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NC State Jenkins MBA Students Continue to Beat the S&P 500

MBA students managing the SunTrust Wolfpack Focus Fund (the Fund) in the NC State Poole College of Management’s Jenkins Graduate School have beaten the Standard and Poor’s 500 cumulative performance over the past five years, reports Dr. Srini Krishnamurthy, associate professor of finance. He teaches the equity valuation course as part of the finance concentration in the college;s Jenkins MBA program.

Each spring semester, students in the class have a special project: assessing stocks and making investment decisions that will carry the fund through the year.

The fund was initially established in 2005 as the student-run SunTrust Fund, with a gift of $100,000 from Central Carolina Bank (now part of SunTrust Banks, Inc.). It was renamed as the SunTrust Wolfpack Focus Fund earlier this year, to reflect a change in the fund’s investment policy to also consider local companies headquartered in North Carolina.

About the students' track record, Krishnamurthy explains that $100,000 invested in the fund at the beginning of the year 2006 would have grown to $116,313 by the end of 2010. A similar investment in a typical fund that follows the S&P 500 index would have grown only to $110,503.

He explains further: To ensure an apples-to-apples comparison, the benchmark return is the total return on the S&P 500 index including dividends, less the operating expenses for a typical index fund of 0.267% per year. Since the SunTrust Wolfpack Focus Fund does not incur management fees, these are not included in estimating the performance of the benchmark index. The estimates of operating expenses are from the article “Are investors rational? Choices among Index Funds” by Edwin J. Elton, Martin J, Gruber, and Jeffrey A. Busse, published in the Journal of Finance in 2005.

Krishnamurthy has been teaching the class since 2009. It previously was taught by Dr. Richard Warr, associate professor of finance. Both are in Poole College's Department of Business Administration.

The students say they appreciate the hands-on experience that managing the Fund provides.

"It is exciting that as students we are in charge of maintaining a fund with real money and not just working through a simulation exercise," said Arlan Arthaud, one of this spring semester's students. "This is a very practical exercise and provides a learning opportunity."

Arthaud said that he has learned a great deal about screening variables and the importance of a solid knowledge in statistics and analysis of data. "Because these were the foundation of the course, we were able to identify stocks that, given historical and projected data, are expected to generate an alpha in the Suntrust Wolfpack Focus Fund," he said. "We not only learned how to use tools to select the best possible stocks but also learned several techniques on how to measure and track performance."

The course also provided some "practical wisdom," he said, "like not chasing a career just for monetary gain. We were encouraged to find something that we really enjoy doing and (to know) we will be more satisfied and potentially successful by enjoying our work."

Alumni Return as Guest Speakers, Bring Career Insight

Near the end of the semester, the students had a chance to gain additional perspective when Chris Campbell and Justin Nicholson, alumni of the Poole College of Management and now associate directors with BB&T Assessment Management/Sterling Capital in Raleigh, N.C., spoke about their respective roles in their company.

They covered topics ranging from software applications to fund management and performance measurement  the nitty-gritty of how investment management works. Whether considering the profession as a career path or just interested in the field for their own personal investment activities, the MBA students said they appreciated the insight provided by the speakers.

"I believe the discussion will play a significant role in my personal investment decisions," said Gabriel Ives, who is graduating this spring with an MBA concentration in supply chain management. He said he was impressed with the speakers' reliance on metrics related to their respective functions, and how closely the two work together – one in equity trading and the other in portfolio management.

Their presentation, he said, "instilled in me a bit more confidence that active managers can beat the market on a consistent basis. Being exposed to real-world asset managers was very valuable and informative."

Agustin Guerrero, also graduating this spring, said he found the software applications being used to track stock and index movements particularly interesting. "It also was very useful to know what everyday work looks like for a professional dealing with equity trading and fund management," he said.

For Hsaing-Lin Tseng, learning about a trader's daily work, asset management skills and how they are evaluated provided a clearer understanding of this career path.

Arthaud, who said he is interested in investment primarily for his own personal use, came away from the classroom discussion with a greater understanding of the proper mix of sectors needed in a portfolio to achieve goals, while Mitch Simmons said the speakers  presentation helped him "solidify my career plans in wanting to be a trader."