BOISE STATE BUSINESS STUDENTS ACT LIKE ADVISERS– JUST FOR FUND: FORMER STEIN ROE CHIEF EXECUTIVE CONTRIBUTES COMPUTER, MORNINGSTAR DATA BASE AND $50,000

Boise, Idaho, is about as far away from Wall Street as it gets -geographically and otherwise.

Nevertheless, what is thought to be the first student-run investment fund dedicated exclusively to mutual funds has been launched there.

Business students at Boise State University, a commuter school in Idaho’s capital, have begun investing in mutual funds with $50,000 donated several months ago by Timothy A. Schlindwein. The former Stein Roe & Farnham chief executive started his own adviser business two years ago in Chicago after leaving the mutual fund company there.

He established the project to spur research into picking portfolios of funds, enabling students to replicate the investment duties of a typical financial planner.

Mr. Schlindwein, a Notre Dame alumnus, chose Boise State because six years ago he began lecturing there at the urging of a finance professor at the school who served on the board of a Stein Roe fund.

The project complements Boise State’s year-old student fund investing in individual stocks, bonds and other securities. The older fund, seeded with $50,000 from D.A. Davidson & Co., a brokerage in Great Falls, Mont., is more typical of these student-run efforts, which have mushroomed in the last decade.

Nationwide, the number of student investment funds running money donated by individuals or university endowments has grown to 60 from three in 1970, estimates Edward C. Lawrence, a banking and finance professor at the University of Missouri in St. Louis. But these funds tend to mirror the role of a money manager, who picks a mixture of stocks, bonds and other securities for institutional investors, fund shareholders or affluent individuals.

Not monopoly money

Mr. Lawrence says that to his knowledge, the student fund set up by Mr. Schlindwein is the first to focus only on mutual funds.

Mr. Schlindwein hopes to spur more academic research on mutual-fund investing and the tasks that precede the actual investment decision.

To that end, before they can invest any of the money,
the student investors must pick an imaginary client, determine his or her goals and risk parameters, and devise an appropriate asset allocation. For this year, that client will be Boise State’s $46 million endowment fund.

Along with the $50,000 –already invested in a portfolio comprising primarily stock funds- Mr. Schlindwein has provided the student fund with a computer and Morningstar Inc.’s Principia data base of mutual-fund performance and analysis. He also is handling the trading through his account with Charles Schwab & Co.

In addition, he’s agreed to bring the total back up to $50,000 if the student investors stumble in the next two years.

That happens rarely with student investment funds, according to Mr. Lawrence. His research, which dates back to the late 1960s, found that most of the funds make money- some outperforming the university endowment – and none has suffered a meltdown.

Betting on bonds

At Boise State, the seven hand-picked business students running the mutual-fund portfolio made their first trades late last month, moving half of the $10,000 in the Third Avenue Value Fund into two junk bond funds.

Foreseeing a near-term end to the long-running bull market, the students expect to move more of the portfolio into bond funds, says Dwayne Barney, the finance professor advising them.

“It’s nice they’re getting a little taste of the real world because the last three years the biggest moron in the world could make money in this market,” Mr. Barney says.

Bill Ruud, who recently switched from being dean of the business school to running the endowment fund, says investment decisions with simulated funds just don’t compare to the experience of running real money.

“The kids’ eyes,” he says, “get as big as saucers.”