Student Managed Portfolio Project Outperforms Market Indices

Four students from the Student Managed Portfolio Project present to Cal Poly Coporation Board. When it comes to investing, the unpredictable financial market can shake even the most veteran industry professionals all around the world. But imagine being a student responsible for investing hundreds of thousands of dollars — of real money — for the first time. That’s exactly what Cal Poly finance students do through the Student Managed Portfolio Project (SMPP), a hands-on program steeped in Cal Poly’s Learn by Doing philosophy.

The SMPP gives a select group of senior finance students the responsibility of managing nearly half a million dollars of Corporation funds — and with it, managing the ups and downs of an ever-changing stock market.

This year has been no easy sprint for the 25 current SMPP students. From dropping commodity prices to presidential elections to a slowing Chinese economy, students have learned first hand that a career in finance isn’t always about earning money.

On January 29, 2016, four Orfalea College of Business students stood strong and confident in the Cal Poly Corporation’s Board of Directors meeting as they presented an update on this year’s investments totaling $455,850. While the overall Vanguard Dividend Appreciation index has dropped almost 10 percent since the beginning of the yearlong project in September 2015, the students’ portfolio value has decreased by a modest 2.5 percent. A few of the stocks they have selected, such as Nike and Lowe’s, have even seen significant growth throughout the tough market conditions. The team also holds a percentage of their capital in cash, and is always looking for more opportunities to maximize their investment.

The Orfalea College of Business has conducted the SMPP as the capstone experience in the finance concentration since 1992 when it was founded by Professor John Lindvall. The course is now helmed by Professor Cyrus Ramezani and Phillip Cohl, senior vice presidents of investments at local firm Stifel. The class is patterned after a real-world relationship between a client (the Corporation) and its adviser (the SMPP students). Though students only earn four units for the course, it requires a yearlong commitment from all students.

Each year, the new crop of student fund managers assesses the portfolio from the previous year’s group. Fall quarter is dedicated to conducting due diligence while developing a strategy for the coming year. In winter and spring, they research new investment opportunities and manage their stocks accordingly. Students are given access to guest speakers to advise them on their investment selections as well as industry-grade news publications, including The Day Ahead and Confluence Comments, to stay on top of the major political and macroeconomic factors affecting the market.

“There’s nothing like real money to drive accountability,” said Ramezani. This year’s course has been much more challenging than last year. Our students are earning such valuable experience here that will directly translate into their careers.”

This year, Ramezani feels that students have been forced to be more resourceful and apply their skills to a market that is defying many of the trends the students have studied during their four years at Cal Poly, especially with historically low oil prices. They are asking themselves the same hard-hitting questions that senior industry professionals are addressing today: how do we ride out the present instability with the focus on long-term, dividend-bearing investments?

Through the uncertainty, each student in the SMPP is gaining valuable knowledge about the finance industry. Student Kevin Louge said navigating real money through these unexpected conditions was a major help in landing a job as a financial analyst at Clorox before graduation.

Through all the market’s ups and downs, students are learning how to not just stay afloat, but thrive in the hard times that scare many others away from the investing world. Student Montana Kosty said that the Learn by Doing approach to the SMPP has allowed her to leave Cal Poly with a knowledge of how to face finance’s toughest challenges head on.

We are responsible for what happens to their investments, so there’s a great deal of pressure to make the right decisions,” Kosty said. It was an honor to present on the progress of the portfolio and class to the people who made it all possible.”

To give back to the Finance Area in the Orfalea College of Business and support the SMPP, visit Cal Poly’s secure giving website.