Seven years ago, students in Professor of Finance Steve Dolvin’s Applied Portfolio Management classes began investing $1 million from the Butler University endowment.
That million is now $1.4 million.
“The College of Business is growing substantially,” Dolvin said. “Enrollments are up, and the finance major is more popular. We want to make sure the class is available to more students, and we also want to offer it to the MBA students as well. Since we’ve done well, we felt that it would be feasible to start a second fund.”
MBA students will get a chance to invest the money in the fall, and undergraduates will have the opportunity in the spring, Dolvin said.
All students who invest the money take a prerequisite investments class that Dolvin teaches in which they learn how to evaluate stocks and build portfolios.
Applied Portfolio Management “is their chance to take that and put it into practice,” he said.
Typically, 12-16 students take the class each semester. They split into four teams, and each is responsible for two segments of the S&P 500. So one group may have consumer staples and industrials; another might have financials and healthcare.
The students provide their classmates with written information about each company, and they’re required to present formal metrics and analysis in the class. Approval by a two-thirds majority of the class is required to place an order to buy.
Students also get the benefit of an eight-person advisory board made up of local investment professionals, many of whom are Butler alumni. Each group gets two advisers for the semester.
Among the students’ best picks has been Express Scripts, a pharmaceutical benefits manager, which has doubled in value, split, and gone up more, Dolvin said. Home Depot also has doubled since they bought the stock.
About 20 fund managers oversee a portion of Butler’s endowment, which is currently valued at around $200 million. Over the past seven years, students in Dolvin’s classes have done about as well as any other manager. One quarter, they were the top performers.
And what have Dolvin and the students learned from that?
“We pay way too much money for people to pick stocks for us,” Dolvin said, “and not enough money for people to help us build portfolios.”