At the beginning of the weekly meeting on Monday, October 23, Tyler Williams, investment fund portfolio manager, stood in front of his PowerPoint presentation and announced that the holdings were outperforming the S&P 500 by an average of 3.5 percent in 2017-an impressive feat, considering the bull market had inflated stock yields across the board.
The accomplishment was also striking since the fund is managed not by professionals, but by Kogod students.
Williams, BS finance '19, explained to the students seated around the classroom that the Student Managed Investment Fund's (SMIF) strong performance was driven largely by its holdings in technology stocks. Toward the end of Williams' portfolio update, Brad Chabra, BS finance '18, SMIF fund manager, expressed his pride in the Fund's performance from his seat toward the front of the room. But he cautioned the student analysts to identify the biggest risks to the sectors they oversaw in the fund's portfolio.
"We are riding the perfect wave," Chabra said. Without preparing to adjust their strategy, however, he warned that the fund's success might be short-lived.
Gaining Real World Experience, with Real World Consequences
SMIF offers AU students the opportunity to earn academic credit while gaining hands-on investment experience using real money. The consequences for poor performance go beyond potentially earning a bad grade. In addition to using alumni contributions, SMIF also manages a portion of the university's endowment. If the stocks lose money, SMIF students have less money to invest.
"We're trying to prove ourselves as a very premier fund," Williams says, explaining how he wants SMIF to earn a "national presence." With a strong reputation, not only will the fund gain the trust of the university, but SMIF participants will also become better positioned to compete with other students for top jobs after graduation.
In addition to enhancing their job prospects, SMIF complements what the students learn in the classroom to solidify their understanding of finance and investment strategy.
"This shaped my learning experience at Kogod, it shaped my finance knowledge," Chabra says. "I think I learned a lot [in my classes], but I didn't know what any of that meant until I took SMIF."
To truly understand the concepts and theory they study in the classroom, Williams explains, the students need to "apply it to a real-world situation."
A Long-term Educational Investment with Strong Personal Dividends
Many of the students seated around the classroom are not technically a part of SMIF and they earn no academic credit for being there. They sit in on the class to understand how it functions and to give themselves a better chance of being accepted should they decide to apply.
Chabra started sitting in on SMIF meetings his freshman year. He had a student mentor who suggested that, if he wanted to learn about markets and investment strategy, this was the experience he needed.
While students manage the portfolio, SMIF does have a faculty adviser, Timothy Timura, Executive-in-Residence in the department of finance and real estate.
"In every single way, this is a student-managed investment fund," Williams says. While they have the liberty to make the decisions as they see fit, "Tim is always there to give us the guidance."
After Williams updated the class on the SMIF performance, Timura spoke briefly about the aspects of the fund that "keep me up at night." He talked about the need for more diversity in their holdings and the importance of staying vigilant about trends that could change how the market was performing.
"I don't think there's any fund in the country that's doing better," Timura told the class. "It's all working—that's exactly the time you don't want to get comfortable."
During the rest of the meeting, many of the student analysts provided overviews of the fund's stocks in the sectors they're responsible for overseeing, while others pitched the group on their recommendations to buy or sell specific stocks.
For Chabra, who will be graduating this December and stepping down from his position as fund manager, he feels that his SMIF experience has been an essential component of his education.
"I knew that [SMIF] was the best of the best experiences that Kogod had to offer for finance majors."