By Kieran Falconer
A STUDENT grant of $100,000 (£55,000) is a bit above the average, but next month 15 students at the Institute of Capital Market Research in Vienna will each receive this amount — and get the chance to see what they can make with it on the markets.
Since October the 15 — undergraduates finishing their first degrees, or PhD students, at the University of Vienna — have used portfolio software, statistical analysis and information sources, such as Reuters and Bloomberg, to gain a grounding in the markets.
Next month they will receive an initial $1 million, plus the chance for a further $500,000, as part of research into innovative methods of portfolio management. The funds will come from Peter Pühringer, an Austrian multimillionaire and founder of the institute, who likes to dabble in financial markets.
His interest in investments and in the historic Vienna School of Economics is clear from a display in the lobby of his Vienna hotel, the Palais Coburg, in which the institute is based. He bought the hotel when it was in a dilapidated state and has spent about £66 million restoring it to its former glory. There seems little sign of him getting a return on his hotel investment; his staff joke that the hotel has become his favourite hobby.
Yet his student grants are another matter. The students are dividing their portfolio research into low, medium and “turbo” risk funds, the latter supervised by Dr Pühringer himself. Their efforts will be monitored by Josef Zechner and Engelbert Dockner from the University of Vienna.
Weekly meetings will track performance and monthly lectures on topics such as hedge funds or taxation law will fill in any gaps. Professor Zechner said: “We did the same thing when we were at the University of British Columbia. We had Goldman Sachs, Lehman Brothers and the rest flying in from New York to hire the students. Of course, we weren’t using the same sort of money – it was funny money.”
Even though the project has not been advertised, the institute has already had representatives of Deutsche Bank and BMW subsidiaries showing interest in what they are doing.
And such is the confidence of the students, they expect returns of at least 6 per cent for the low-risk funds, 8 per cent for the medium-risk, and 12 per cent for the turbo-risk.
Sadly, there is no such thing as a free lunch. The students will not keep any profits themselves. Instead, all funds will be invested in the institute. Professor Zechner said: “We can’t let them share the losses because there might be one hell of a student debt.”
Source: Times Online