Students Find $350,000 Fund Pays Educational Dividends From: University Currents Date: May 17, 2000 By: Carey Hoffman Phone: (513) 556-1825 Photo: courtesy of Raj Mehta Archive: Campus News, General News If you think you get worried watching your stocks bounce up and down, consider what the students in Steve Wyatt's Special Topics in Finance class are going through this quarter. The class is the first in the College of Business Administration to get a crack at managing the Department of Finance's new Johnson Investment Counsel Fund. The fund, worth approximately $350,000, was a gift from finance professor Timothy E. Johnson. Finance students manage the fund as a learning experience, while profits will go for scholarships for future finance students. "The best thing about this is plugging concepts into the real world," says Chris Perry, one of the students in Wyatt's class. "You expect business school to be theoretical, so this is a great experience." Knowing the money is real "makes a huge difference," adds Joe Judge, another student from the class. "You know you can't just make random recommendations. You care about what you say here, because you know so many other people are working hard in this class. The bar is raised, and you want to look as intelligent as everyone else." Generating that sort of added impact for the students is just what Johnson had in mind. "The purpose is to give students real-life experience and, at the same time, know that they are affecting the future students' scholarships," said Johnson, who also is founder and president of Johnson Investment Counsel Inc., a highly successful local investment firm. "There are two kinds of help going on - one, the practical application of portfolio management and security analysis fundamentals for these students, and then the other being the scholarships for future students." As for the short-term fluctuations that have dogged the stock market this spring, they're not a big concern - the fund is designed with a long-term outlook. That doesn't make it any easier, however, for the students who argue for putting money in an investment in front of the class, then see that investment take a hit as the quarter progresses. Wyatt, head of the finance department, says the class emphasizes the mastery of fundamentals, not short-term gains. The class of about 20 students is divided up into panels that represent the real forces that would be involved in professionally managing a portfolio. Four main groups are analyzing management of the fund - a bond portfolio group, a stock analyst group, a tactical allocation group and an asset allocation group. Presentations are made when the class meets on Wednesday night, and then the deliberations begin. "One recent topic we've been going back and forth on is Microsoft," Wyatt says. "We have it in our portfolio, it's taken a big hit, and we wish we sold it, but now we've come to the conclusion that at its current price, it has good prospects. We think at the worst (if the government splits Microsoft), we'll end up with two good companies in the portfolio." The portfolio has 45 stocks in it and has gained about $10,000 since the beginning of the quarter, while the fund has also realized a 6 percent gain in cash holdings. Fund information can be found on the web. Plans are for the fund to be managed by a finance class every quarter, while the students' Financial Management Association (FMA) will also have input into the fund. A faculty group will oversee the fund's direction. "Running a fund like this is always a challenge. You won't know if you were right or wrong for a year or two, because this is really long-term investing. I always tell the students in my security analysis class that I'm going to give them an incomplete, then send them a grade in about three years," Johnson joked.