Meet the Young Managers of IIM Student Funds, B-Schools

Naman Jain is an example of this. He is a 24-year-old MBA student who has a big responsibility outside of his academic duties – managing the money of about 146 of his bandmates. Jain, along with his classmate Swarnadeep Ghosh, leads the investment fund Joka Advantage Fund (JAF) at the Indian Institute of Management (IIM) in Kolkata. JAF is a student fund that manages student money by investing in the capital markets.

Jain entered the metropolitan markets at a fairly young age. “My mother was a trader when I was in school. CNBC was on our TV from 9 am to 3 pm, and that’s how I got interested in stocks early,” he said, adding that he began investing in stocks from his first year of undergraduate studies. had to decide which extra-curricular club to join while in business school, Yoka seemed like a natural choice.

In faraway Jamshedpur, Pratiksha Amrendra Kumar also sits on a 20-member committee of a similar investment club at the Xavier School of Management (XLRI). Kumar is a qualified Chartered Accountant and has extensive theoretical knowledge of capital markets. “I wanted to get first-hand knowledge of money management. Joining the SIF (short for Student Investment Fund) allowed me to do that,” she said.

Like Jain and Kumar, business school students run these investment clubs, which are mostly student-led and involve minimal college faculty. It’s not just some other extracurricular activity for these 20 year olds to get extra credits. This is a serious matter, because the money of 100-150 students is at stake.

“We monitor the markets daily and have investment strategy discussions at least twice a week,” said Sahinshu Sharma, Niveshak investment fund member at IIM Shillong.

Also, while the main goal is to generate significant returns for investors, these young fund managers are mindful of sticking to the basics when choosing stocks and not resorting to risky methods like investing in derivatives to make a profit.

Take the case of Pavan Teja, a 23-year-old IIM student in Bangalore. He traded futures and options (F&O) with his own money and even recorded a solid profit of around 48% over the last year, but since he is in charge of the college investment fund, he only invests in stocks. “Given the volatility of derivatives, we (Teja and two other fund managers) cannot risk other people’s money,” Teja said.

serious business

In most colleges, funds are collected annually by members of the fund from students for a period of 10-11 months, and the money is returned at the end of the term. Very few colleges change capital from year to year, as this entails volatility in changing leadership and difficulty in changing directors each year.

In many ways, these funds function similarly to a mutual fund (MF). They apply the basics of MF, such as setting rules for maximum exposure to one company or sector, creating sector-specific study groups, and periodically publishing the fund’s performance and net asset value, or NAV.

According to Sumyadeep Poddar, a member of the club, the IIM Indore fund, called Voyage Capital, has allocation rules according to the market capitalization of companies. “At least 60-65% of the entire portfolio is in large-cap stocks. We also capped the share of small caps at 15%,” he said.

To ensure that fund managers adhere to these restrictions, Voyage has a mandate that if a member breaks any rules that result in unsatisfactory performance, fund managers must bear the cost. “Members must return the investors’ capital from their own pockets. This only applies if the unsatisfactory performance is the result of a violation of the rules. If the backlog is due to market conditions, there is no such obligation,” Poddar said.

Even the selection process for a fund manager includes the same criteria as previous experience in a mutual fund as a stock researcher, financial experience, or a proven track record in trading one’s own money.

At IIM Lucknow, all of Credence Capital’s current eight investment fund managers have capital markets experience. “Student fund managers are selected through a rigorous screening process and come from a variety of financial backgrounds,” said Arav Sangai, a member of Credence Capital.

Saharsh Singhania, another member of Credence Capital, said: “I have worked for an international derivatives trading firm for over three years. The rest worked in investment banks, venture capital firms and capital research with a specialization in certain sectors.

When Sharma was locked in his home during Covid-19, he began investing by closely watching the work of his father, who owns a portfolio management firm (PMS). “He created my portfolio and let me manage it,” he said. These fund managers also take a “skin in the game” approach.

As for the choice of shares, sectors are distributed among the participants, and each of them offers shares. In some cases, such as at IIM Calcutta and IIM Bangalore, the final investment decision is made by the fund manager(s), who are usually final year students, but research and share offerings are also accepted from freshmen who are part of the club.

Student fund managers do not make money for themselves, and therefore there are no management fees. “The main goal is to generate interest in investing among group mates and give them a boost by delivering returns on their investments that outperform the index,” said Anuj Agarwal, Member and CIO of SIF XLRI.

Most of these foundations operate as separate organizations, registered either as an association of persons (AOP) or as a body of persons (EC). “We plan to register our fund as a BOI, which will have a separate PAN, and therefore we will take care of all aspects of regulation. As a separate entity, the foundation is not part of the college in terms of profit sharing,” said Ayush Singhi, an IIM Trichy student. IIM Trichy Financial Club is in the process of launching its investment fund. is not registered as a separate organization functioning as a trust fund, in which two or three demo accounts are opened in the names of different members of the club.

steps

For many of these young fund managers, this college investment fund management role is a stepping stone to a career in equity research, asset management, or wealth management. For example, XLRI’s Kumar managed to complete a summer internship at an investment banking firm. “My role at SIF helped me get this opportunity,” she said.