Demand grows for student-led impact investment funds
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Katie Wheeler applied to the University of Michigan to study how private-sector approaches could be deployed in the public sector, but ended up with far more than classroom-based learning. She was soon shaking up a $500,000 student-run fund to scrutinise the effectiveness of the social enterprises in which it invests.
Ms Wheeler is one of a growing number of students seeking ways to make an impact while they are learning — acquiring practical skills in line with their personal values and which they can apply in their professional lives.
“Action-based learning of the best kind” is how Ms Wheeler describes the Ross School of Business’s pioneering Social Venture Fund. Upon graduation, she hopes to work for an investor or developer in affordable housing. “I’m interested in cross-sector collaboration and innovative ways to finance equitable development,” she says.
Kurt Buchbinder’s passion is for the environment. After five years at bond group Pimco, he opted for an MBA at Tuck Business School at Dartmouth, to pursue what he calls a “more impact-oriented career”. The Californian says: “I feel strongly about ocean conservation as well as water-saving technologies since California is perennially in a drought.”
The course appealed to him because the school operates multiple student-managed social impact funds. With fellow students and faculty, he has since launched the Tuck ESG Fund, which uses environmental, social and governance (ESG) factors in deciding how its managers will invest $100,000.
Like the University of Michigan, Tuck’s student-led experiential projects have three characteristics: a focus on financial as well as social returns; integration into the curriculum; and a breadth of approaches to help develop different skills.
“To equip the next generation of investment professionals who can credibly assess ESG risk/opportunities . . . it’s increasingly important to offer the full spectrum of learning across asset classes, representing more of a total portfolio approach to sustainable investing,” says John McKinley, Tuck’s executive director of the Center for Business, Government and Society.
Some funds offer venture capital for early-stage companies, while others focus on investing in equities or bonds. St Xavier University in Chicago oversees the Cougar Student Managed Hedge Fund, part of an undergraduate derivatives course in its Graham School of Management.
The Sustainable & Impact Investing Learning and Knowledge (Siilk) network alone includes more than 40 active student-managed investment funds, primarily in the US, with a focus on responsible investment.
“We see a lot of enthusiasm,” says Georges Dyer, executive director of the Intentional Endowments Network, which encourages university endowments to switch to more sustainable investments, and created Siilk to promote student-led funds and sustainability in school curriculums. and investor activism.
While some student funds are supported by a benefactor or donations from students, others manage a share of their university endowment directly. Examples include the Sustainable Investment Fund at Haas school of business at the University of Berkeley, and Desautels Capital Management Socially Responsible Investment fund at McGill in Montreal.
Some projects such as Wharton’s Impact Venture Associates prepare investment cases and then seek external support through crowdfunding, while others have formed partnerships with external funds.
Another option is the Turner MBA Impact Investing Network and Training (Miint) competition, which gets students to pitch for a $50,000 investment. Brian Trelstad, an impact investor who helps oversee it, says: “We provide the one-stop shop. Many schools have their own funds but have found real value in attending the competition to sharpen their saw against others.”
There are two problems in the expansion of such initiatives. The first, as he concedes, is that “the demand for impact investing jobs currently vastly exceeds the supply”.
That inspired Steven Petterson, a graduate of the University of British Columbia, to follow his passion by founding the National Social Value Fund, which raises money and uses students at universities across Canada to identify and invest in local “social purpose” businesses.
The second is that business schools are not the only source of demand. New York University’s Impact Investment Fund draws on students from business, public service and law schools. It backed Sapient Industries, which uses machine learning to improve electrical grid efficiency, and has itself been deployed on campus to reduce carbon footprint.
At the extreme, Mr Petterson has resolved to work only with undergraduates. “There’s a lot less ego and they are much more intentional,” he says. “One professor even said they even outperform the MBAs. We don’t want everyone just coming from business or they talk exactly the same.”