The SMIF has an overriding educational objective, which is to enable University of Stirling students to gain a better understanding of stock valuation and portfolio management, and thus enhance employability. More specifically, the SMIF aims to:
Enable students to gain valuable practical experience of the process of stock valuation and portfolio construction and management.
Provide students with the opportunity to pitch investment ideas to professional investment analysts and portfolio managers during Stock Pitch events each semester.
Provide students with the opportunity to use the Bloomberg, Thomson Reuters DataStream and S&P Capital IQ databases in the dedicated SMIF Resource Room.
Provide students with the opportunity to develop leadership skills through participation in the SMIF Student Committee.
Provide students with the opportunity to enhance their skills in running meetings using the boardroom in the dedicated SMIF Resource Room.
Statement of Investment Principles
Decisions will be guided by the following Investment Principles.
The overall investment philosophy is long-term “buy and hold”.
Fundamental analysis will be used to determine whether a given stock is included in the SMIF portfolio.
The SMIF seeks to generate a positive real return from its investments, where return is equal to capital gains plus dividends.
The principles of modern portfolio theory will be used to achieve an efficiently diversified portfolio.
A proportion of any surplus funds will be reinvested in the fund or used to support charitable causes, as decided by the SMIF Student Committee.
The SMIF invests only in the stocks of listed firms or Exchange Traded Funds (ETFs).
Stocks and ETFs may be sourced from any of the major stock exchanges worldwide.
Transactions involving short positions or products traded on derivatives exchanges are prohibited, as are ETFs that use products traded on derivatives exchanges.
The SMIF aims to maximise total returns from a diversified portfolio of up to 30 equity securities or ETFs.
The distribution of sector weights in the portfolio will take into account correlations between sectors and the principles of portfolio diversification.
ETF Investments will be reduced as the number of stocks in the portfolio increases.
Securities will normally be traded only twice a year, following the Stock Pitch events.
Although the SMIF does not place stop-losses, securities may be sold if there are extenuating circumstances, for example when the risk/return profile of a particular company changes dramatically.
The performance of the fund will be benchmarked against the FTSE Developed Index.
Students who join the SMIF will become SMIF
Analysts and may engage in the following activities:
Join a Sector Team. Analysts review industry sectors and join their preferred Sector Team or work independently if they prefer.
Research the Industry. The search for suitable stocks begins. Top-down, research is carried out to identify industry trends. Analysts are encouraged to take a long-term view when looking for suitable companies
In-depth research and stock selection. Basic screening criteria are used to determine stocks that are potential investments. Once these stocks are selected a more in-depth financial analysis takes place. The single stock which ranks the highest is selected.
Stock Pitch. The selected stocks are pitched SMIF Analysts at the Stock Pitch Event held towards the end of the semester and/or the year. SMIF members and the audience vote on the suitability of the stocks pitched, as do an Advisory Panel made up of University of Stirling alumni and academic staff.
The SMIF Student Committee makes the investment decisions. The SMIF Student Committee then meets and makes decisions about the stocks to incorporate into the SMIF portfolio, as well as their respective weightings. The committee may choose to disregard the voting recommendations of the Advisory Panel.
Oversight Committee approval. The recommended stocks are then passed on to an Oversight Committee for approval and are then signed off. If the Oversight Committee queries a judgement of the SMIF Student Committee, more detail will be required to explain why a particular stock is deemed to be suitable for the SMIF
Monitor and Review the SMIF portfolio. A record of the justification for each decision is kept. Future SMIF members will have the responsibility to monitor the selected stocks to discover if the investment theses play out as expected and review the composition of the SMIF portfolio. Stocks which were rejected or put on a Watch List are also monitored, as they may be incorporated into the SMIF portfolio in the future.
Stock market investments have a high level of uncertainty and
complexity, making it important to consider the following main risks:
Market risk (systematic risk)
is the potential for an entire stock market to decline due to events relating
to the economy or politics. As it affects a whole market, this type of risk
cannot be diversified away, and hence it is an important risk to consider. The
extent to which a stock moves in line with the market as a whole, and thus
possesses market risk, is reflected in its beta coefficient.
is the risk that a specific stock may change in value independent of the stock
market’s direction as a whole. It is possible to minimise this risk through
diversification, illustrating the thought process behind the SMIF’s decision to
organise the analysis of stocks using Sector Teams, thus ensuring the selection
of stocks from different industries each semester. This process ensures a level
of diversification to minimise unsystematic risk.
Currency exchange risks are
those that arise from fluctuations of foreign currency exchange values relative
to the Pound Sterling, the currency in which the SMIF portfolio is denominated.
These risks are particularly important given the international character of the
is based on uncertainty about the future market values of commodities (e.g.
corn, copper, crude oil). It is necessary to consider this risk when evaluating
investments as variations in commodity prices have repercussion for equities.
For example, Donald Trump’s imposition of tariffs on steel and aluminium is an
example of an increase in commodity risk.
Market capitalisation risk
must be considered when analysing equity markets. The lower the size, or market
cap, of a company, the higher is the volatility of its stock returns. As a
result of their greater risk, small-cap stocks require more careful evaluation
than large-cap and mid-cap stocks.
Liquidity risk refers to the possibility that it may not be possible to buy or sell a stock as and when desired or in sufficient quantity. This risk is greater for small-cap stocks.
Theme developed by the University of Stirling Digital Team