Student-run Funds Beat S&P 500 Index

On May 11, 2007, two student-run funds at the University of Maryland's Robert H. Smith School of Business reported beating Standard & Poor's 500 Index in their year-end performance presentations. The Mayer Fund is a $3 million endowment managed by 12 select students in the MBA program. The Senbet Fund is the undergraduate portfolio named in honor of Lemma Senbet, William E. Mayer Chair Professor in Finance.

Tray Spilker and Akinola Dosunmu, both 2007 MBA graduates and co-portfolio managers of the Mayer Fund, reported to the advisory board, faculty and administration at the Smith School that the Mayer Fund outperformed its benchmark S&P 500 Index by 267 basis points. This marks the sixth time in eight years that the Mayer Fund has outperformed the S&P 500 Index.  Since the Mayer Fund's inception in 1993 with a $250,000 contribution from the College Business and Management Foundation, it has focused primarily on equity selection through fundamental analysis. This year’s class, however, reported that for the first time, the Mayer Fund instituted a covered-call strategy on one of its key holdings to add excess return in a stagnant market environment. The members of the advisory board were impressed with the strategy and the overall performance.

Mayer Fund members of the Class of 2008 gave their market outlook for the next year. Bill Song, one of the co-portfolio managers, expressed concern about the slowing economy, persistent inflation and a drop in company expenditures. Despite their concerns, they are off to a fantastic start, beating the S&P 500 Index by nearly 200 basis points after only six weeks on the fund.

Immediately following the Mayer Fund presentation, the Senbet Fund gave their annual performance report.  With a $50,000 portfolio, the undergraduate-student-run Senbet Fund applies a similar strategy to the Mayer Fund: a thorough top-down analysis selecting stocks with strong fundamentals. The inaugural undergraduate class reported it beat the S&P 500 Index by 113 basis points during its fiscal year.

Both funds expressed gratitude to faculty advisor Sarah Kroncke. Kroncke, an MBA alumna who is finishing up her first year teaching at Smith, brings with her years of real-world experience as an investment banker at Deutsche Bank and Wachovia Securities. She teaches "Equity Analysis and Investment Management" in the Smith MBA program. The fund members emphasized how Kroncke was able to help them bridge the theories taught in the classroom with the real-world investment decisions they had to make to provide excess return for their shareholders.

Mayer Fund: http://www.rhsmith.umd.edu/mayerfund/

Senbet Fund: http://www.rhsmith.umd.edu/senbetfund/

▓ Bill Song, Mayer Fund Portfolio Manager, MBA Candidate 2008