Stocks Rising at Pace
The Pace Student Managed Investment Portfolio has considerably outperformed its expectations since its founding in 2003. Recently the fund paid back its entire initial loan and continues to perform in an impressive manner.
Seventeen years ago, the Pace Student Managed Investment Portfolio (SMIP) was formed with a $165,000 loan from the Goldstein foundation, and $35,000 in gifts from Pace Board members. Today, it can undoubtedly be considered a major success.
“By 2003, we had $200,000,” said Professor of Finance Ron Filante, PhD. “That was the beginning of our story.”
Although Filante does indeed teach Finance 357—a course intended for juniors and seniors, in which students collectively manage the SMIP—he is without a doubt laissez-faire when it comes to anything regarding initiating trades and managing the fund. This investment fund, as per its name, is comprised of a portfolio selected entirely by students. Meaning the class, as Filante notes, is as experiential as experiential learning can get.
In addition to selecting which stocks to buy and sell, students conduct research, use Bloomberg terminals and stock analysis packages, and must pitch their classmates on their findings and recommendations. Which means that when the portfolio performs well, students see their hard work pay off via an increase the overall worth of the portfolio. And when the portfolio doesn’t perform well, students must face the sometimes-fickle realities of the market head-on.
“The fact that it was real money made me want to get more invested in it,” said finance major Matthew Martinez ’21, who took the class last spring. “I wanted to do deeper research, really put 100% in the class and do my due diligence.”
“The fact that they have skin in the game promotes a lot of interest in the program,” said Filante.
While the fund has seen its peaks and valleys over the years—the valleys being natural and often in correlation with the fluctuations in the market over the years—its long-term performance has been quite impressive. As of this writing, the fund is outperforming the S&P 500 by an impressive 10 points and is currently worth nearly $450,000, more than double the amount the SMIP started with in 2003.
Those numbers are even more impressive given the fact that as of this year, the fund has now fully paid back the initial $165,000 loan to the Goldstein Foundation, and, on top of that, have taken another $60,000 in gains and contributed it towards a Lubin scholarship.
“The formula that we’ve used in the past is one in which when we make profits—probably two-thirds of the years—we take half of those profits and keep the money, and the other half, we give back to repay the loan and to fund the Lubin scholarship,” says Filante. “Over the years, we’ve given back about $225,000. It’s been remarkable from the standpoint of both student learning and enthusiasm, and the financial results.”
Filante estimates that over 1,000 students like Martinez have helped manage the portfolio over the years, and that many have gone on to successful financial careers with many of the top-tier banks and investment funds. One recent Pace graduate, Anthony Senato ’19, considered his experience pitching stocks and managing the SMIP to be one of the most rewarding and compelling experiences of his time as an undergraduate. Senato hopes to have a long and successful career in financial risk management and credits his time with the SMIP as essential to making him market-ready for the working world.
“The class was really set up where you, or the students, make the decision. Professor Filante would not offer comments. One thing you learned is how to communicate with peers, and work with them effectively,” said Senato “You had to step outside that realm of ‘I want to pitch what I really like’ and step into the realm of ‘whatever you pitch has to be the best for the portfolio.’”
Senato and Martinez have also noticed that their experience in the SMIP has not only been worthwhile and valuable from an experiential and educational standpoint but has also proven to be an excellent resume item. When an employer hears about the SMIP, they often want to hear more.
“I feel like it’s an experience that a lot of students don’t necessarily get. Especially as a finance students, someone that would want to work with equities as a career in the future,” says Martinez “A stock pitch, for example, is a skill that you should learn before you get in the industry.”
“Students recognize when they go to job interviews, they can say I not only took a class in portfolio management, but I was a portfolio manager,” added Filante. “Which is a very different conversation.”
Over the next few years, Filante looks forward to continuing to oversee the fund, and perhaps find another professor to pass the class on to when he reaches his deserved retirement. For now, he is excited to help students continue to succeed and build their professional skills through this incredibly unique experience, the appeal of which Martinez was able to reiterate quite succinctly.
“We get to use actual money. It’s the closest thing to hands-on trading.”
Pace professors are ending the semester strong, weighing in on a number of current and evergreen issues in this month's edition of Fit to Print.
Fit to Print: May 2021
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The Library Shelf: May 2021