Student managed fund beats benchmark again

Undergraduate | Dec 23, 2014 | Gabelli School of Business

Students in the Fordham University Student Managed Investment Fund program stand outside Hughes Hall.

The portfolio managers and analysts for Fordham University Gabelli School of Business Student Managed Investment Fund beat their performance benchmark this semester, and they received their bonus from the administration.

What do they get for managing more than $1 million of Fordham’s endowment?

“Every semester Eric Wood, the [Fordham] chief investment officer, challenges the students that if they beat their benchmark, he’ll buy pizza for everyone at the semester-ending presentation,” said program adviser James Russell Kelly. “So, guess what? We had pizza.”

The meal is not a given, and this semester was particularly tricky. Unprecedented volatility in the market made the job of the fund managers and analysts more difficult. While the fund was actually down, it did beat its benchmark, a blending the Standard & Poor’s Global 1200 Index and others.

“I think they did a commendable job,” Kelly said.

“Our benchmark equity S&P Global 1200 Index declined by 9 percent … from the beginning of the semester until the middle of October. And then from the middle of October until the end of November it gained 9 percent,” Kelly said. “It was a roller coaster.”

The Student Managed Investment Fund is a two-term finance-elective program. Thirteen students are accepted into the program each semester. In a student’s first term, he or she functions as an analyst who monitors asset classes and equities and prepares research reports. In the second semester, those 13 graduate to new roles as portfolio managers, while a new group of 13 takes over as analysts. The managers vote to buy and sell securities.

“But the most important thing is they sit right next to the analysts and mentor them, so there’s this incredible process of mentoring going on all semester long,” Kelly said. “The experienced analyst who is now the [portfolio manager] trains the new analyst. That’s really very effective, and it builds teamwork.”

The students have performed so well over the years that they have won first place three times for the best hybrid fund in the Quinnipiac Global Asset Management Education conference.

The fund started five years ago with $1 million from the endowment fund. Its primary objective, Kelly said, is to preserve capital, so the fund is designed to be stable and conservative.

“We got it up to $1,365,000 at the beginning of the semester. Now it’s down a little bit,” said Kelly.

But that market adversity was a good learning experience, he said.

“They managed the fund through a period of adversity, which is a wonderful environment for learning,” Kelly said. “When things are going tough, you really have to focus.”