University Park, Pa. -- The student managers of the Nittany Lion Fund LLC, an investment portfolio at Penn State's Smeal College of Business that is worth $2.8 million, announced in their third-quarter report that the fund is up 12.98 percent since opening in January. The fund is considerably outperforming its benchmark, the S&P 500, which was up less than 3 percent when the report was issued.
Unlike most of the nearly 200 other student-managed investment funds around the country, the Nittany Lion Fund did not come from a university endowment. Rather, 44 investors have each placed at least $25,000 -- and as much as $250,000 -- under the control of the student fund managers.
Members of the Penn State Investment Association manage every aspect of the fund. These activities include not only equity research and stock selection, but also asset allocation, portfolio management, trading, compliance, and investor relations.
"Every decision is up to the students," says faculty adviser and fund CEO J. Randall Woolridge, who also is an investor.
That accountability, according to Woolridge, led the students to come up with an effective stock purchasing process that has been a major factor in the fund's success. Once a company is identified for potential investment, student managers meticulously research its stock to determine whether it's undervalued. Another team determines how much of the stock should be purchased if the investment is approved. The research teams then present their findings to the entire investment association. The stock joins the portfolio only if two-thirds of the students in the association affirm the purchase.
The fund's investors have also been a source of investment ideas. According to Woolridge, "A lot of our investors have made careers in the financial industry, so they're more than just investors -- they're mentors for our student managers. At the same time though, they are not afraid to voice concerns about how their money is being managed."
As of the end of the third quarter, the fund's performance has been driven primarily by stock selection. "The energy and health-care sectors have been the big winners for the S&P, and we made money there; but we also had good returns in the consumer discretionary, utilities, and information technology sectors," says fund president Ryan Miller, a senior pursuing degrees in finance and French.
The fund typically holds 30 to 35 stocks, with a targeted turnover ratio of 25 percent. The stocks performing the best for the fund have been Genentech, Abercrombie & Fitch, General Dynamics, Consolidated Energy, Western Gas, Texas Instruments, Vornado Realty Trust, and United Health Group.
The Nittany Lion Fund board of directors consists of Chairman Edward Hintz, president of Hintz, Holman & Robillard; David Branigan, executive director of Penn State's Office of Investment Management; Arthur Miltenberger, retired executive vice president and chief financial officer of the Richard King Mellon Foundation; J. David Rogers, founder and managing member of JD Capital Management; Woolridge as the fund CEO; and Smeal dean Judy Olian in an ex officio capacity.
For more information about the Nittany Lion Fund, visit http://www.smeal.psu.edu/fund/index.html