When asked what makes the University unique, many are quick to point to Thomas Jefferson, the Lawn, the honor system or Division I athletics. A commonly overlooked aspect, however, is the University’s history with money management. From hosting a nationally acclaimed investment conference to training some of the world’s most successful investors, and hosting top programs in finance to supporting some of the nation’s largest student-run funds, the University sets itself apart from its peers by serving as a leader in money management education.
Last week, the Commerce and Darden Schools co-hosted the Second Annual Virginia Value Investing Conference. The conference assembled some of the nation’s top money managers to discuss a chaotic period in global financial markets. Students with a passion for finance compared the event to a rock concert for investing. The lineup for speakers was, no doubt, impressive. The keynote speaker was world-renowned short seller James Chanos of Kynikos Associates.
Short selling is essentially betting against a stock by borrowing shares and selling them in the market with the hope of later buying them back at a lower price. Chanos is known for selling short shares of notorious corporate catastrophes including Baldwin-United, Commodore International, Coleco, Integrated Resources, Boston Chicken, Sunbeam, Conseco and Tyco International. Barron himself dubbed his short sale of Enron as “the market call of the decade, if not the past 50 years.”
Legendary investor and philanthropist Julian Robertson also spoke. Robertson is most widely known for founding Tiger Management with only $8 million in 1980 and turning it into the world’s largest hedge fund with capital of more than $23 billion in the late 1990s. His fund realized annualized returns of 31.5 percent, a tremendous feat.
Other speakers included notable University alumni and leading hedge fund managers John Griffin (Commerce ’85), founder of Blue Ridge Capital; Lee Ainslie (Engineering ’86), founder of Maverick Capital; Paul Tudor Jones (College ’76), founder of the Tudor Investment Corporation; Carney Hawks (Commerce ’96), founder of Brigade Capital Management and Matthew Iorio (Commerce ’93), founder of White Elm Capital. Collectively they manage more than $30 billion.
To be frank, “the University has educated some of the best long/short equity mangers in the world,” said Christopher Brightman, the CEO of the University’s Investment Managing Company.
The University is home to two of the largest student-run funds in the nation: Darden Capital Management and the McIntire Investment Institute. Darden Capital Management is a student-run organization that manages four funds: Cavalier, Darden, Jefferson and Monticello. Through these independent funds, Darden students are given the opportunity to gain experience with investment analysis and portfolio management. The Cavalier Fund is a long/short equity fund that focuses primarily on domestic equities of any size. The Darden Fund is a small-cap fund. The Jefferson Fund uses a value-based strategy with concentration on companies with market capitalization between $200 million and $5 billion. The Monticello Fund is a global equity fund that combines bottom-up stock picking with global macro themes. Each fund has four fund managers who are responsible for making all the investment decisions. These managers are selected by application during the spring of their first year and receive 4.5 class credits toward their MBA.
DCM was founded in 1990 when the Darden Foundation recognized that hands-on management experience helps to prepare students for careers in investment management. At the time, the Foundation earmarked $250,000 of its overall endowment for active management by DCM. Today, DCM has more than $5 million under management between its four funds. DCM also sponsors presentations from leading professionals in the industry. It publishes a quarterly newsletter, The Advisor, which contains current holdings, recent transactions, performance figures and selected investment pitches. Fund managers present to Darden’s trustees twice a year and eight members are selected each year to attend the Berkshire Hathaway shareholder meeting in Omaha, Nebraska.
The McIntire Investment Institute, for which I serve as manager, is an entirely student-run long/short equity fund and is one of the largest in the nation at the undergraduate level. With a portfolio currently valued at about $440,000, MII operates as a nonprofit within the McIntire Foundation. Commerce alumnus John Griffin first conceived the idea, donating $1 million to the University in 1993, $575,000 of which was earmarked for a student-run investment organization. An initial $100,000 was made available to the students in October 1994 and an additional $200,000 was allocated to the fund in 2000. The Institute has since donated $150,000 of its gains, including $75,000 in April 2006 to help remodel Robertson Hall.
The Institute strives to achieve high absolute returns through a variant perception of the market. The MII believes this variant perception is gained by focusing on the key drivers of value for investment ideas and establishing credibility through tenacious VAR (value-added research). VAR involves contacting stakeholders (including customers, suppliers, competitors, experts, etc.) to better understand the business from the ground up. As president of the Institute, I can attest to the fact that all University students are welcome and encouraged to actively participate. The club’s membership currently boasts 10 managers, 7 associates and more than 100 members. In the last five years, our fund returned 42 percent, while the S&P 500 has declined 3 percent over the same time frame.
By hosting nationally acclaimed investing conferences and two of the largest student-run investment funds in the country, the University is on track to continue its tradition training some of the world’s best money managers.
Rahul’s column runs biweekly Thursdays. He can be reached at r.gorawara@cavalierdaily.com.
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