Student Stock Portfolios Beat Market Benchmark
The Henry Fund, the MBA student portfolio, gained 14.67 percent over 2004, outperforming the S&P 500, which was up 10.88 percent. The Krause Fund, managed by undergraduate students in the Henry B. Tippie College of Business, was up 14.64 percent, and also beat the S&P 500. The top performers in the Henry Fund portfolio included Autodesk with a 128.1 percent return and Target at 36.5 percent.
Twelve MBA students manage the fund composed of 40 stocks in 13 sectors. Overall, the fund has performed well: from its inception in the spring of 1994, the portfolio has grown from its initial investment of $50,000 to a value of more than $396,000. The Henry Fund has outperformed the S&P 500 in eight of the 11 years since its inception. During this time, the fund has averaged a 17.20 percent annual return, compared to 14.00 percent for the S&P 500.
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.
Top performers in the Krause Fund included MGM Mirage with a 59.94 percent return, and ConocoPhillips with a 32.42 percent return.
In the Krause Fund, 48 undergraduate students from the Tippie College's Security Analysis class manage a portfolio of 14 stocks. At least 25 percent of the fund's assets are invested in firms with a significant presence in the state of Iowa.
Endowed by W.A. "Bill" Krause, president and chief executive officer of the Krause Gentle Corp., the Krause Fund provides undergraduate UI students real-world portfolio management experience. The 1957 graduate of the UI also established similar funds at Iowa State University, the University of Northern Iowa and Drake University in 1998. Undergraduates at the four universities compete in the annual Krause Challenge, in which each group attempts to show the best return on their investments. One student from each of the four universities serves on the board of directors of the Krause Gentle Corp. and presents the portfolio for board approval each year.
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, said Todd Houge, the assistant professor of finance in the UI's Tippie College of Business who oversees the student portfolios.
"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.
Contact: Todd Houge, Department of Finance, 319-335-3754