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Success of Student Managed Fund at York College leaves student investors bullish on future

June 27, 2017
York College's Finance Lab

Andrew Rhodes spent early June pondering what seismic shock waves former FBI Director James Comey’s much-anticipated Congressional testimony might have – but it wasn’t about politics. Rather, it was about its potential effect on the financial markets.

As president of the Student Managed Fund at York College of Pennsylvania, Andrew has an incredible responsibility. He and about a dozen other students manage a six-figure portfolio of investments for the school.

Something as big as Comey’s testimony had the chance to disrupt the markets. It was a nerve-wracking scenario – with real money at stake – but it’s part of the hands-on learning experiences at York College.

“That’s what makes this organization so unique,” Andrew says. “I’ve never come across an organization that puts so much responsibility and so much pressure on individuals like myself and the organization. But it’s good pressure – the kind of pressure that turns coal into diamond.”

A win-win for students, school

So far, the students have responded with shiny results. Since October, the fund has grown from $250,000 to about $280,000. Its growth has even been a tick ahead of the S&P 500 Index, considered one of the top investment performance benchmarks.

“That just shows that we stick to our strategies,” Andrew says. 

The Student Managed Fund is the brainchild of Pawan Madhogarhia, a York College professor of finance and a faculty advisor. He pitched the school to allocate some investment funds from its pool to the program, and the administration accepted the proposal. 

It’s a win-win, Professor Madhogarhia says. The school doesn’t incur investment fees, and the students get real-word experience that will set them apart in job interviews and leave them more prepared to make financial decisions. 

“The goal of the fund is not so much to generate so much in returns,” he says. “It’s a learning exercise where students are dealing with real money, so the level of prudence and diligence that they show is more than if they were dealing with virtual money.”

Early investments pay off

The students can spend as much as 15 hours a week in the school’s NASDAQ Trading Lab. They have 32 work stations, real-time stock information on a NASDAQ sponsored ticker, and financial software like Bloomberg and Morningstar. It’s also where the Student Managed Fund hosts its meetings and hashes out which stocks to buy.

Students first invested in the Exelon Corp., a Fortune 100 energy company headquartered in Chicago. They bought in at $34.20 a share on Sept. 27; it was up to $36.63 as of early June.

So far, the most successful investment has been in the CSX Corp. The Student Managed Fund bought in Oct. 3 at $30.27 a share. As of early June, it was up to $54.54 a share – a whopping 80 percent return on the original investment.

Because the students use school funds, they adhere to a lower-risk approach. In fact, their investment policy statement limits them to securities within the S&P 500, which includes large companies. Investments in each sector and individual stocks are also capped. 

While students act independently – they propose their own stocks, discuss their merits, and then decide democratically – their professor still serves as a safeguard. As the students excel, the school has given them more latitude. 

Open to all students

While college credit cannot be earned for work with the Student Managed Fund, Professor Madhogarhia hopes that changes in the future.

Andrew is a rising sophomore and Finance major with an eye on working in hedge funds. The program is open to students in all departments; they just need to have a desire and willingness to put in the requisite time, Professor Madhogarhia says.

“On Wall Street, they don’t want people just from finance to join the team. They want people from all different backgrounds,” he says.

Whoever joins will get excellent hands-on experiences, even if it means some stressful days. An unpredictable political environment and hyper-charged news cycle always raise the possibility the market could dip.

Andrew and his colleagues were considering a strategy to mitigate that, should Comey’s testimony reverberate outside of D.C. They were fortunate: U.S. stocks finished mostly higher after the testimony.

Still, it was another high-pressure experience, the kind students might face in the real world.

“I’m sure our careers could come down to a moment like that,” Andrew says.

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