While some investors have struggled to succeed in the stock market over the past few years, a group of college students from the University of Dayton has consistently out-performed many Wall Street investors while maintaining a portfolio of $3 million, money entrusted to them by the university’s board of trustees.
“The students’ investment track record proves that this academic program is building solid financial skill sets,” said Tom Dharte, manager of the school’s Davis Center for Portfolio Management, which serves as the group’s home base. “It’s an experiential academic program which allows us to gain real-world industry experience.”
The group, called Flyer Investments, consists of 15 different seniors each semester who meet as part of a capstone finance class. The class, which is moderated by Dr. David Sauer, started in 1999 with an endowed portfolio of $1 million. After three years of excellent investing and maintenance, the university’s Board of Trustees added $2 million more to the student investment portfolio, money that has apparently been well-invested.
According to Dharte, over the past five years Flyer Investments has out-performed the S&P 500 and Merrill Lynch 1-3 blended benchmark by an average of 2.7 percent annually. The year-to-date number for the equity portion of its portfolio has also beaten the blended benchmark by 4 percent.
How do they do it? Dharte credits both a conservative yet progressive investment strategy and a wide range of market knowledge for the group’s success.
“Our style is a blend of relative value and growth at a reasonable price,” he said. “We use qualitative, quantitative and technical analysis, we’re well diversified and we invest in market leaders that we believe will perform well in a competitive market.”
Even after hearing of the success that Flyer Investments has enjoyed, some may ask why a university would entrust so much money to a group of students who, despite having a moderator in Sauer, are ultimately responsible for its investment and maintenance. According to Greg DeMars, an analyst for Merrill Lynch Investment Managers in New York and the former internal associate manager of the Davis Center, using real money gives the program an edge that other programs using simulated or tightly-regulated portfolios lack.
“There is a responsibility that goes with using real money that makes you work harder,” DeMars said. “We are held to the same standards as the other endowed programs so if we mess up, our funding gets cut. It also gives you the chance to put to use what you learn in class.”
All questions and fears aside, it is clear that the students involved in Flyer Investments over the past five years have consistently proven themselves in a stock market that has, in that time, gotten the better of more than a few professional investors. The group has done so well in fact, that, according to Dharte, the school may add more money to the student investment portfolio in the next few years.
In addition to Flyer Investments, the business school also annually hosts the Redefining Investment Strategy Education (R.I.S.E.) Symposium which, according to Dharte, is a very unique college event that runs over three days.
“R.I.S.E. is the world’s largest student investment conference,” Dharte said. “There is nothing like it anywhere else.”
The symposium’s first day offers several keynote speeches from prominent investors. The second day offers breakout sessions with professionals from specific areas of finance and investing. The final day provides career strategies from young professionals, who, according to former Davis Center manager and R.I.S.E. attendee Jane Rombach, offer a viewpoint that every finance student should hear.
“You see the accomplished rich investors giving the keynote speeches and you think it’s easy,” Rombach said. “What the young professionals give you is a view of someone who’s been in the business for three to five years. They give you a view of how you get to the top.”
R.I.S.E. also conducts a student portfolio competition that is generally based on the risk adjusted return of a portfolio, or the portfolio’s net gain minus the estimated risk involved with its investments.
Dharte claims that the symposium as a whole is a great way to break into the world of business finance.
“It broadens horizons,” he said. “It’s an awesome way to interact with people from Wall Street.”
Copyright © 2004. YOUNG MONEY®