Managing a million
Student investment club reports on UD endowment earnings
11:58 a.m., March 22, 2012--While endowments at many institutions of higher education are closely managed by the administration, the University of Delaware’s commitment to discovery learning opens this aspect of fiscal operations to the student experience, evidenced by a report from the Blue Hen Investment Club (BHIC) to the Investment Committee of the University's Board of Trustees earlier this month.
The BHIC, which represents any UD student willing to make the commitment to manage a real portion of the University’s endowment fund, is a student-run organization within the Alfred Lerner College of Business and Economics.
National training ground
Currently, the group controls $1.2 million of the University’s endowment.
John White, student president of the BHIC, along with vice president Eric Floyd and secretary Ryan McNamara, reported to the Investment Committee that the group had a return of -1.09 percent in 2011, outperforming the Nasdaq and NYSE Composite Indexes but lagging the Dow Jones 30 and S&P 500 indexes.
In particular, three of the stocks selected by the students returned over 30 percent in 2011, including Centene (up 56 percent), Whole Foods (up 38 percent) and McDonalds (up 31 percent).
“Despite the slight underperformance – on a risk adjusted basis – of the club’s holdings in comparison to the S&P 500, all of the members have been working hard to identify undervalued companies,” said White in his annual letter to the committee.
Rich Jakotowicz, faculty adviser to the BHIC and director of the Exelon Trading Center, said the group puts quite a bit of energy and effort into its investment strategies.
“We have a group of very ambitious and talented students who commit a great deal of their personal time to ensure the success of the club,” said Jakotowicz. “Their passion for finance is contagious and it is an absolute honor for me to work with them.”
White also commented in his annual letter about the BHIC’s new “Education Initiative,” designed to level the playing field for the diverse range of students attracted to the club.
“This new initiative will be a month process each semester where the BHIC executive board will conduct a meeting to expose the members to the different approaches of analyzing a stock,” said White. “The meetings will focus on simple ratios, comparative analysis and discounted cash flows.”
According to White, the ultimate goal of the education initiative along with fine-tuning the club’s investment strategy is to “place the investment club in a position to outperform the S&P 500 next year.”
Of equal importance to students in the BHIC is the ability to develop strong analytical, decision-making, public speaking and teamwork skills – which they gain by presenting live to the Investment Committee, chaired by Kenneth Whitney, a 1980 accounting graduate and senior managing director at Blackstone Group, and including Daniel Strickberger, a 1978 finance graduate and co-founder/co-managing partner at DSM Captial Partners, and Michael Geltzeiler, a 1980 accounting graduate and CFO and group executive president of NYSE Euronext.
After seeing the BHIC presentations for the past three years, Strickberger noted the professionalism and drive of the students.
“It is evident that each year the group builds upon the process of the prior year’s group to improve the experience of incoming students,” said Strickberger. “The investment results have been solid and the students do a great job.”
Strickberger also commented on the value of the investment and portfolio design experience.
“These are real investments the students are handling which provides a unique learning opportunity,” said Strickberger. “I also commend the faculty adviser because of the important, hands-on guidance role he plays with the students.”
Student perspectives on BHIC
“The Blue Hen Investment Club has been an extremely rewarding experience,” White said. “Joining the club as a freshman, I’ve learned a lot. So this year, my goal has been to educate the other members as much as possible.”
He said the opportunity to make presentations before the Investment Committee “was a great opportunity. The members gave us great feedback on the club’s current goals and performance.”
White said involvement in BHIC “has really enhanced my experience in Lerner. I've been able to build upon the principles learned in the classroom and apply them to the real world. I am really glad I’ve been able to be apart of this unique club. The lessons I’ve learned and relationships I’ve made will continue to benefit me well beyond graduation.”
“Being in the Blue Hen Investment Club has been the best learning experience I’ve had here at Lerner,” Floyd said, adding, “It is not an experience people get at most other schools and allows us to apply what we learn in classes to our own real dollar investing. You learn from both the decisions that work and that don’t, along with learning from the other people in the club. Over four years the board members have gone from the students to the teachers in the club.”
Floyd agreed that being able to present to the Investment Committee was a stellar opportunity for the students. “It was a chance to get a real world taste of a very serious presentation to the people who control whether our club continues or not. I felt like both the club and classes prepared us very well for this chance,” he said.
“Through the time I have spent in the club, I have had a first-hand view of the investment field and have further developed financial analysis skills,” McNamara said. “Preparing and presenting the club’s annual report taught me a lot about the process a fund goes through in analyzing its annual performance.”
McNamara said BHIC “has better prepared me for a career with a large investment management company. After graduation, I will be able to apply my experiences within the club to projects at work on a daily basis.”
An electronic copy of the BHIC annual report, including general information and further details on the performance review and portfolio overview, is available online.
Article by Kathryn Meier