Portfolio Structure

The USIF seeks to outperform the S&P 500 Index while maintaining essentially the same risk profile of the Index. The Fund is managed as a set of 10 industry sector subportfolios with an overlay portfolio dedicated to risk management.

The 10 industry sector subportfolios collectively constitute two-thirds of the value of the Fund. The industry sectors are the same as used by S&P to decompose the Index into sectors. Ten groups of industry sector managers, each consisting of 2-3 students, manage these sector subportfolios. Within each sector, the student managers allocate their capital within a subuniverse consisting of the ten stocks with the greatest market capitalization in their sector. The total capital allocated to each sector is in proportion to the total capitalization of all stocks in that sector of the S&P 500 Index. The objective of the student sector managers is to choose stocks that will outperform the capitalization-weighted index of their 10 stock subuniverse.

The students will manage the remaining one-third of the USIF funds to minimize the tracking error of the overall portfolio with respect to the S&P 500 Index. This portion of the fund will be invested in various ETFs to offset any excess exposures to value, growth, size, and systematic market risks that result from the sector mangers’ investment decisions. 

This portfolio structure ensures that all student managers are responsible for significant value at risk, while minimizing the collective risk of the portfolio. 

Fund may only take long positions in the 100 S&P 500 stocks in its Universe. It may also take long positions in broad based ETFs to manage overall risk. The Fund will not establish short positions or hold positions in derivative contracts. 

Before executing any trade, each sector group must present and defend their investment decisions to the USIF investment committee, which consists of all student managers. Decision are implemented only with a 2/3 majority.