Student Managed Funds
Under the faculty mentorship of Professor Daniel Pu Liu and Assistant Professor Craig Rennie, the Garrison Financial Institute oversees six student managed-funds.
These investments include the Rebsamen Fund, an undergraduate hybrid fund with assets of approximately $1.1 million; the $380,000 Shollmier Fund, a hybrid fund managed by MBA students; the Arvest Fixed Income Fund, a $5 million fund belonging to Arvest Bank; two separate accounts, one with $5 million and one with $250,000; and an energy fund with $50,000. Altogether, these six student-managed funds total approximately $11.3 million. The hands-on experience that our students receive through the management of these funds, give them an advantage in obtaining jobs when they graduate.
The goal of each equity fund is to outperform the Russell 1000 Index. Students use a consistent investment philosophy for the all of the equity funds mentioned above. The philosophy is a structured approach to top-down asset allocation and bottom-up securities selection. Based on a model for the Garrison Financial Institute developed by Professors Wayne Lee and Craig Rennie, students start with a top-down analysis of external factors such as industrial production, inflation, yield curve, and market risk premium. Unlike traditional models that assume historic mean returns to forecast expected future returns, the Garrison Financial Institute model uses implied returns from the Black-Litterman model whereby current market weights can be used to forecast implied market returns. Black-Litterman model returns are used in the Garrison Financial Institute top-down asset allocation model to estimate optimum weights in each market sector. The goal of this model is to generate future returns that will be higher than the Russell 1000, but with lower volatility.
The top-down analysis is integrated with a bottom-up stock selection model. This bottom-up model ranks stocks in each size-sector based on their sensitivity to eleven technical and fundamental factors, and selects the stocks expected to outperform their peers. Students then vet the selected stocks, applying fundamental and technical analysis. At weekly Investment Committee Meetings run by the Garrison Financial Institute, students make buy, sell, or hold recommendations, on a sector by sector basis, for each stock held by our funds.
The Shollmier Fund, managed by our MBA students, was established in 2000 with a $250,000 investment from Dudley and Ken Shollmier. It was valued at more than $380,000 at the end of 2007. Since inception, the Shollmier Fund portfolio returned 71.54 percent cumulative return compared to a 66.81 percent cumulative return for the Russell 1000 Index. For the six-month period ending June 30, 2008, the fund bested its benchmark by 2.94 percent earning -8.25 percent compared to a -11.19 percent return for the Russell 1000 Index.
Each week, the Shollmier class meets with the undergraduate portfolio management class to discuss the investment portfolio and to make buy, sell or hold recommendations. Craig Rennie is the faculty mentor for both classes.
Arvest Bank Fixed Income Fund
Under the faculty mentorship of Professor Daniel Pu Liu, undergraduate students manage a $5 million fixed-income fund held at Arvest Bank. Students make investment recommendations based on their economic outlook, interest-rate forecast, and comparisons of the relative value of treasury securities. Participation in Dr. Liu's fixed income class is competitive, and only our best finance students are admitted.
Established in 1971 with a $100,000 gift from the Rebsamen Foundation, the Rebsamen Trust has now grown to approximately $1.1 million. Managed by undergraduates under the faculty mentorship of Assistant Professor Craig Rennie, this hybrid equity fund has, since inception, returned 210.22 percent compared to a 163.61 percent cumulative return for the Russell 1000 Index. For the six-month period ending June 30, 2008, the fund exceeded its benchmark by 7.74 percent earning -3.45 percent compared to a -11.19 percent return for the Russell 1000 Index.
Together with MBA students from the Shollmier Fund, these undergraduates make buy, sell and hold recommendations.
University of Arkansas Foundation Fund
Since June 2007, students have managed a $5,000,000 fund for the University of Arkansas Fayetteville Campus Foundation. For the fiscal year ending June 30, 2008, the fund exceeding the benchmark by 17.53 percent, earning 5.17 percent compared to a -12.36 percent return for the Russell 1000 Index.