CSOM investment group seeks funds

A Carlson School of Management student group oversees $15 million, but members said they want more.

Carlson Funds Enterprise, made up of Master of Business Administration students and one undergraduate, operates at a loss despite the amount of money it manages, Joe Barsky, the group’s program director said.

The students manage money that several companies and corporations have invested.

The group is now trying to convince local investment management firms and corporations to invest more, Barsky said.

Barsky said it costs approximately $400,000 per year to run the group, which includes faculty salaries and technology.

The group’s 1,000-square-foot financial markets lab rivals technology used on Wall Street, Barsky said.

He said the fee the group charges companies covers approximately one-third of operating costs.

The fees are collected from two funds the group manages.

The group charges 1 percent on the $4.5 million Carlson School growth fund, an equity fund, and 0.5 percent on its $11 million Carlson School fixed income fund. The administrative fee makes approximately $100,000 each year, Barsky said.

Another $50,000 to $100,000 comes from private donations and the remainder is provided from a foundation, Barsky said.

But he said Carlson School Dean Larry Benveniste has pressured the group to become self-sustaining.

“The dean said we need to get closer to breaking even,” Barsky said.

The group can have a maximum of 99 investors, so it is seeking investors willing to commit large sums of money, Barsky said.

M.B.A. student and group member Devon Muir said the group is creating a “pitch book” that will contain information on the group’s growth and financial reliability.

Professionals often use pitch books to market a firm, he said.

“This is another aspect of practical learning,” he said. “In the investment world firms do this regularly.”

Although the group is seeking relatively large investments, it does not seek them from the largest corporations, Barsky said.

“We mostly look for really small companies that people either haven’t heard of, or the stock isn’t making headlines,” Barsky said.

He defines “really small companies” as those that have market capitalization of less than $2 billion. Market capitalization is evaluated by multiplying the price per share by the number of shares the company offers, Barsky said.

Muir said the fixed income fund buys mostly bonds.

M.B.A. student and group member Manos Pytikakis said the group sets its standards of growth high.

The group uses Lehman Brothers investment firm and the Russell 2000 Growth index as “benchmarks” for their success, he said.

“Obviously, if you replicate exactly the index portfolio, you will perform as good as the index,” Pytikakis said.

“However, everybody tries to beat the index by either overweighting or underweighting certain parts of the sectors,” he said.

Muir said the group has performed well.

“We’re consistently beating our benchmark,” he said.

He said he is confident in the group’s ability get more investment money.

“It wouldn’t be unthinkable for us to have $20 million in the next two years,” he said.

Pytikakis said the group does not manage its large investments haphazardly.

“We have mentors and we’re overseen by advisers that make sure the strategy is right and it makes sense,” he said.