The University of Richmond ETF Fund began in 2014. It originated from the extension of a long-standing experiential learning format prominent around many universities, in which students construct and manage a portfolio of stocks. However, the ETF Fund is unusual because, unlike the typical student-managed investment fund, it is composed entirely of exchanged traded funds (ETFs).
Unlike the common emphasis on "stock picking," the pedagogical focus on the ETF Fund is on developing a broad investment theme based on national and international macroeconomic factors. This analysis then guides the selection of ETFs to represent geographic regions and industrial sectors that are expected to "outperform" the global market over a one-year time horizon. The ETF Fund’s orientation around ETFs is forward-looking model, consistent with the phenomenal growth of ETFs over the last 25 years, whose market has increased to become one of the more prominent investment methods moving forward.
In its first two years of inception, the ETF Fund was an exercise conducted with only "virtual money". Eight economics students participated in the original group and guided by academic supervisors Professor Robert Dolan and Professors Jerry Stevens the students created and built the structure that the ETF Fund is currently operating under. Unlike, the SMIF Fund, which is a traditional stock-picking fund and has existed in the university for over 25 years, the ETF Fund is focused on giving economics students the ability to use their unique skill set and practice investment methods that are more in line with their educational foundation.
With the support of University of Richmond’s Robins School of Business, the fund received its first investor, the University of Richmond Endowment, with a commitment of $25,000 in January of 2017. The first group positioned their holding across 24 ETFs. In March of 2018, the ETF Fund sent students to represent the university for the first time in the annual G.A.M.E conference in New York City sponsored by Quinnipiac University. The ETF Fund was also entered into a competition with other student funds from across the nation and won first place in the “Growth Portfolio” competition.
Although rate of return is the key practical measure of success, the value of ETF Fund to the University lies in its experiential learning virtues. Students present weekly to the advising professor, and have presented annually to an advisory board of investment professionals to explain the rationale for the composition of the most recent portfolio. Beyond portfolio construction, the ETF Fund has also provided an environment in which students have conducted quantitative analysis that incorporates arbitrage pricing theory and efficient frontier analysis. A co-authored student-faculty paper based entirely on the ETF Fund activity was published in the Journal of Trading in January of 2018.
The ETF Fund has continued to evolve over the years, improving both its level of analysis and portfolio review, and each year adding more aspects to the fund portfolio construction. It has also put a strong emphasis on selecting the most successful students, and improving diversity and representation of all student groups on campus. Students have overwhelmingly enjoyed the fund and are proud to continue to represent its long history of successful academic, economic, and financial success.