The size of the global bond market has tripled to more than $100 trillion since the Great Recession, creating a critical need for financial professionals. Enter the Tippie College of Business and its Hart Fund.
Mahmut Ilerisoy, associate professor of instruction in finance and Hart Fund faculty advisor, makes sure University of Iowa graduates speak and understand the language of bonds and fixed income.
The students in his class manage the college’s Hart Fund, real money fixed income security funds that give Tippie students hands on experience running an actual fund.
The Hart Fund is actually two funds named for benefactor Lorraine Hart (MBA75), the retired vice president of investments for Ameriprise Financial in Minneapolis.
The first fund started trading in 2019 and since then has grown by 14.64%, better than the 11.15% of its benchmark Bloomberg Aggregate U.S. Bond Index. The second started trading in 2021 and has grown by 4.33%, well above the .05% of its benchmark. The funds’ combined value is more than $1.8 million.
Ilerisoy, a former bond analyst himself for Aegon and Aviva, said The University of Iowa is one of few that offer a student-managed fixed income funds. Once the quiet backwater of global finance compared to the roller coaster of the stock market, fixed income securities became much more roiled following the Great Recession and, later, the COVID-19 pandemic.
The student fund managers take a class taught by Ilerisoy with visits from professionals in local banks and financial services companies. They learn to dig into financial statements and news updates to assess the market and determine which U.S. Treasury bonds, mortgage-backed securities, and corporate bonds to buy.
At the same time, they decide which securities to sell. They make transactions twice a year, at the end of each semester under Ilerisoy’s supervision.
Not only is it an exercise in learning about bonds, but Ilerisoy said they also learn to distinguish reliable sources of news from misinformation or disinformation. Financial news giant Bloomberg is their primary news source (they have access to nine Bloomberg terminals in the Hadley Finance Lab), along with investment company websites, while news organizations like The Wall Street Journal and The New York Times are important secondary sources.
There’s been lots of news to read lately, as huge government deficits, sticky inflation, and geopolitical uncertainty destabilize the markets and lead bondholders to sell and yields to rise.
What to make of the turmoil?
“Three months ago, I would have said it was transitory, but now I think it’s not going to end anytime soon,” said Jackson Peer, a senior from Bettendorf, IA.
Peer and the other student managers are preparing for careers as bond analysts, wealth advisors, portfolio managers, or roles within the insurance sector. Ilerisoy said insurance companies are among the largest employers of bond traders and analysts, so the Hart Fund is an important source of employees in Iowa, with the insurance industry making up 11% of the state’s GDP.
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