Student-managed investment portfolios are becoming more common at universities in this country and around the world. They provide a great way for students to get practical experience in investment management before they come knocking on your door looking for a job.

The University of Wisconsin has one of the biggest student-run fund programs – students now manage more than $50 million in equity and fixed-income assets.  Another large example: Students at the University of Minnesota manage more than $35 million through the school’s Carlson Funds Enterprise.

But only a handful of schools have students managing money in socially responsible funds. Adrian M. Cowan, a former associate professor at St. Mary’s University in San Antonio, Texas, noted in a paper that she was able to identify only four schools – St. Mary’s, Villanova University, Franklin and Marshall College, and University of California at Berkeley -- that had portfolios managed in a socially responsible way by students.

I wanted to learn more about student-managed SRI funds, so I recently spoke with Dr. David Nawrocki, a Villanova finance professor who oversees the school’s SRI program, and Tyler O’Connor, a student who leads its student-managed funds program.

The Catholic university now has five funds, four of which are managed based on SRI principles. Four donors provided the money for the five funds, and each fund started with about $100,000. The first was an SRI fund, started in March 2004, and the fifth fund was launched in 2007. The Villanova funds now have a total of about $600,000 in assets, and about 180 graduate and undergraduate students are involved in managing them, Nawrocki said.

“It would be nice if all the funds were SRI, but we have an ETF fund that looks at ETFs all over the world, and that’s very difficult to do SRI on,” Nawrocki says about The Coleman Fund, a 50-50 blend of domestic and international, long only, exchange-traded funds. The socially responsible funds include two that invest in large-cap equities, the Haley Large-Cap Fund and the Whipkey Large-Cap Fund; one that invests in mid-cap equities, the Haley Mid-Cap Fund; and one split 50/50 between mid- and large caps, the Arnone-Lerer Fund.

The Arnone-Lerer Fund is the school’s flagship fund, and it’s up 74 percent since its inception in 2004. Since then, it has earned 7 percent a year, while the S&P 500 index earned about 6.1 percent, Nawrocki says.

The students develop their screens based on guidelines for socially responsible investing outlined in the statement of the Catholic Bishop of the Archdiocese of the United States. That typically means avoiding companies involved with abortion, nuclear weapons and other activities that would be against Catholic teachings. The school uses socially responsible rankings of companies done by IW Financial.

Nawrocki notes the students primarily use top-down screening to rotate sectors: They consider the five phases of the business cycle, nonfarm payrolls, the consumer price index and other big-picture economic variables. But they also will evaluate sectors and individual stocks based on what they read in newspapers and magazines and on the Internet.

“One example was in 2006 -- we pulled out of financials because we saw a number of articles on structured products using 100 percent subprime and other large credit-card companies were doing predatory lending with their credit cards. The problem at the time was there were no SR ratings on the financials, and since then that’s been added,” Nawrocki said.  Their 2006 decision is the main reason that the funds have stayed ahead of the S&P 500 index, he added.  The funds got back into the financials in 2011.

Although Nawrocki provides advice and review, students formulate investment strategies autonomously for the funds and learn a lot that they can’t really pick up in class, says O’Connor, who is chief investment officer of Villanova’s Haley Mid-Cap Fund.

 “A lot of the people who go through the program ultimately end up going into private banking or wealth management or investment management,” adds O’Connor, a senior, who has been offered a full-time job when he graduates at the private bank where he interned last summer. While on the internship, he says, he did work with some clients interested in SRI.

“It’s definitely a field that has been growing rapidly over the years,” he noted about SRI. “Obviously, it’s not on every client’s radar, but there are people out there interested in it.”