The University of North Carolina at Chapel Hill’s Kenan-Flagler Business School has established what is believed to be the first investment fund in real estate through its Center for Real Estate Development, as well as a private equity fund through its Center for Entrepreneurial Studies. Both funds are run exclusively by business students.
The real estate investment fund has raised $1.6 million to date to invest in real estate development projects. The private equity fund has raised $1 million to date and recently made its first investment in TransEnterix Inc., a medical device startup company in the Research Triangle that recently closed $20 million in financing. Each fund has a goal of raising $3 million and will remain open for additional investment until May 2008.
What makes these funds unique is not only the risk/reward taken by the limited partners, but that all investments made by the student fund managers “piggy-back” on existing deals that have major sources of capital and are made available by seasoned fund managers for Kenan-Flagler students to invest, said Steve Jones, Kenan-Flagler dean. Expected returns and structure are similar to major private funds.
“Students are using funds from real investors to make real investments resulting in real gains and losses,” Jones said. “Gains and losses go to the limited partners of the funds as they would in any traditional fund investment. These student-run funds are not just educational exercises with money provided by donors or endowment funds.”
As fund managers, Kenan-Flagler students are identifying and evaluating investment opportunities and making investment decisions. Once the fund’s board approves the investment, students are responsible for monitoring the progress of the investments and reporting to investors. In the process, they also are establishing professional relationships with investment managers, and gaining insights into the operation and management of private investment funds and their portfolio companies.
Guiding the students are a board of directors and a faculty advisory board. Kenan-Flagler professors, many with entrepreneurial track records, working with the students include Clay Hamner, Frank Hawkins Kenan Professor of Entrepreneurship and Center for Entrepreneurial Studies director; David Hartzell, Steven D. Bell and Leonard W. Wood Distinguished Professor in Real Estate and Center for Real Estate Development (CRED) director; Randy Myer, entrepreneurial professor of the practice; and Stephen Cumbie, CRED executive director.
The student managers will groom their successors. Beginning this month they will choose the next team of student managers with the guidance of faculty advisers. First-year MBA students and undergraduate business students will assist with the fund and take over management responsibility in the fall.
Private equity fund contact: Randy Myer, (919) 843-6124 or randy_myer@unc.edu
Real estate fund contact: Dave Hartzell, (919) 962-3160 or dave_hartzell@unc.edu
Kenan-Flagler contact: Allison Adams, (919) 962-7235 or aadams@unc.edu
News Services contact: Susan Houston, (919) 962-8415 or susan_houston@unc.edu