YPSILANTI - For many investment fund managers, beating the S&P 500 is a pipe dream.
Since 2007, just 35 percent of fund managers have earned an annual investment return exceeding the performance of the Standard & Poor’s 500 index in any calendar year, according to Bloomberg. Beating the market is all the more difficult these days due to factors like inflation, rising interest rates, an ongoing war, and the looming specter of a possible recession.
Despite the daunting odds, the Eagle Investment Fund (EIF), a student-managed investment fund supervised by faculty in Eastern’s College of Business, has outperformed the S&P 500 by 1.63 percent since last April. In addition, the EIF has beaten the All Country World Index (ACWI)—an important global equity index that includes international stocks—by 4.40 percent during the same time period.
“Beating established benchmarks like this is very difficult, especially during a time when markets have declined and we are seemingly at the doorstep of a recession,” says Ivan Rodriguez, EMU assistant professor of Finance and an EIF faculty advisor.
From the EIF’s launch in March 2019 to January 2022, it earned a 9.99% rate of return. What accounts for the fund’s success? Diligence, solid application of concepts learned, and strong mentorship.
Yu Zhang, EMU professor of Finance and EIF faculty advisor alongside Rodriguez, says the fund has two primary goals.
“Providing hands-on experience in managing a portfolio to students interested in financial investment careers,” she says. “Secondly, developing the students’ professional skills through the writing and presentation of a year-end financial report to their external advisory group. It’s a big deal that the students and advisory board take very seriously.”
The skills students develop can also translate into internships and potential jobs.
“Already, two EIF members have found jobs with a local investment company,” Rodriguez says.
Currently, 11 undergraduates and five graduate students make up the EIF team. Most are accounting or finance majors within the College of Business. To join, students go through a competitive application and interview process. Students can receive up to three credit hours for a one-year tenure as a fund manager.
At weekly EIF meetings, the team members discuss the performance of their holdings and develop investment policies and strategies. Currently, the fund has 40 to 50 stocks in companies like Berkshire Hathaway, Inc., Lockheed Martin, Microsoft, Adobe and others.
In addition to receiving feedback from faculty advisors, the advisory board—comprised of four experienced fund managers (three of whom are EMU alums)—provides professional guidance.
“The advisory board members work in the field every day and are in the best position to share insights about current financial trends,” Zhang says. “They also share information about what the industry is seeking from job applicants.”
Vincent Hayes, an Eastern MBA student, has already benefitted from his experience as EIF lead portfolio manager. In September 2021, he landed a job as a financial analyst with PFM, a Philadelphia-based financial services company that serves public entities like local governments and school districts.
“My involvement with the fund has been one of the most intellectually stimulating exercises of my life,” Hayes says. “Thinking critically about what makes companies succeed, what could be hindrances, what are relative risks and strengths—everything learned is cumulative and constantly informing your next step as a fund manager.
“The advisory board is also invaluable. Our stock selection presentations to them are really sales pitches. During one of our meetings, an advisor said he could tell we had thought very critically about our selections. He said he’d let us manage an SMA [separately managed account] right now. Those comments really mean a lot to us.”
Kenneth Lord, dean of EMU’s College of Business, says the EIF’s success isn’t surprising. The fund is also attracting prospective students.
“The EIF student managers perform high-quality work and use a very sophisticated approach to determine their allocations,” Lord says. “There will naturally be ebbs and flows in the marketplace. Not every quarter is a winner. But they consistently match or beat marketplace benchmarks.
“When I meet with prospective students and their parents, I always mention the Eagle Investment Fund. It creates an additional opportunity for students to apply their training at a very high level. Participating is a tremendous plus for them as they enter the job market.”
The EIF began with $100,000 in “paper money,” or virtual dollars, for use in an AmeriTrade account. Since establishing a successful investment track record, donors have given $110,000 ($60,000 from the College of Business and $50,000 from the EMU Foundation) to the EIF for future use in a live brokerage account. Returns could help students pay for conference fees, as well as College of Business or other university initiatives.
“In October, EIF students attended the 9th annual Student Managed Investment Fund Consortium Conference in Chicago,” Zhang says. “They not only received third place in the firm analysis competition, they also met with industry professionals and learned about their careers. Those experiences are invaluable in helping students make their own career choices.”
Visit the Eagle Investment Fund website to learn more about the fund, how to join the EIF team and how to become a fund benefactor.
About Eastern Michigan University
Founded in 1849, Eastern is the second oldest public university in Michigan. It currently serves more than 14,000 students pursuing undergraduate, graduate, specialist, doctoral and certificate degrees in the arts, sciences and professions. In all, more than 300 majors, minors and concentrations are delivered through the University's Colleges of Arts and Sciences; Business; Education; Engineering and Technology; Health and Human Services; and its graduate school. National publications regularly recognize EMU for its excellence, diversity, and commitment to applied education. Visit the University’s rankings and points of pride websites to learn more. For more information about Eastern Michigan University, visit the University's website. To stay up to date on University news, activities and announcements, visit EMU Today.