By Mike Zaccardi
Ok, I have mentioned it many times before, but here is yet another shameless plug for UNF’s student managed investment fund, the Osprey Financial Group (OFG).
OFG is a group of ten undergraduate and MBA finance students chosen by finance professor Dr. Reinhold Lamb to manage roughly $740,000 of the University endowment Fund.
The junior portfolio managers have their own trading room on the second floor in the Coggin College of Business building. In the room, each analyst has a dual-monitor trading desk and access to the Bloomberg Professional service which helps them to manage money like the pros.
Similar student managed Funds exist across America; most of the major universities have professional money managers for their respective endowments. A few schools allow finance students to get the experience of managing real money.
What makes student managed funds so interesting is that they have a history of outperforming professional money managers. UNF’s group has recorded very strong gains since its inception in 2002, beating the benchmark return in five of eight years.
OFG’s benchmark is mix of US stocks, international stocks, and fixed income. The “client” the OFG portfolio managers must report to is the UNF Foundation. The Foundation is very strict about how the Fund is to be managed – if there is any sign of mismanagement or lack of due diligence by an analyst, the student will be fired from the Group.
Research shows that roughly 80 percent of professional portfolio managers underperform their respective benchmarks each year. The remaining 20 percent of outperformers change each year which can be attributable to pure luck.
Luck appears to have nothing to do with the strong performance of OFG. In their best year, the group of student investors beat the benchmark by more than 11 percent. Even the worst year saw the Fund lose only about two and a half percent to the benchmark.
The Fund has an active management period from middle October through March 31 each academic year. During the summer, the Fund is not actively managed. The students of the previous year setup of the portfolio for the idle summer months.
The 2008-2009 class took a bold bet by avoiding stocks during the historic downturn during their period of active management. The bet paid off, or at least avoided significant losses, through the market bottom on March 9, 2009.
The students left the portfolio in cash through the summer of 2009 as equity markets rose sharply, causing significant underperformance until the 2009-2010 team took the helm. The 09-10 team inherited the Fund after the S&P 500 gained nearly 70 percent from the previous spring.
Last year’s term of management, dubbed “A Rocky Recovery” by OFG, managed to add about $40,000 to the Fund as the semester ended. Despite the strong nominal gain, the Group (I should say “we” as I was in the Group last year) underperformed slightly.
The theme “Rocky Recovery” had a double meaning to us last year. Not only was the economy shaky, but our group competed in and won the CFA Global Investment Research Challenge in Naples, FL. Before we left, Dr. Lamb inspired us to “Win Rocky, Win!” in a pre-competition motivational speech a la Vince Lombardi or Coach Parseghian in Rudy.
Getting back on subject…a topic I have discussed in previous articles, the Flash Crash on May 6, 2010, caused turmoil for many investors. OFG was among them. Many positions that had been strategically designed for the six month period of passive management were quickly wiped out when the market dropped 10 percent intraday.
The market continued to decline through the middle of the summer and special situations were evoked to allow a few equity positions to be taken as the market dipped. The market has recovered much all losses since the April highs.
The 2010-2011 Group has a tough challenge as the market has appreciated significantly in the last two months. They must decide whether to be over or under weight equities versus the benchmark. Additionally, they must find stocks that are undervalued which has become more difficult.
One thing I appreciate about OFG is that the Group rarely loses money for UNF. While other student organizations ask for thousands of dollars for different events, OFG has generated nearly a quarter of a million dollars for UNF.
OFG has a history of producing strong talent for local, national, and international finance companies. Locally, OFG grads have gone onto successful careers at Everbank, The Energy Authority, and Intrepid Capital Management to name a few. Others have gone on to prestigious front office positions at BP, JP Morgan, Wells Fargo, and Morgan Stanley.
I encourage all undergraduate business students to consider majoring in Finance and making it a goal to earn a spot in OFG. I can say from experience that having it on my resume makes me standout from my peers. If you are a freshman or sophomore, definitely ask about this great program at UNF.
