By: Gene Walden, Senior Financial Editor February 08, 2019
St. Paul, MN - When Bethel University students gather in the Thrivent Asset Management Financial Markets Lab to discuss their stock selection strategy, they're not just going through the motions of a classroom simulation.
They're managing real money - more than $1 million in total assets - thanks to a partnership with Thrivent.
Just a year-and-a-half after launching the student-managed investment fund, the "Royals Investment Fund" is already paying dividends beyond the bottom line. Participating students who help manage the fund have not only garnered some important insights into the investment markets, they've also lined up some impressive job offers from several of the nation's leading financial firms.
And, by the way, their fund's investment results aren't so shabby either.
"So far, we're still outperforming our benchmark," says Xiaoshuo Liu, a recent Bethel graduate who now serves as the executive research assistant for the fund. But, of course, the mandatory disclaimer - past performance is no guarantee of future results - certainly applies here, and perhaps more so in this case since the student leadership of the mutual fund turns over every year as students graduate.
In all, 23 student participants have been involved in the management of the fund this year, with students assigned to a variety of specialties.
"They're not just picking stocks," says Amanda Carter, associate business and economics professor at Bethel and the faculty advisor for the program. "They're learning how to run the complete operation of a fund, utilizing a whole cafeteria of skills, including marketing, HR (human resources), data analysis, finance, and accounting."
The extracurricular program is open to juniors and seniors, with the seniors handling the leadership roles while the juniors learn the ropes in anticipation of taking over the reins of the fund the following year. Leadership roles include a chief investment officer (CIO), head of marketing, head of client relations, head of risk and operations, and head of research.
"The program gives the students the chance to learn how to run an asset management business from the top down," explains Janice Guimond, vice president, Investment Operations, Thrivent Asset Management, and a member of the fund advisory board. "They get real hands-on experience in stock analysis and portfolio management - as well as other components of the business."
"For me," explains Bethel senior Lacey Benz, who serves as the fund CIO, "this experience has become much more than just learning about investments and managing a fund. I had never had the chance to manage people before, so this has given me tons of leadership experience." Her experience has also led to a promising career opportunity - she recently accepted an offer to work on Wall Street with a leading investment firm after graduation next summer.
Beyond the Bottom Line
The Royals Investment Fund, LLC, was launched in the fall of 2017 through a partnership with Thrivent, who invested $1 million in seed capital to start the fund. Several other investors have since invested in the fund, raising the assets under management to about $1.25 million.
Around the same time, Thrivent Asset Management, the investment advisor for Thrivent Mutual Funds, donated the funding for an investment lab on campus in the Robertson Center that includes a conference table, several wall-mounted flat screen TVs with streaming financial news, and access to a comprehensive database of timely market research.
While the goal of the fund is to outperform its benchmark, the objective of the program goes much deeper.
"We believe that developing future talent is essential to the success of our industry," explains Mark Simenstad, Chief Investment Strategist, Thrivent Asset Management, who was involved with the launch of the program.
"It really gives us a leg up," says Bethel senior Andrew Heuss, the fund's head of risk and operations. "Before I even graduate, I'll have had two years of financial management experience. It's something I bring up right away in my job interviews, and immediately we're off on a 30-minute conversation." That experience has helped Heuss land job offers from several prominent financial firms.
"I think the fund has been a key discussion point in interviews for all of the students," says Chuck Hannema, associate professor emeritus at Bethel, who serves as an academic advisor for the program.
"It's a great talking point," agrees Nick Lee, who served as portfolio manager and head of research for the fund. "They were always impressed that I already had this knowledge and experience beyond the classroom." Lee is a January 2019 graduate who recently accepted a job in the wealth management division of a major Twin Cities-based bank.
"This is probably the greatest thing on my resume," adds Riley Magnuson, senior, a research analyst covering the utilities sector for the fund. "I had no experience with stocks before, but now I understand how the markets work, and I'm able to research companies and effectively present my findings to the group." Magnuson had been a pre-med student, but after participating in the program, he has had a change of heart. "Now I'm looking forward to a career in finance and investing."
But students insist that investing acumen is not the only benefit of the program. “You learn how to communicate clearly and effectively, how to delegate within the team, and how to do in-depth research,” explains Lee. “And you’re not just doing this in a class room. This is a real professional investment experience.”
“This has been a fantastic experiential learning opportunity for Bethel students,” explains Dean Junkans, a former CIO of Wells Fargo who now serves as a faculty advisor and executive-in-residence for the fund. “They’re facing many of the same kinds of challenges you’d face in any new business.”
“We’ve had a lot of bumps in the road going through the whole start-up process,” agrees Heuss, who has been involved with the fund since the launch in the fall of 2017. “But it has been a good problem-solving experience. I really enjoy thinking outside the box and meeting with the Thrivent people. It’s been a great spot for me, a great networking opportunity.”
“We’re very appreciative of the pivotal role Thrivent played in launching the fund,” adds Hannema, “and for the opportunity that our students have had to learn through their experience with Thrivent.”
“One of the reasons our partnership with Thrivent has worked so well is because our missions are perfectly aligned,” adds Junkans. “One of Bethel’s primary missions is to prepare young Christians to go into the world and make a difference, which is right in line with Thrivent’s mission of helping Christians live a more prosperous and generous life.”
“Thrivent’s mission is to help Christians be wise with money through the products and services we offer,” agrees David Royal, CIO of Thrivent Asset Management and president of Thrivent Mutual Funds. “But we also believe it’s important to help develop the next generation of talent to help people be wise with money in the coming decades and beyond.”
Stock Selection Process
The Royals Investment Fund (named for the Bethel "Royals" moniker) is an "all-cap" stock fund which invests in small-, mid- and large-capitalization stocks across a diversified range of sectors. (The fund also holds some exchange traded funds and a mutual fund to provide further diversification.) The goal is capital appreciation with some income to be reinvested, and a relatively low portfolio turnover ratio of about 20 - 40%.
New stocks can be added to the fund only after an extensive screening process that entails several steps:
1. Each semester, a team of about a dozen student research analysts research the stocks in their designated industries and compile short reports on two or three companies.
2. The analysts present their reports to the investment team, and the team decides which stocks to pursue with additional research.
3. The analysts then compile a longer more comprehensive report on each of the final candidates and give a follow-up presentation to the team. "The analysts are expected to support their position," explains Liu. "We encourage them to be objective, which may sometimes mean recommending against buying one of the stocks they've researched."
4. After those presentations, the student investment team votes on the stocks they believe should be added to the portfolio.
5. The student recommendations are passed on to the five-person advisory board. The board, which is made up of investment professionals from five Twin Cities investment offices, weighs the strengths of each recommendation and makes the final decision on which stocks to buy, which to watch for possible future investment, and which to reject. "They may decide on all of the recommendations or none of them," says Liu. "For the last set of recommendations, we bought five of the 10 stocks, and we're still watching two of them."