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Students learn to invest in class

Jen Rowling | Wednesday, August 31, 2005

A group of Notre Dame business students are set to receive real life financial experience in investing in the finance course Applied Investment Management (AIM), an 11-year old program for which students are required to apply.

AIM received approximately $70,000 from a student fund at the inception of the curriculum. Each semester the University added another $50,000 to the portfolio.

The portfolio’s growth into a $3 million investment was a direct result of University donations and portfolio performance, professor Frank Reilly said.

“[The University] realized when they gave us the money there was no promise how the students would do,” Reilly said.

For the last 10 years, the portfolio’s benchmark has been the S&P 500. During this time period, it has out-performed the S&P by an average of three percent each year.

Students must apply and be accepted into the AIM course. Each semester approximately 60 to 65 students send in their resume, statement of intent and transcript for review. From the pool of applicants, roughly 25 are admitted to the course. Ninety-five percent of the students are finance majors, Reilly said.

The team of instructors heading the course includes Bernard J. Hank, Professor Frank K. Reilly, Executive in Residence Jerry Langley – former Vice President of Global System Finance of McDonald’s Corp. – and Assistant Professor Scott Malpass, the Vice President for Finance and Chief Investment Officer for Notre Dame.

When students first enter the class, they are assigned to analyze one of the 25 stocks comprising the portfolio passed down from the previous semester. At mid-semester the students decide whether to sell or buy more of the individual stocks, Reilly said.

In the second half of the semester, each student chooses and analyzes his or her individual stock selection. At the conclusion of the class, students must determine whether or not to invest in the researched stocks. The updated portfolio is then passed on to the crop of AIM students.

Recognizable investments in the portfolio include Accenture, Avon Products, Dell, McDonald’s, Morgan Stanley, and United Health Group.

“Students are evaluated on the basis of their effort and input to the portfolio,” Reilly said. “The performance of the portfolio has nothing to do with the grade.”

Throughout the semester, students visit Chicago and New York. These trips offer the AIM participants exposure to a wide variety of money management firms, investment banks, private equity companies, hedge funds and real-estate portfolios.

Students who have taken the AIM class have gone on to work for such corporations and firms as Morgan Stanley, Goldman Sachs, Merrill Lynch, Boston Consulting, Fidelity Investments and Morning Star.

Roughly 500 Notre Dame students have completed the AIM course. The former students feel a strong allegiance to the curriculum and provide strong connections for current AIM students entering the job market.

“Employers who have these students feel they represent ND very well,” Reilly said.

Tim Lavelle, a finance major who completed the course last year, said that in all of his interviews, potential employers questioned whether or not he had taken the AIM course.

“It is the most applicable class I have taken and the fact that there are multiple professors is very good because they have their own perspectives and strategies,” Lavelle said.

Current AIM student Craig Brede said the advantages of the course are well-deserved given the effort put in by students.

“We learn everything we need to know to make us marketable to Wall Street firms,” Brede said. “Unfortunately, we pay for this by the enormous work load.”