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Student Stock Portfolio Posts 12.5 Percent Return

A stock portfolio managed by University of Iowa MBA students posted stellar returns in 2005, beating its benchmark, the S&P 500 Index.

The Henry Fund gained 12.53 percent in 2005, outperforming the S&P 500, which was up 4.91 percent for the year. The top performer among the current Henry Fund portfolio was SanDisk Corp., which produces flash memory and data storage devices, with a 134.3 percent return. The fund's performance also benefited from a sharp rise in oil prices during the year. In the fall, analyst team sold their position in oil refinery Frontier Oil Corp. following a gain of 197.2 percent. Twelve select MBA students from the UI's Tippie School of Management manage the fund, which currently holds positions in 31 stocks across 13 economic sectors. The fund managers showed a preference for smaller capitalization stocks earlier in the year. In December, after reviewing their economic outlook for 2006, the team repositioned the portfolio toward more traditional large cap holdings with international exposure. A new group of students take over managing the fund in January 2006.

From its inception in the spring of 1994, the fund has performed well. The portfolio has grown from an initial investment of $50,000 to a value of more than $446,000. During this time, the fund has averaged a 14.98 percent annual return, compared to 12.41 percent for the S&P 500. On a relative basis in 2005, the fund also posted the second-best year in its history compared to the index. Investment income from the portfolio is used to support scholarships to UI MBA students.

"Our long-term performance would likely rank the Henry Fund among the top 1 percent of all large cap equity mutual funds during this time period," said Todd Houge, an assistant professor of finance in the UI's Tippie College of Business, who oversees the student portfolio.

Named for its two founding benefactors, Henry Royer and Henry B. Tippie, the Henry Fund is an endowed equity portfolio that invests in companies that are industry leaders with above-average investment opportunities. Managing the fund provides MBA students enrolled in the Applied Securities Management course with hands-on experience investigating and recommending stocks. Each of the 12 analysts works within one or more economic sectors and is responsible for developing an investment review, researching new companies to purchase, and evaluating the buy/sell recommendations of other managers.

The portfolio management experience helps students sell themselves in the competitive finance job market, allowing them to give concrete examples of their analysis during job interviews. Henry Fund alumni have secured excellent positions at investment firms and in corporate finance.

"Students perform an in-depth fundamental valuation of each company. They review their classmates' work and recommendations, and, by doing so, they learn from each other," said Houge.

Income from the fund is used to support scholarships for first- and second-year MBA students, guest speakers and educational travel opportunities for students. While the gifts from Royer and Tippie establishing the fund were made in 1994, contributions from other supporters are welcome to increase the size of the Henry Fund. Private gifts for the fund are accepted by the UI Foundation and can be made online at www.GiveToIowa.org/business3.


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