Students Achieve 50% Returns in Socially Responsible Investment Fund During Turbulent Times

Students Achieve 50% Returns in Socially Responsible Investment in Turbulent Times

Students at UC Berkeley’s Center for Responsible Business run a socially responsible investment fund. They explain why the fund is a powerful learning tool.
Chelsea Hicks-Webster May 1, 2017
The Haas School of Business houses a student-run socially responsible investment fund.  Several of the fund’s student principals – Alicia Chan, Chao Zhang, Emilie Deng, Michael Ciulis, Matt Therian and Paul Maa – describe the operation of the fund:

In 2007, $1.325M was donated to Haas’ Center for Responsible Business. The money was used to create the Haas Socially Responsible Investment Fund (HSRIF), which is managed by Haas MBA students. Students began investing with $1.14M in 2008. The fund's principal has steadily grown to approximately $1.7M, a return of almost 50 per cent over five years. “These returns were achieved during one of the most turbulent markets in modern history,” says Haas Professor Lloyd Kurtz, who serves on the HSRIF Advisory Board. “During the past four years, the S&P 500 reached a high of 1466 and a low of 667.”

Running the Fund

The fund is run by a team of six to 12 student managers. The students have full responsibility for investment decisions, including conducting their own research on companies’ environmental, social and governance (ESG) performance. All investment decisions start with a “quick pitch," where a student submits a one- to two-page investment proposal for review by their peers. If the quick pitch is well received, the student will then write a 10- to 20-page pitch, outlining the details of the investment recommendation. The long pitch is followed by a vote.

One of the challenges faced by the fund is a 50 per cent turnover of student managers each year, due to graduation. To maintain consistency in fund management, students begin recruiting their replacements in the fall semester. This allows successful applicants to work alongside the current principals for a full semester in the spring. The period of overlap ensures that values and management processes are passed from year to year, increasing consistency.

While the fund is fully student-run, students receive guidance from both a faculty advisor and an advisory board. The faculty advisor, Dr. Nadja Guenster, provides regular input on portfolio management, understanding portfolio performance and ESG investing. The Fund’s Advisory Board has 11 members, all professionals working in investment management. The students hold quarterly calls with the Advisory Board, for advice on issues including fund voting practices and advice on investing in particular companies.

Benefits of the Student-led SRI Fund

Christina Meinberg, Associate Director of the Center for Responsible Business, and the fund’s student managers share the positive outcomes of the fund:

Students can shape practice.

Through their work evaluating the social and environmental performance of firms, student managers are also presented with lobbying opportunities. For example, several years ago, students lobbied a large, global consulting firm to change its approach to political contributions. The result? The firm agreed to publicly post its policy on political spending, which specifically forbids use of corporate funds. It also agreed to join the Environmental Committee of the U.S. Chamber of Commerce so that it could better influence the views of the Chamber.

Students learn to work independently.

Student managers have full responsibility for managing the investment portfolio. This includes managing processes for research, pitching, voting, recruiting and managing relationships with the Advisory Board. This independence teaches skills that cannot be taught in a classroom, such as:

Networking leads to employment.

Student managers network with a range of professionals in the investment industry. The networking and skill development that comes from these relationships often leads to post-graduation employment. For example, HSRIF alumni now work for investment firms such as Prudential Capital, Osmium Partners, Cambridge Associates and other traditional Wall Street firms where they can raise awareness on social responsibility issues.

Tips for Creating a Successful, Student-led Investment Fund

Dr. Nadja Guenster, fund faculty advisor, and Christina Meinberg share their advice for ensuring student-led investment funds are successful:
Berkeley Haas extends special thanks Professor Kellie McElhaney, who launched the Fund with generous donations from Haas alumnus Charlie Michael (BS ‘78); his wife, Doris; Haas alumnus Al Johnson, (BS ‘62 and MBA ‘69); along with his wife, Marguerite; and Haas alumnus Larry Johnson (BS '72); and his wife Victoria.

More Information

Learn more about the Haas Socially Responsible Investment Fund or contact Nadja Guenster for more information.