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Posted at 5:38 p.m. PST Friday, January 28, 2000

Schools encourage student investors

AP Business Writer

CHICAGO (AP) -- Would you trust a bunch of college kids with $220,000?

Northern Illinois University does.

The school is turning over responsibility for that amount to the students of Finance 445 on Tuesday -- with just a few caveats to guard against any temptations to sink the whole bundle into a high-tech startup or their fathers' firms.

Similar programs are run elsewhere by as many as 70 schools, with some success. Still, the high stakes attached to this real-world educational experience are enough to give the teacher a mild case of pre-investment jitters.

``It makes me a little nervous to give them the responsibility,'' concedes Jeff Mercer, chairman of NIU's Finance Department. ``But these are very sharp people -- they are conservative; they are going to take a value-investing approach.''

Or so he hopes.

The class is part of a new program at the university that allows students to manage the investment of a $20,000 gift from the Treasury Management Association of Chicago along with $200,000 in NIU Foundation assets.

Mercer selected eight top students to participate. Like the professional fund managers who handle money for the foundation, they must report quarterly to the NIU Foundation's finance committee and answer to an oversight committee.

All are males, around age 21 -- not exactly your archetypical conservative-style investor. They could be forgiven for dreams of unearthing the next Sun Microsystems or Dell Computer, which racked up multithousand-percent stock gains in the 1990s.

But knowing that what may look like ``tomorrow's Dell'' could turn out to be investors' hell, the NIU Foundation set some ground rules that include investing no more than 25 percent in any sector. And Mercer has veto power over the students' choices.

That's fine with David Hass, the only junior in the otherwise all-senior class. Sounding like the investment analyst he aspires to be, he spoke confidently Thursday of plans for a diversified, value-oriented portfolio that should produce ``some nice gains.''

``We're going to invest slightly in technology, but we're not going to overlook the value companies that are the steady earnings growers,'' said Hass, 21.

Other universities have found the students do surprisingly well, sometimes outperforming professional managers, while drawing positive publicity -- and sometimes extra donations.

Among other universities with student-run investing programs are the University of Chicago, DePaul University, Illinois State University, Indiana University, Notre Dame and the University of Wisconsin.

NIU Foundation president Mallory Simpson says the idea is primarily to provide a learning opportunity that goes beyond ``play money'' simulations.

``We're not viewing this as 'Can these students beat our professional money managers,''' she said. ``It's an educational experience.''

And if the students bomb, the foundation can reconsider its plan to turn it over to a new class every year.

Hass said the experience will be great.

``If your idea is invested ... you're going to be proud of that,'' he said. ``It's going to be fun to pick and choose and go through the market for the stocks you think will do well.''

(PROFILE (CO:Sun Microsystems Inc; TS:SUNW; IG:CPR;) (CO:Dell Computer; TS:DELL; IG:CPR;) )

Copyright © 1999 Associated Press. All rights reserved.


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