Students use real capital to develop investment skills

By Adam Duvernay
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SHREVEPORT, La. — Navigating financial markets is tough even for veteran investors, but real money serves as a learning tool for Centenary College business students dipping their toes into an ocean of investment opportunities.

Students in Centenary College's Frost School of Business have managed an investment portfolio for seven years and, with the help of their advisory board, have consistently turned a profit even in unstable markets.

The Student Management Investment Fund began with a $100,000 donation to the Frost school in 2004. The money was slated for an advanced investment class — Finance 460 — that would allow students the opportunity to manage and administer a real investment portfolio, according to course instructor Dr. Barbara Davis.

"That first group was one of the hardest as far as student work goes," Davis said. "They had to lay the groundwork and had the pressure of working something that had never been done here before."

Since then, students have managed the portfolio throughout the year, presented to the SMIF Advisory Board and passed down the profits to the next class with 4.5 percent returned to the Frost School, Davis said.

The fund is now valued at $130,417, having turned a profit every year except the recessionary year of 2008 when many funds lost value, Davis said. In 2008, the SMIF's return was -37 percent, but rebounded in 2009 to 26.7 percent, Davis said.

The students' hard work paid off with a 17.8 percent return for 2010, bringing the return since the initial investment to 37 percent, Davis said.

The class averages about 10 students a semester broken into five teams focused on large-cap funds, medium- to small-cap funds, international funds, alternative investments and fixed-income funds, Davis said.

"You can learn formulas and terms, but until you actually apply them, it doesn't really sink in," said Lyndsay Bertrand, who graduated after co-managing the international funds of the most recent class. "We'd never been responsible for this amount of money, someone else's money."

Students generally invest into mutual funds because of the limited value of the SMIF, Bertrand said. She said students use a list of criteria — like how old the fund is, how long the manager has worked with the fund and its turnover ratio — to narrow the students' investment field.

"Finding out everything we could about the companies was a great learning tool as to how to even begin a process like that," Bertrand said. "It's mind-blowing how much information is out there. It's hard to filter it."

The 2010 class used the S&P 500, Barclays Aggregate Index, Russell 2000, the MSCI-EM index and Wilshire REIT as benchmarks to gauge their success or failures in the market, beating those benchmarks six of 12 months.

About Centenary College of Louisiana

Centenary College is a private, four-year arts and sciences college affiliated with the United Methodist Church. Founded in 1825, it is the oldest chartered liberal arts college west of the Mississippi River and is accredited by the Southern Association of Colleges and Schools. Centenary is one of 16 colleges and universities constituting the Associated Colleges of the South and has been recognized as "One of the Best 373 Colleges" by the Princeton Review and one of "America's Best Colleges" and one of "America's Best Private Colleges" by Forbes.com. In 2008 Centenary College celebrated 100 years in Shreveport and Bossier City.