IU real estate students launch $4.2M private equity firm

A new private equity fund at the Indiana University Kelley School of Business could go a long way in helping the college’s real estate students get real world investment experience.

The $4.2 million fund, called Sample Gates Management LLC, has more than three dozen individual investors—including Kelley school alumni—and real estate and financial firms, all of whom students pitched during events last year in Indianapolis and Chicago. It is the largest raise for an undergraduate, student-managed private equity real estate fund in the United States, according to Indiana University officials.

All of the money in the fund came from investments rather than donations, meaning those involved expect a return on their contributions.

The students will look for opportunities to invest from $300,000 to $500,000 at a time, typically as a small portion of a larger investment pool. It will focus on multi-family properties with the potential for rent growth. All prospective investments will be vetted by a committee consisting of alumni and fund investors.

“This is very much the full experience for our students. And probably one of the greatest benefits of our program, besides the training, is that it involves our alumni in the deepest, most meaningful way,” said Doug McCoy, the Al and Shary Oak director of real estate, who oversees the school’s real estate department. “They’re investing real dollars, they’re seeking a return and they expect it all to go well and get the return on their capital.”

The new program will give students an opportunity to manage Sample Gates year-round, including raising capital and making investments in consultation with the advisory committee.

The initial target is for an 8% return on those investments. Sample Gates is expected to invest in properties across the country. While most of the investments are likely to be of a smaller scale, involvement in larger projects could be on the table, McCoy said, including for some properties in downtown Indianapolis.

He said the smaller size of the expected investments in properties might have typically kept some individuals and firms from contributing to the fund, McCoy said. But they joined because of the impact it could have on students.

“There’s a heart for this,” he said. “These folks—a lot of them are IU grads and Kelley grads. It’s really a great fit for us to get into larger transactions as a small part of the equity, and we do foresee that.”

Interest in real estate is growing among undergraduates in the IU system. In fall 2022, 380 students majored in the field at Bloomington, including 115 that had it as their only area of study. More than 70 students in Indianapolis are co-majoring in real estate. And 500 students are part of the real estate club at IU Bloomington, up from 250 members one year ago. 

The fund was established last year, following a three-year process that began with Patrick Engels, who graduated from IU in 2021 and now works as an analyst at Evercore, a New York-based investment management firm.

Engles worked with Tom Peck, chief investment officer at Fishers firm The Hageman Group, as well as Proporium Capital Partners founder and partner J. Timothy Morris, an alumnus, to win support from the university’s administration. Peck is the faculty advisor for the school’s real estate club and the new equity fund.

Will Huber, a senior at IU Bloomington, is student president of the program. He said there’s “a lot of excitement” surrounding the program, largely because of the opportunities students will have to immerse themselves in the real estate world before they even graduate.

“I don’t think [students] are used to having to be available around the clock, … whether it’s investors with questions or deals being sent to us, or short timelines in terms of closings,” he said. “It’s real life, and you can never really sign off. We have a fiduciary duty to protect these investments and train the next class of students coming in, which is a huge part of our business. That’s what is so special about this experience.”

McCoy agreed, adding there’s not much of a difference between what IU students will be doing and what happens at larger firms.

“The only difference between us and a private equity fund with pension money is the private equity fund will be writing bigger checks than our checks,” he said. “Otherwise, we’re doing the same kind of work and there’s the same experience involved in those transactions.”