Live Portfolio Managed By Baylor Business Students Grows To $1 Million

Oct. 23, 2002

by Cynthia J. Jackson

Baylor University's business students soon will be managing a live $1 million portfolio.

"Many schools have investment portfolios run by students," said Dr. Terry Maness, dean of Baylor's Hankamer School of Business, "but most of those are just on paper. We actually have our students managing this endowment as a live portfolio. It's the real thing."

The investment fund started in the spring of 2000 with a $250,000 endowment from Philip M. Dorr, a Baylor business school graduate and a principal of Water Valley Investment Advisors Inc. in Illinois, with additional gifts from alumni and friends bringing the total to $400,000. More funds will now be applied to the endowment, bringing the total fund to $1 million.

The live fund is managed actively by select graduate students and senior undergraduates. The class, "Practicum in Portfolio Management," combines readings and research reports prepared by students working in teams. Each team is responsible for analyzing securities within one or more sectors of the S&P 500.

"An advisory board consisting of professional money managers is available for consultation, but the students make all the decisions," said Maness.

The goal of the fund is to obtain a long-term return (calculated on a five-year basis) as high as possible, and within given risk parameters, but at least as high as the return on the S&P 500. In the first one and one-half years the fund has beaten the S&P by 14%.

"By managing an investment fund with real dollars, students gain valuable hands-on experience in securities research, valuation of risky assets and asset allocation," said Maness.

Part of the annual growth in fund value is dedicated to providing scholarships for business student-athletes.

The class is taught by Brian R. Bruce, visiting professor and director of global investments for PanAgora Asset Management Inc. and Dr. William R. Reichenstein, professor of finance and holder of The Pat and Thomas R. Powers Chair of Investment Management.

For more details, contact Bruce at (617) 439-6613 or bbruce@panagora.com

or Reichenstein at (254) 710-6146 or Bill_Reichenstein@baylor.edu.

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