College alumni may soon be plumbed as yet another new distribution channel for mutual funds.

Officials at Florida A&M University of Tallahassee, Fla., who have formed a non-profit investment adviser, are working on plans to offer two mutual funds. In addition to providing institutional investors with low-cost products, university officials plan to have undergraduate and graduate students work on the funds as part of their education.

Unlike at some schools where there are investment clubs or mock funds, Florida A&M's School of Business and Industry will run its program as a business. The New York law firm of Wachtell, Lipton, Rosen & Katz is providing advice for the project and an investment professional, Darrell R. Williams, formerly a vice president at Precision Asset Management, has been hired to oversee it.

"If you knew this program, it is not traditional," said Sybil C. Mobley, dean of Florida A&M's business school. "We do a lot of oddball things."

Florida A&M's business school has started and runs several businesses for students as part of its program, Mobley said. While it may not be unusual for educational institutions to run businesses in other industries, it is unheard of in the mutual fund industry. Although there are no centralized records for such phenomena, there appears to be no instance of a university starting an investment advisory firm and organizing a mutual fund.

"There really is no precedent," said Laura Lallos, an analyst at Morningstar, the fund tracking firm in Chicago.

The Vanguard Group, with ownership ultimately vested in its shareholders, and the not-for-profit adviser to the TIAA-CREF Mutual Funds are examples of fund advisory firms with nontraditional ownership structures. But those are the rare exceptions to the rule. Lallos said that religious and fraternal organizations which sponsor funds typically are enterprises designed to make a profit. Furthermore, while colleges and universities use a variety of means such as investment clubs to train students on securities analysis, there appears to be no instance of a mutual fund investment adviser founded by a university, Lallos said.

But that is what is happening at the SBI Fund. The fund's investment adviser, SBI Capital Management and Research Corp., was established by Florida A&M's business school. According to SEC filings, undergraduates will do mostly clerical work. Graduate students will do research. All students will work without pay and will be supervised by professionals.

In addition to providing service and investment returns to shareholders, the SBI fund is designed to link "the students' finance and investment education with real world' investment applications," according to one of the fund's SEC filings.

SBI recently withdrew plans for the funds with regulators, a move Mobley described as forced by a regulatory deadline which the funds were not able to meet. The school intends to proceed with its plans shortly, she said. "We never give up," she added.

While the structure may be unusual, the funds themselves look like routine offerings, according to draft prospectuses. SBI is planning to offer an index fund and a growth fund, according to past regulatory filings. Both would have low expenses -- 0.10 percent for the index fund and 0.50 percent for the growth fund. With a $250,000 minimum initial investment, the funds are targeted at institutional investors.

Lallos said the role of students should not necessarily hurt performance, and lower costs resulting from the adviser's non-profit status should help. Also, the funds may be able to mine alumni as a lucrative channel for attracting assets.

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