Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW
Investment Club Watch
Return to Article

USC Students Beat Their Benchmarks With ADRs

Jonas Elmerraji

11/12/07 - 05:29 PM EST
The Center for Investment Studies at the University of Southern California's Marshall School of Business is tasked with preparing the school's graduates to make a serious impact in the professional world of business and finance. The center, founded in 2002 and currently headed by Professor Larry Harris, has positioned itself as a leader in financial analysis and valuation valuation.

USC Marshall student groups at both the undergraduate and MBA levels are working on honing their investment knowledge and experience. This Investment Club Watch will take a look at how the MBA investment group manages real money and beats their benchmarks benchmark.

The $4 Million SIF

The Student Investment Fund (SIF) is USC Marshall's crown jewel. The fund mutual-fund puts MBA students in charge of a $4 million school endowment, the proceeds of which are used to fund student scholarships.

The SIF sets USC apart from its peer schools for a couple of reasons. According to Professor Harris, "We have more money under [student] management, and the program is integrated into our curriculum."

The fund is managed by up to sixteen student managers money-manger who are handpicked to work in the fund. What does Harris look for in a student fund manager? He says, "We're looking for highly motivated, committed students who show a strong interest in investment management, and whom we believe could benefit substantially from the program."

The Student Investment Fund is comprised of four funds: the Provident Growth growth Fund (a growth fund growth-fund), the Trojan Equity Fund (a long term value fund value-fund), the Babcock California Fund (a small-cap small-capitalization-stock fund, half of which is composed of California-based companies), and the Marshall Fixed-Income Fund (a fixed-income fixed-income portfolio that includes U.S. Treasury us-treasury-bond notes note and various types of bonds bond).

The SIF's Provident and Trojan Funds

Mark Dombrowski, a manager of the Provident Growth Fund, says that he's "pleased" with the fund's performance since his team took it over in April. Dombrowski says, "We are up around 17% since April and we are beating our benchmarks [the previous portfolio and the S&P standard-&-poor Midcap Growth Index -index] by over 6%."

This upbeat sentiment was echoed by Kerrisha Jenkins, a manager of the Trojan Equity Fund. Jenkins says: "We have managed to exceed our benchmark [the S&P 500 Value Index] by a significant margin in large part by executing a tactical allocation asset-allocation strategy that significantly reduced our exposure to financials from May through September of this year. We chose to 'lock in' these gains relative to our benchmark, by purchasing international banks [like Lloyds TSB Group]with limited subprime credit exposure to more closely track benchmark sector allocations and further benefit from our expectation of a continuing decline in the dollar versus the Euro."

You can also see the Trojan Equity Fund's international theme at play in four of the equity fund's top five performing holdings:

USC's fast-paced MBA-run investment fund is certainly making the Marshall school a dynamic place to start a financial career. But enrolling in business school is not your only option to get a rigorous hands-on education in investing. Eric Ward, a student manager of the Trojan Equity Fund, has a few suggestions for young people trying to break into the investing world -- whether as full-time industry pros or self-directed individual investors. Ward says: "Join or start an investment group that manages either real or 'paper' money and try to run it as you would a real investment fund. Set mandates on investment criteria and understand each stock in your portfolio. [That way,] you will learn a lot about the markets, the economy, and the potential emotions that come into play."

Afterwards, Ward advises to "get out and start meeting people in the industry." He says, "You will have a lot more to talk about [with professionals] if you have had a couple months under your belt [of] managing your [group] fund and have learned from the experience."