Risk and Rewards
by Jody Murphy and Christopher Kubik, Associate Professors of Business Administration
Editor's Note: Since the article below was published in the Spring 2013 magazine, the Business Administration Department and its student investment fund managers competed against more than 50 other student-managed portfolios in five categories to be named international champions in the undergraduate Value Investing category at the Quinnipiac Global Asset Management Education (G.A.M.E.) Forum III held in New York City April 4-6, 2013. The Colby-Sawyer students who manage the Suzanne '66 and John Hammond Student Managed Investment Fund were recognized at the Student-Managed Portfolio Competition for a 21.21% time weighted return in 2012.
Business Administration majors Amigo Khadka '15, Hang Nguyen '14, Jagat Pokharel '14 and Suraj Mali '14, accompanied by Associate Professor and Chair of Business Administration Chris Kubik, represented Colby-Sawyer and were among the 1,000 conference attendees from 118 colleges and universities around the world who gathered to learn about the financial services industry with break-out panels and workshop sessions that explored career and network opportunities.
As faculty in the Business Administration Department, we are enthusiastic about the opportunities for engaged learning that are part of our Investment Management course. These experiential activities include investing real dollars in the stock market and visiting key financial sites in New York City.
In teaching this course, we have seen firsthand the significant learning that occurs through students' management of the fund and their class trip. We have also heard from our students and alumni about the impact these opportunities had on their learningboth within the business discipline and their liberal education studiesas well as on their entire college experience.
The Suzanne '66 and John Hammond Student Managed Investment Fund gives students the opportunity to trade stocks and to understand the workings of the market through direct experience. The fund began with a generous gift of $25,000 from the Hammonds, and as of January 2013, it had an approximate value of $160,000.
The fund has grown significantly due to generous individual gifts and an endowment allocation from the Colby-Sawyer Board of Trustees. The allocation was the direct result of our students' presentation to the board, in which they requested an opportunity to manage a portion of the college's endowed funds. Last October the trustees approved their request and appropriated $50,000 to the student-managed investment fund, with additional funding conditional on meeting investment and reporting goals.
How does the fund work? Early on in the class, we discuss forecasting models and approaches to market analysis that include analysis of the economy, industry sectors and individual companies. Each student takes responsibility for a specific industry and through research and due diligence becomes a sector expert. Using online resources, students analyze securities and present their findings to their classmates for a vote, as dictated by the fund's bylaws. Each student makes a pitch for their sector, followed by class votes on each proposal. The winning proposals comprise the students' fund portfolio for that semester.
This is truly a student managed fund; the course professor has neither a vote nor veto power. The students then present the fund to the broader college community, which includes college administrators, donors, trustees, Business Administration faculty, and friends of the college. Going forward, the Investment Management class will also present its investment results to the Board of Trustees on an annual or as-needed basis, similar to what professional financial managers do for their clients.
From the outset, the goal of the student-managed fund has been student learning. On balance, the fund has neither lost nor earned a great deal of money under their management. The greatest gains have been in students' knowledge and understanding of the stock market.
The Investment Management class trip is another way for students to experience what they have studied. Last fall, they witnessed the NASDAQ opening bell and visited the Charging Bull, the Federal Reserve Bank of New York, the New York Stock Exchange, Federal Hall, the 9/11 Memorial and the CFA Institute. Each of these sites provides wonderful learning opportunities, but the New York Stock Exchange is typically the highlight. The Exchange offers an educational discussion with a question-and-answer session, and permits students to visit the trading floor in small groups that are partnered with a designated market maker's post, where they can interact with experts.
Tyler Hendrickson '12 found that his involvement with the student-managed investment fund had a large influence on the type of jobs he applied for. The experience of analyzing stocks and watching trends over the year allowed for a better understanding of the markets and how they worked, and now that is something I use every day in my career, he says.
I learned a lot more about things I already knew, learned a few entirely new things, and made new connections, says Abhiyan Thapaliya '13 of his experience with the class and the trip to New York. Aimee Cates '11 notes that many of these organizations are closed to the general public and the fact that I was able to experience the inner workings of the NASDAQ, the Federal Reserve and the New York Stock Exchange is not something I will forget.
As the value of the investment fund and our trustees' involvement grows, our students' sense of responsibilityas well as their opportunities for learningwill also grow. The trustees, many of whom have deep experience in the stock market or in managing companies and investments, will ask hard questions, which our students must be prepared to answer. The Investment Management class will remain a safe learning environment for students, and the trustees' deeper engagement will augment this real-world experience for students, who will ultimately benefit from the trustees' wisdom, insight and experience.
Whatever our business students choose to pursue in their careers, their learning experiences in the stock market and financial industry as undergraduates will serve as a valuable part of their liberal arts education. These opportunities to acquire and apply knowledge, to hone their critical thinking skills and exercise good judgment, will help to prepare them for the job market as well as for other challenges in their lives.