Csomstock fund gets high-tech home

Justin Costley

While Wall Street boasts some of the hottest real-world mutual-fund managers, a group of savvy student investors are burning much brighter at the University.
As one of only five student-run mutual funds in the United States that puts real money on the line, the Golden Gopher Growth Fund gives 20 MBA students each year the opportunity to manage $3 million dollars.
After a rocky start in its first year with single-digit returns, the GGGF took off this year, soaring 31 percent. The gain overshadowed the S&P 500 — up 11 percent — and the Dow Jones industrial average — up 17 percent. Only the technology driven Nasdaq beat the GGGF with a 40 percent increase.
The portfolio is comprised of stocks from 13 small Minnesota companies. The students manage the stocks with the guidance of several Twin Cities financial managers.
The fund was established in May 1998 by pledges from USBancorp, Norwest and Alliance Capital Management. Since its founding, it has grown 17.5 percent.

Learning in labs
A new financial-markets lab houses the fund, equipped with 12 personal work-stations and three state-of-the-art information systems in the Carlson School building’s main atrium.
The lab also includes high-tech audio-visual equipment, Internet access and an electronic ticker tape with real-time stock quotes.
Carlson’s investment program and financial lab are based on comparable facilities at the University of Texas-Austin and the University of Wisconsin-Madison. Cornell University also started a similar program recently.
Matt Dudley, one of Carlson’s student fund managers, said the information tools he has access to in this lab rival the resources he possessed when he worked for Citibank in New York.
While working in the lab, the students take on their three responsibilities — evaluating current holdings, tracking stocks and evaluating new companies for possible addition to the fund.
The students also serve on marketing, media and investor relations committees.
When the students decide to make a significant change in the fund, they have to go before their mentors.
“These are professionals who are working with professional research analysts for their companies who have already made recommendations on a particular stock,” said Dan Efron, student fund manager.
At these periodic meetings, the students recommend actions on existing holdings as well as possible future holdings.
“I’d say about 90 percent of the time they go along with what we say, and about 10 percent they have their own ideas,” Efron said.
Efron said the mentors use their own judgment to see whether the students have made a sound judgment on a stock.
“They can tell right away if you’ve done your homework or not,” Dudley said. “It’s not much fun getting up there and showing them that you haven’t shown as much diligence as you should have.”
The student investors said the program is about learning how to run a mutual fund professionally.
“Our goal is that this experience mimics the real-world experience,” Efron said.

The numbers have it
The Carlson School and the Twin Cities community have committed themselves to these programs encouraging so-called real-world experience. Proof of that is the $3 million invested in the fund by local companies.
The size of the fund, both in asset value and number of stocks, is expected to grow in the near future.
Fund managers are evaluating the option of adding new stocks to the portfolio. They expect the number of stocks to grow to more than 20 by January.
Despite the fund’s high profile, the program requires only about 10 to 12 hours of work per week for which students earn six credits a year.
Mort Silverman, a mentor from USBancorp Piper Jaffray, said the program has done well at using real money to help students gain a hands-on approach to what they’ll be doing in the investment field.
“From the standpoint of having the students identify companies to invest in, do the reading and research on them, go out and visit the management, call suppliers, customers, and make presentations, they’ve done very well.”

— Staff Reporter Peter Frost contributed to this article.

Justin Costley welcomes comments at [email protected]