Student-Managed Henry Fund Posts 33 Percent Gain in 2009
The Henry Fund, the stock portfolio managed by finance students in The University of Iowa's Tippie MBA Program, posted a gain of 33.6 percent in 2009, beating its benchmark S&P 500 by better than 7 percent.
The fund started the year with about $980,000 in assets and ended with $1.3 million. The S&P 500 gained 26.5 percent for the year.
Alan Adams, one of the 12 student fund managers, said the group positioned the fund for a recovery in 2009, assuming the worst of the recession had passed.
"Historically, materials and energy sectors outperform during the initial stages of an economic recovery so we chose to overweight them," Adams said. The risk paid off, as those sectors soared. The fund's position in Peabody Energy, for instance, was up 96.3 percent, oil driller Noble Corp. 84 percent, and oil field services provider Schlumberger 54 percent.
Not all energy stocks paid off. Exxon Mobil dropped 14.6 percent, making it the second-biggest loser in the portfolio. But losers were the exception as only seven of the 49 stocks the fund held at some point through the year posted a loss. The student managers plan to hold the stock, believing the market is undervaluing it based on recent investments in liquefied natural gas and disciplined financial management.
"We also shied away from consumer staples, telecom, and utilities because they are characterized as more defensive in nature, and we did not see them outperforming the rest of the market," said student fund manager John Culley.
While the fund generally shied away from the financial sector, they found a prize in Banco Santander, a Spanish bank that posted a 73 percent return.The holding was initiated by the previous group of fund managers in 2008, and the 2009 managers opted to keep it because the bank had little exposure to subprime mortgages, derivatives, and other investment devices that hurt other banks.
"We held our position in Santander because the company's international exposure, risk averse management, and assertive growth strategy convinced us that it is better positioned than its peers for gains in 2010," said student Sebastian Bock.
The fund's biggest gainer was Google, which started the year at $307.65 and finished at $619.98, an increase of 101 percent.
The Henry Fund was started in 1994 with seed gifts from Tippie graduate and UI benefactor Henry Tippie and Cedar Rapids civic and business leader Henry Royer. Since then, it has lost value in only three years.
For more information about the Henry Fund or to make a contribution, visit www.henryfund.org.
Contact: Tom Snee, UI News Services, 319-384-0010