It's become very clear over the last two years that economists, investment experts and academics can't always predict the behaviour of financial markets - so imagine being a student and trying to get a handle on the best money-handling moves.
Witness the recession we've been crawling out of in recent months. The economic fall was swift and sudden, throwing the financial services industry and investors into damage-control mode.
MBA schools have long been preparing students for such problems in the business world, with many still cutting their money-managing teeth on virtual portfolios and imaginary situations.
But many universities - including McGill and Concordia in Montreal, McMaster in Hamilton and Simon Fraser in Vancouver - also offer programs that get students thinking about, preparing for and acting on real-world financial and investment issues.
At McGill's Desautels Faculty of Management, one of the few schools in North America with a working investment fund that attracts clients outside the university, there are six MBA students as well as 10 senior and 10 junior Bachelor of Commerce students in the Investment Management Program (IMP).
They get involved in every aspect of handling clients' investments in two funds: one equity and one fixed-income, with each holding about $1-million. The clients are high-net-worth ones, mostly alumni but also financial institutions, in Quebec and Ontario.
"Real clients, real compliance, a real firm, real funds, real investment process - everything the students do is what is done in the real world," says Alex King, the faculty's development director, who as head of investor relations also recruits clients.
Students, who took academic courses in the fall term and started the investing program in January, take on different roles in the fund company - including as analysts, asset strategists, macro managers and risk managers. They collaborate in daily meetings, go through the investment process and pitch their suggestions to the chief investment officer, Ken Lester, a discretionary money manager and CEO of Lester Asset Management, who handles the stock and bond trades recommended by the student analysts.
The IMP program was conceived in 2006, and it took some time to get all the legalities and regulatory requirements in place to get it off the ground the beginning of this year, says Mr. Lester, who believes in letting students take charge, including calling in the trades themselves.
The economic turmoil of the last couple of years is having its impact on student investment handlers, who learn how to ride the wave, and when to exercise caution, he says.
"As money in Desautels has been coming in, students have been hesitant to invest it … there is a bit of nervousness and justifiably so … I tell them that's a perfectly reasonable position to take right now. If my students wanted to invest more eagerly, I would agree on that too - but they have to justify everything."
Many students say working with real portfolios gives them a distinct advantage with prospective employers.
John Tarraf, 28, was born in Beirut, Lebanon, came to Canada as a teenager, earned his B.Comm degree and worked four years at RBC in Montreal before entering the Desautels program in September.
"The program gives me, as an MBA student, the opportunity and chance to take part in a professional investment management firm that provides real services to real clients and manages real money, and reflects the prophecies in investment management firms outside university," says Mr. Tarraf, who handles equities work in the endowment fund.
Michal Marszal, 27, who moved to Canada from Poland, is a 2008 McGill medical school graduate who wants a career at a health-care investment firm.
Also working on the equities side of Desautels, he keeps his eye on investment opportunities in the biotechnology and medical devices industries.
Although the pharmaceutical industry is facing challenges, "health care as a whole is expected to grow due to demographics, an increase in the incidence of certain conditions, with many pharmaceutical companies engaging in different strategies," he says. He adds that deciding what companies to invest in entails a multi-pronged assessment taking into account outcomes of clinical trials, regulatory issues, and companies' research and development budgets.
At Simon Fraser University, the 55 students in the one-year Master of Financial Risk Management program were chosen from about 300 applicants, says Anton Theunissen, academic director of graduate finance programs and an adjunct professor of finance at the university's Segal Graduate School of Business.
Risk management skills tend to be associated with actuarial work, and as recently as five years ago, "it was considered a back-office activity," says Dr. Theunissen, who also teaches credit risk management, and fixed income and financial modelling.
"It wasn't a glamour business. But that has changed. Going forward, we want to be a step ahead of changes in market sentiment … there is now a clear market appetite for financial risk management."
Dr. Theunissen says students have the opportunity to manage a piece of the university's endowment fund, valued at about $10-million.
"It's a sort of shock therapy and we think it pays very handsome dividends," he says.
"We don't put the students through some training program and say, 'This is how you manage the fund.' We throw them into the deep end. We say, 'Here's $10-million in the university endowment and it's yours.' The objective is for them to learn by doing, by calling a broker, and not just read in a textbook about how one executes a futures trade."
Gaining hands-on experience is one of the main reasons Sanja Simic left her job as a senior accountant at a school in California to enroll in Simon Fraser's risk management program.
Ms. Simic, 24, says her endowment fund responsibilities largely involve evaluating the performance of the portfolio, and she hopes to carry that work over into one of Canada's top banks after she graduates later this year.
Although she escaped the pressures of working on the endowment fund in the depths of the recession a year and a half ago, today's economic challenges are also keeping students on their toes, Ms. Simic says.
"What we are facing right now is more of a currency risk in our portfolio and that is something we are looking at different models, to … hedge that risk. We have a global portfolio, we invest in the U.S. and Europe, and emerging markets [Asia-Pacific] and right now the euro is weakening, so we have to think about, how is that going to affect our portfolio?"
Asked if the real-portfolio pressure ever gets to her, Ms. Simic says: "It's a big responsibility for us, but it's a great experience. … We get to deal with brokers, custodians, and manage the fund actively on a daily basis."
"Every quarter we have a performance review where different industry members, wealth management groups and banks grill us and ask us questions about why we pursue a certain strategy. That's also a great experience in helping us build our soft [presenting]skills."
Special to The Globe and Mail
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