Learn the art and science of stock picking with Victoria’s pre-eminent student managed fund where your recommendations influence portfolio construction.
Join us in a conversation with Lochie Noonan, Chief Investment Officer (CIO), and Matthew Wang, Co-President of the Monash Student Managed Fund (MSMF), as we unravel the exciting possibilities this opportunity offers to students.
Hugh: Hi Lochie and Matt, thanks for joining us today. We are excited to hear about the Monash Student Managed Fund. Could you please share with us how the idea of the MSMF came about. What inspired you?
Lochie: MSMF was founded with the goal to provide practical investing opportunities to students in finance. We realised that there weren’t any student managed funds at Monash and even in Victoria so that was the initial catalyst to start MSMF. There are lots of interstate and even global student managed funds that have seen great success and so the team figured it was time for Monash and Victoria to bring these opportunities for students.
Nga: What are your longer term plans for the MSMF?
Lochie: The main goal is for the MSMF to manage real capital in the near future. At the moment, we’re working towards a capital raising with Monash and hopefully, by the end of the next year, we’re able to invest real money. Once profitable, we’d like to use those proceeds to fund scholarships that encourage female participation in the finance industry. We’ve realized that females are underrepresented in our fund, and we’d like to see that improve.
Matt: Our overarching primary goal is to build the predominant investing club at Monash that provides a platform for students, irrespective of their backgrounds, to develop practical investing skills that will help in breaking into the finance industry. We’re going to continue growing our user base and we would also like our fund to have some recognition on a national level. We’ve already spoken to a couple of people within industry recognising what we do, but it’d be wonderful for the MSMF to be recognised as a value-add brand.
Hugh: What draws students to the MSMF?
Lochie: What draws students to the MSMF is the practical nature of our program that allows students to implement what they’ve learnt in the classroom to real time trades in Australian and global equities. We’re also really proud of our industry engagement where we now have eight mentors that support the investment analysts. Having that industry engagement allows you to learn a lot about what the investment process looks like.
We are also proud of our retention rates with students. In the past three semesters, we’ve averaged about 80% retention of students which indicates a willingness to stick with the program and speaks to the quality of what the MSMF provides.
Hugh: What can students learn/benefit from joining the MSMF?
Lochie: There’s lots of unique opportunities and career growth with the MSMF as we offer very clear and distinct roles for students that allow them to focus on specific skill sets. This gives students a clear pathway, whether you want to try an Investment Analyst role and focus on analysing securities or if you want to learn more about how portfolios are managed and constructed, there’s also a role for that too. There are also pitch nights where analyst team gets to pitch their stocks to the investment committee.
Nga: Tell us how you structure the MSMF to emulate a real investment fund.
Lochie: There are a few different teams which have their own distinct roles, responsibilities and tasks described below:
1. Starting with the CIO, this role is to manage the various divisions and ensure that teams are communicating together.
2. The Equity Research Team is the predominant program which most students initially join. Teams are assigned sectors to cover, generating and pitching stock ideas.
3. The Portfolio Division Team is in charge of portfolio management, economics and risk, and ESG initiatives.
4. We are currently building out the Trading Division Team which will be focused on the execution of trades.
5. A separate Legal Risk and Compliance team that’s independent of the CIO. Their role is to ensure that any risk is mitigated and the portfolio does not “blow up.”
We’ve also spent a large amount of time this year developing document processes to record every action we do from buying/selling a stock, rebalancing, etc. The investment policy statement is also developed to identify and ensure the MSMF adheres to the investment objective.
MSMF is also developing plans to expand the investment committee, which will commence next year. It would consist of a large number of alumni to add an additional layer of governance and provide overall advice for the portfolio from a top-down perspective.
Hugh: Could you give us some characteristics of what stocks make it into the portfolio? Number of stocks, size, style?
Lochie: We have a preference for large blue cap stocks that have four quarters of positive free cash flow. This is primarily because we think it’s better for getting those distribution amounts to meet our investment objective. This allows us to avoid selling stocks to generate income which wouldn’t be tax-efficient. Names have to have a minimum market cap of $2b and we do not invest in any Chinese ADRs (American Depository Receipts).
Nga: How do you ensure continuity of leadership and operations across different generations of students?
Matt: There are five members in charge of the portfolio division team who work closely with each other and meet two to three times a week to make decisions. We’ve finalised our senior leadership recruitment for next year’s team where we’ve selected the incoming CIO. When selecting who would be suitable for the role, we firstly looked at whether they would be interested in the role, and whether they have the capabilities and skills to carry out the role. They have been working with Lochie (the current CIO) since January, going to all strategy meetings and meeting with key stakeholders, and so continuity of the MSMF leadership/investment process has been addressed for when Lochie leaves.
Hugh: Thank you Lochie and Matt for joining us today. We wish you and the MSMF all the best with your capital raising.
This interview was conducted by Hugh Lam (Investment Analyst | Lonsec) and Nga Pham (Senior Research Fellow | Monash Centre for Financial Studies).
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