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Students invest on Wall Street

Marcela Berrios | Wednesday, October 4, 2006

The next time the toilet overflows in your residence hall and you wonder where the University’s money is being spent, ask a couple of the finance students in your section – they may have more access to the Notre Dame Endowment than you think.

In fact, the “Applied Investment Management” (AIM) course gives senior finance students the opportunity to manage a stock portfolio worth 3.7 million dollars – grown from a piece of the University’s Endowment – and establish working relationships with companies and investment firms along the way.

Finance professor Frank Reilly teaches the course alongside resident professional analyst Jerry Langley and Notre Dame Vice President and Chief Investment Officer Scott Malpass – although the students also learn from the different lecturers and guest speakers that often visit the classroom.

Alumni who have sat in the class themselves at one point during the course’s 11-year run don’t hesitate to come in and give students advice on their portfolio decisions – which may range from determining which company’s stock should be bought or sold, to researching the market to find new promising investment options.

Based on the portfolio handed over to them by the previous class, this fall’s AIM students are working with companies such as Anheuser-Busch, Coach, Dell, McDonalds, PetsMart and Tupperware Brands, among many others.

“The class is a really good introduction to the real world of finance and investment and what you will be doing after school,” said senior Ted Lawless, a student in the AIM class.

Every student is assigned one of the companies from the portfolio and is required to monitor and assess that company, and eventually make a recommendation to the classroom regarding the sale or the retention of the stock.

The students also make informed suggestions regarding companies they believe would make fine additions to the growing portfolio, and if the classroom approves, the students soon find themselves working with a broker from Mellon Bank to implement the decision.

In the past, the classroom used Standard & Poor’s 500 Index as a benchmark for the portfolio’s risk and returns – an objective the course has surpassed by approximately four percent every semester in recent years, Reilly said.

Any returns or dividends received are re-invested – which explains how the portfolio expanded over time into a worth of several million dollars. And while the University has left the portfolio alone to develop, it is still part of the Endowment and can be tapped into at any time.

“This course has developed a certain reputation in Wall Street due to the success of the student’s immersion into the world of corporate finances and stock trading,” Reilly said.

“Employers are always happy with our students’ performance and they come back every year asking for more.”

Some of his previous students are currently working in investment firms like Goldman Sachs, financial services providers like the Boston Consulting Group, large accounting firms and traditional banks like the Bank of America.

Reilly said most of the students build strong working relationships with companies and firms through their work for the course, and judging from past experience, most AIM students will receive approximately a dozen serious employment offers before Thanksgiving.

Lawless said he and his classmates receive “four or five e-mails every week from companies saying ‘We’ve noticed you’re enrolled in this class. We would really be interested in working with you. Please send us your resume.'”

Lawless also said this interest is due to the course’s reputation, but also to the professors’ own efforts to help them create a strong network with alumni and employers.

“At the beginning of the semester, the professors asked us for our resumes, and they put them all together in a book that they sent out to all their partners and associates to help us create our own network of business acquaintances,” he said.

They indeed have made friends in high places.

Wall Street’s interest in Reilly’s students is such that several companies even sponsor the classroom’s traditional trips to New York City and Chicago to visit different offices and attend lectures.

While the course may sound glamorous and the networking benefits of taking this class are certainly enticing, the workload is a strong dose of reality.

“It’s not uncommon for us to be up all night working on our [assigned] company’s reports,” said Shelton Tsui, another student in the class. “Coming up with our recommendations is a lot of work. You have to put in hours of research, and read analyst reports and business journals and magazines to really understand how the entire economy affects your company, and to be able to make educated guesses about the future.”

Tsui said he has already turned in approximately seven reports about Exxon Mobile – the company he is evaluating – and he suspected he would work on at least 7 more before the end of the semester.

Despite the heavy workload, the competition to earn a seat in the classroom is intense.

Reilly said last semester 65 students submitted applications, but only 25 were accepted based on their resumes, internship expertise and a personal essay.

Though there are no minimum GPA requirements to be eligible for the class, Reilly noted that the students selected are usually “some of the best students within the Mendoza College of Business.”

This semester, undergraduate senior finance students were given preference in the application process, but next semester Reilly said he plans to guide MBA graduate students in their portfolio management.