1 Undergraduate Student Managed Fund Spring 2014 Presentation March 6, 2014.

1

Undergraduate Student Managed Fund

Spring 2014 PresentationMarch 6, 2014

2Student Managed FundFund ManagersSpring 2014 Presentation

Fund Managers

Officers:Lead Manager: Robert BaileyPortfolio Manager: Duston HodgkinsSecretary: Tom Blankemeier

Managers: Alexander Anisimov David Boudreau

Eric BourassaMichael Cox

Joseph GriecoMatthew MastrogiorgioLina Posada

3

Agenda

1) Investment Objective and Philosophy2) Investment Process3) Economic Outlook4) Portfolio Overview

1) Interesting Holdings2) Performance3) Attribution Analysis

5) Lessons Learned

Student Managed FundAgendaSpring 2014 Presentation

4Student Managed FundInvestment Objective & PhilosophySpring 2014 Presentation

Investment Objective & PhilosophyObjective• Outperform the S&P 500• Learn to analyze as value investors

Philosophy• Search for undervalued securities based on estimation of

intrinsic value compared to current market price

Style• Bottom-up approach

5Student Managed FundIndustry ManagersSpring 2014 Presentation

Industry Managers• Basic Materials: Matthew Mastrogiorgio• Consumer Discretionary: Robert Bailey, David Boudreau• Consumer Staples: Thomas Blankemeier, Duston Hodgkins• Energy: Alexander Anisimov, Michael Cox, Lina Posada• Financials: Thomas Blankemeier, David Boudreau, Joseph Grieco• Healthcare: Eric Bourassa, Robert Bailey, Alexander Anisimov• Industrials: Matthew Mastrogiorgio, Lina Posada• Real Estate: Eric Bourassa, Michael Cox• Transportation: Michael Cox• Technology: Joseph Grieco, Duston Hodgkins

6Student Managed FundInvestment StrategySpring 2014 Presentation

Investment Strategy

• High ROE & ROIC• i.e. ORCL

• Sustainable Barriers to Competition• i.e. ACN

• Consistent Return to Shareholders• i.e. SLB

• Strong Business Models• i.e. DTV

7Student Managed FundInvestment ToolsSpring 2014 Presentation

Investment Tools

8Student Managed FundInvestment ProcessSpring 2014 Presentation

Investment Process

Step 1

• Manager Researches Chosen Company

Step 2

• Presents Research to Other Managers

Step 3

• Thorough Discussion on Company Research

Step 4

• Majority of Managers Vote for Approval

Step 5

• If Yes Vote on Allocation of Capital• If No Conduct Further Research

9Student Managed FundPortfolio ApproachSpring 2014 Presentation

Portfolio Approach

• Seek to take positions at various percentage increments depending on a variety of factors

6% or under position• Strong fundamentals• Fairly valued• Carry more risk

6% or larger position• Safe/predictable• Strong upside

potential• Strong downside

protection• Undervalued

10Student Managed FundEconomic OutlookSpring 2014 Presentation

• Quantitative Easing and recent tapering • Unemployment in the US • Eurozone Recovery and Deflation

Economic Outlook


Quantitative Easing

The growth of the Fed’s Balance Sheet and Interest Rates

2008 2009 2010 2011 2012 2013$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Federal Reserve Balance Sheet 10yr Treasury

Tot

al A

sset

s (U

SD

$bn)

Inte

rest

Rat

e (%

)

Source: Bloomberg LP

• Interest rates appear to be on the rebound with the recent tapering of mortgage-backed securities and 30-year Treasury purchases


QE’s Affect on the US Equity Market

Correlation of Balance Sheet and Equity Performance


2008 2009 2010 2011 2012 2013$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Federal Reserve Balance Sheet S&P Index

Tot

al A

sset

s (U

SD

$bn)

S$P

500

Ind

ex le

vel

• With QE looking to halt by year end, will the equity market be able to maintain this positive trend without being artificially stimulated?


Strength of the US EconomyThe Unemployment rate 2007 – Present


Sep-07

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

Sep-12

Mar-13

Sep-13

456789

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61.062.063.064.065.066.067.0

Unemployment Rate Participation Rate

Une

mpl

oym

ent (

%)

Par

ticip

atio

n ra

te (

%)

1970 1975 1980 1985 1990 1995 2000 2005 201059

61

63

65

67

Participation Rate

Par

ticip

atio

n ra

te (

%)


• Slow Recovery• Deflation• European Central Bank and Outright Monetary Transaction

(OMT) program

Conditions in the Eurozone

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Portfolio Breakdown

Student Managed FundPortfolio BreakdownSpring 2014 Presentation

• Average weight per company: 5.88%

16Student Managed FundSector AllocationSpring 2014 Presentation

Sector Allocation

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Portfolio Performance

Student Managed FundPortfolio PerformanceSpring 2014 Presentation

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Portfolio Performance


Undergraduate SMF Portfolio S&P 500

Beginning Value(9/13/2013) $1,567,133.91 Beginning Value 1,687.99Current Value(2/28/2014) $1,731,941.92 Current Value 1,859.45OverallProfit/(Loss) $164,808.01

OverallProfit/Loss 171.46

Return 10.51%Return 11.18%

• Undergraduate SMF portfolio has underperformed the S&P 500 by 0.67% (67 BPS)

• Beta = 0.97, Sharpe Ratio = 2.48, Treynor Ratio = 0.29

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Individual Stock Performance


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Best Performing Stock - NVR• Real Estate: Homebuilder• Unrealized gain of 26.12%• Strong Q4 earnings EPS $21.15 vs.

estimates of $16.08• On December 18th management authorized

an additional $300 million buyback program


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Worst Performing Stock – Bed Bath and Beyond

Reason• Q4 guidance lowered• Worried about holiday season

Reinvestment• Growth opportunities• Free cash flow stability• Lower cost basis


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Attribution Analysis

Student Managed FundAttribution AnalysisSpring 2014 Presentation

23Student Managed FundAttribution AnalysisSpring 2014 Presentation

Attribution Analysis – Allocation Effect


Attribution Analysis – Selection Effect


Attribution Analysis – By Sector

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Risk Management

Student Managed FundRisk ManagementSpring 2014 Presentation

• Rigorous screening and analysis process• Purchased half of stocks analyzed or pitched

• Diversification across sectors to avoid aggregation risk• Stop-loss• Focus on long-term performance, not concerned with

short-term volatility

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Lessons Learned

Difficulties• Record high market conditions• Corporate social responsibility

Lessons• Corporate social responsibility initiative• Company price tracking• Teamwork and personal responsibility

Student Managed FundLessons LearnedSpring 2014 Presentation

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Acknowledgements

• UConn Foundation Board• Investment Advisory Board• Pat Terrion• Jeff Annello• Dr. Chinmoy Ghosh• Dr. Michel Rakotomavo• Laurel Grisamer

Student Managed FundAcknowledgementsSpring 2014 Presentation

1 Undergraduate Student Managed Fund Spring 2014 Presentation March 6, 2014.

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Transcript of 1 Undergraduate Student Managed Fund Spring 2014 Presentation March 6, 2014.