Jul 12, 2011

Category: CFS

The University of New Brunswick’s Student Investment Fund program consistently outperformed many professional money managers over the last three years, in the worst market since the Depression. During the three-year period, known as the great recession, the student investors outperformed many professionals who are still trying to get their clients’ portfolios back to their pre-2007 highs. Not only were the students able to protect the value of their portfolio, they managed to grow it. At year-end 2010, the students had well surpassed their 2007 high of $2.3 million achieving a yearend balance of $2.6 million, all from investment returns. Specifically, the total Fund return for the one-year ended Dec. 31, 2010 was 10.7% or 56 basis points above the benchmark established by the program’s founding partner, the New Brunswick Investment Management Corporation (NBIMC).

During the Great Recession the total fund performance was 5.2% above the benchmark set by NBIMC. “It’s very satisfying that we are not a one-trick pony having consistently performed well over a 13 year period,” said program director, Glenn Cleland. The outperformance is due to the students’ tactical asset allocation decision and fixed income decision. As a result of a detailed economic scenario analysis the students were underweight equities versus their equities benchmark from March 2007 to March 2009. They subsequently went overweight equities in March 2009 because the dividend yield on the TSX/S&P 60 was greater than the ten-year bond yield. Their fixed income outperformance was due to being overweight provincial and municipal bonds vs. the program partner’s benchmark.

The Student Investment Fund program began in September of 1998 when the NBIMC gave the Faculty of Business Administration’s program $1.0 million of real money to invest in the capital markets. The fund continues to grow and reached $2.7 million in January 2011. (NOTE: The Centre for Financial Studies has just published a report called "Investment Education for the 21st Century" which summarizes the strategy of the Centre for Financial Studies and celebrates the SIF's stellar portfolio performance from 2008-2010.