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Student investment fund skyrockets

BY NORA HEATON | JANUARY 26, 2010 7:30 AM

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Twelve UI students saw their investments jump above the $1 million mark last year, outperforming expectations despite the challenging economy.

The Henry Fund, an endowed stock portfolio managed by 12 students in the Tippie College of Business M.B.A. finance program, saw a 33.6 percent gain in 2009. This is a 7 percent better than the fund’s benchmark S&P 500 Index for the year.

At the beginning of 2009, the fund had nearly $980,000 in assets. By the end of the year, it boasted $1.3 million, with a S&P 500 gain of 26.5 percent for the year.

The student managers also make up an experiential learning course taught by Todd Houge, a UI lecturer in finance. The students had to specially apply for the course, which is centered on managing the Henry Fund with portfolio work, marketing to donors, and production of an annual report.

Managing the fund is good hands-on experience, several of the students agreed.

“It adds a lot of rigor to how I individually make investments and also gives me the opportunity to share my opinion with others who are making similar investments,” said Alan Adams, one of the fund’s student managers.

The student managers set a benchmark for the fund at the beginning of 2009 by comparing their own fund with other stocks that had similar restrictions and limitations in the S&P 500 Index.

The fund’s success is especially unusual given the current economic decline. Anil Ramchandani, a fund manager, said many asset managers are struggling.

“Their asset base has shrunk significantly after the great fall in equities across the globe,” he said.

A typical fund faces expenses for marketing or paying managers, Ramchandani said. As those expenses become harder to bear in a declining economy, not all funds are able to return more than the S&P 500 benchmark.

“We had a couple of stocks up 100 percent or so last year” despite the challenges of the recession, Houge said. “We were fortunate to have very few ‘losers’ on the year.”

Assuming the economy would begin to improve, the managers based their equity selections on recovering sectors in the economy.

Arindam Majumdar, a fund manager, said the student investors steered clear of most holdings in the financial sector and focused their investments on the technology sector.

Google gave the fund its biggest gain of the year, starting out at $307.65 and finishing at $619.98 for a 101.5 percent increase.

The fund also received recognition when it received first-place honors in its category at the Redefining Investment Strategy Education competition, an investment symposium sponsored by the University of Dayton, which attracted more than 300 schools.

The fund has been successful in past years as well. Majumdar said the Henry Fund has won this honor in its category every year since first entering the competition in 2005. The fund has declined in value just three times since its inception in 1994.


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