For Amanda Barros Ambrogini, financial training goes way beyond academic theory: she’s the co-president of London Business School’s (LBS) Student Investment Fund. The group of MBAs from the Investment Management Club get real experience in asset management: screening companies that match the funds’ criteria and carrying out a due diligence of the commercial opportunity.
“We invest in seed stage ventures that are both financially sustainable and positively contribute to a social need, for instance education, environment, health, gender or poverty relief,” says Ambrogini. Investments range in size from £20,000 to £70,000 and there’s usually a co-investor, as the LBS fund is small: assets under management (AUM) are around £600,000.
Ambrogini also learnt the legal process of creating an investment vehicle and how to effectively manage stakeholders with different needs, including the faculty who oversee the fund and the donors who bankroll it.
Her co-president Giulia Poletti de Chaurand has reaped many benefits beyond an enriched learning experience. “Working with the fund has given us access to an incredibly large network,” she says, which can help them win investment jobs. “We enjoy relationships with students, faculty, the wider school and London’s finance scene — a hub for impact investing.”
LBS is one of a growing number of business schools giving its MBA students experience managing real cash in investment funds.
MBA-managed investment funds focus on social, financial goals
Notably, many of these MBA-managed funds focus on social as well as financial goals.
“Generationally, there seems to be more concern for these types of issues,” says NYU Stern School of Business professor Anthony Marciano, who is faculty advisor of the Michael Price Student Investment Fund (MPSIF). Indeed, 86 percent of millennials (20-somethings) say that sustainability is a priority for them in their investments, according to research by JPMorgan Private Bank.
Marciano adds that there is evidence of potential outperformance from ESG (environmental, social and governance) investing. For example, nearly two-thirds of sustainable funds beat the average performer in their category, according to data provider Morningstar. “This is the ‘doing well by doing good’ objective that many students have,” says Marciano.
The MPSIF was financed by the famed investor Michael Price with $2m in 2001.
The fund has just started to invest in equity stocks with ESG goals. Marciano expects to invest about $500,000 in such shares in the next year. It’s too early to tell whether the investments will outperform. Marciano is optimistic, given past progress. So far, the MPSIF has delivered a cumulative return (after trading costs) of 5.2 percent each year, below an equally-weighted basket of market benchmarks.
The MPSIF enrols about 40 MBA students each year who get course credit for doing it. They can also enrol in the NYU Impact Investment Fund, alongside policy students from NYU’s Wagner Graduate School of Public Service and students from NYU Law.
Investing actual dollars
Scott Taitel, director of social impact, innovation and investment at NYU’s Wagner school, says students value the unique opportunity to invest actual dollars. “They see it as critical to preparing them for a future career at the intersection of social impact and finance,” he says. “This is particularly the case in a nascent field where practices are still evolving and internships are limited.”
Impact investing has come on leaps and bounds, especially among university endowment funds who have come under pressure from students to divest from fossil fuels and focus more on companies hitting ESG measures. The Global Impact Investing Network estimates that impact investing assets at 1,340 organizations worldwide reached $502bn at the end of last year. It defines impact investing as investments that lead to social or environmental benefits, as well as yielding a financial return.
The alumni-financed Social Venture Fund at University of Michigan’s Ross School of Business is the most popular of several student-led funds at the school, according to Gautam Kaul, a Ross finance professor. He says up to 70 people apply each year for 40 places on the social fund, which yields academic credit.
How an MBA investment fund can lead to jobs
One reason for the Social Venture Fund’s popularity is that it can improve participants’ chances of getting a post-graduation job in a wide variety of fields, not just investment, says Kaul. “The best students who get the best jobs come from the fund. The best companies want the ESG students first rather than the other students.”
These include the top consulting firms like McKinsey & Company, The Boston Consulting Group, even investment banks, according to Kaul. “They want someone who understands how to value a company but also the wider impact of their work,” he says.
Defining and measuring impact in a consistent way is a big challenge, however. “The arbitrary methodologies now in use create some confusion and also risk confusing investors that want to increasingly dedicate resources to the sector,” says de Chaurand at LBS.
She says the United Nations’ Sustainable Development Goals are one of the most widely used frameworks for impact investing. “In just the past five years, there has been incredible progress in both measuring impact and in the track record of impact funds.”
She is working tirelessly towards establishing a similar record of success. “We have needed to work hard on our time management to be able to carry on the fund’s activities and management, while juggling the regular MBA schedule,” she says.
“It’s challenging, but incredibly enriching.”
