In an economy characterized by receding retirement funds and a volatile stock market, a group of Brigham Young University Master of Business Administration students beat the odds – and 18 other universities – to earn a 32 percent return on their portfolio in a national contest.
Sponsors of the competition, brokerage firm D.A. Davidson & Co., awarded the Marriott School's Peery Institute with a $7,000 check for successfully managing the company's $50,000 investment portfolio throughout last year.
"BYU came in No. 1 in the competition of 18 schools in the Northwest," says D.A. Davidson Vice President Dudley Probert. "They were tremendous."
Under the D.A. Davidson Student Investment Fund program, the brokerage firm provides a team of business students from each school with $50,000 to invest as a partner-in-education exercise. Depending on the students' performance, the schools can receive a share of the profits.
Returns are calculated at the end of August each year, and schools receive one-half of investment returns above 5 percent. D.A. Davidson & Co. absorbs any losses, and makes sure the team starts each academic year with $50,000 to invest.
"These MBA students put a lot of time and effort into doing the background research on which companies were bargains in the stock market and which ones were not," says business management professor Steven Thorley. "Based on presentations in class, the students voted on whether or not they felt a persuasive reason to buy a particular stock."
Representatives from D.A. Davidson met with students and presented a $7,000 check to the school's Peery Institute of Financial Services.
Overall, the 18 schools participating in the investment program achieved an average annual return of 13.19 percent. This compares with the S&P 500 and the Dow Jones Industrial Average, which produced returns of 12.06 percent and 11.37 percent respectively for the same period. Nearly half of the schools beat these major indices.
In-state rival University of Utah came in second with a 30 percent return while Boise State University achieved the third-highest return of 27 percent. Utah State University had a return of 17 percent, which landed the Aggies in sixth place.
"It's wonderful our students have the opportunity to invest real dollars and get a sense of the exciting world of investing and the pressures of making right decisions," says Ned C. Hill, Marriott School dean. "We really appreciate the D.A. Davidson Company for providing the funding for the students and giving them, in a sense, a piece of the action so they can have this exciting experience."
The D.A. Davidson Student Investment Fund, which began in 1985, provides business students with an opportunity to apply modern finance theory to investment decisions involving actual market transactions. In addition, students have a greater incentive for their studies, knowing that they will soon apply the theories to practical fund management in the advanced courses. Their successes and failures show the value of the theories and give greater meaning to the concept of risk.
"The investment of time and effort – plus a little bit of luck – led to our success," says MBA student Scott Stohlton. "We watched and monitored the market on a daily basis and moved accordingly."
The program is the only one of its kind in the Northwest and one of very few in the nation in which students are given real money to invest and earn funds for the schools.
MBA students who participate in the D.A. Davidson program in their first year can be selected to manage a Marriott School portfolio called the Silver Fund in their second year. The donation was made more than 20 years ago by Harold Silver and other members of the Silver family with the express purpose to be managed by finance students during their MBA education. The original donation was a couple hundred thousand dollars and has grown to be worth more than $1 million.
Writer: Andrew Watson