Henry Fund, Managed By Tippie MBA Students, Grows 12 Percent in 2007
"It was a phenomenal performance given all the volatility in the markets last year," said Todd Houge, assistant professor of finance in the University of Iowa's Tippie College of Business and faculty advisor to the Henry Fund.
The fund finished the year with a return of 12.57 percent, more than double the 5.49 percent return of its benchmark, the S&P 500 Index. Of the 45 stocks the fund held during the year, 29 finished with gains, and 11 of those showed double digit increases.
The Henry Fund is an investment fund that gives 12 students enrolled in the Tippie MBA program's Applied Securities Management course real-world investment management experience. The management team changes every January.
Houge credited the strong performance to a prescient investment philosophy adopted by the Tippie MBA students who managed the fund.
"In the spring, the students positioned the portfolio for an expectation of slow economic growth, a weak dollar and high oil prices, and the portfolio's performance benefited from that analysis," Houge said
To take advantage of high oil prices and a weak dollar, fund managers maintained high exposure to energy companies and companies with a strong international presence. As a result, the fund's top three performers for the year are all based outside the United States.: BHP Billiton Ltd., an Australian metals and mining company, returned 91.9 percent; Central European Distribution, a spirits distribution firm doing business mainly in Poland, returned 86.3 percent; and Schlumberger, the Dutch oil field services giant, returned 63.5 percent.
Other big winners held by the fund included Charles River Labs, a Boston-based pharmaceutical research support company that returned 47.9 percent, and computer chip maker Intel, which returned 36.3 percent.
Houge said the fund's success also came from limited holdings of stocks that were dragged down by the housing meltdown and sub-prime mortgage debacle. Two of the fund's biggest losers were home improvement retailer Lowe's Corp. and financial services company United Bank of Switzerland (UBS), which were both sold by the fund during the year.
Although many economic analysts believe the U.S. economy is heading toward recession, last year's Henry Fund managers discounted the possibility in the fall, believing the weak dollar would keep inflation tamed.
"The fund's holdings are positioned for slower growth in the economy, but not a recession," Houge said.
However, he said this year's fund managers may take a different outlook given more pessimistic economic news that has come to light since the end of the fall semester.
Houge points out that the Henry Fund has consistently beaten the S&P 500 since its inception in 1994. Its three-year performance is 12.85 percent, handily beating the S&P 500's 8.9 percent growth during the same period; its five year growth is 17.9 percent, compared to the S&P 500's 13.2 percent; and its 10 year performance is 11 percent, compared to the S&P 500's 7.3 percent.
Since 1994, the fund's annual average return has been 14.7 percent, beating the 12.2 percent of the S&P 500. The fund's market value has grown during that time from $50,000 to more than $1.5 million, due to portfolio performance and additional gifts and contributions.
The Henry Fund is named for the two UI benefactors who provided a portion of the initial $50,000 in capital. Henry Tippie is a 1949 UI graduate who owns several companies and has provided many gifts to the UI business school that now bears his name. Henry Royer is the former chairman and CEO of Firstar Bank in Cedar Rapids and executive vice president of Berthel Fisher & Co. of Cedar Rapids.
Income from the fund is used to support scholarships for first- and second-year MBA students, guest speakers, and educational travel opportunities for students. 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/henry.
More information about the Henry Fund can be found online at www.henryfund.org.
Contact: Tom Snee, UI News Services, 319-384-0010