Tag Archives: finance

Historic MBA class gift seeds Foster’s first student-run investment fund

MBA-Investment-Fund3
Senior lecturer Lance Young and portfolio managers Brennen Ricks, Tristan Toomey, Aalok Shah and Brett Schulte.

Lance Young is not afraid to wield a sports metaphor when it’s warranted. And to describe the Foster School’s new MBA Investment Fund, his game of choice is baseball.

“It’s like AAA ball,” says the senior lecturer in finance who serves as faculty advisor for the nascent student-managed fund. “We play the game to the best of our ability the way it’s played by research and money management shops, applying all of the frameworks we learn here at Foster.”

That is to say, the school’s “minor league of investment management” is educational, but not academic. The fund is a serious venture led by portfolio managers and informed by research analysts, each following a disciplined and rigorous strategy.

And now, they have real money to invest.

Funding

That money originated with the Foster MBA Class of 2011 which dedicated its outgoing class gift toward creating a live investment fund for future students to manage as an indelible learning experience and a pipeline to the majors, so to speak.

“We wanted Foster to develop more opportunities for MBA students with an interest in finance, and also improve the competitive positioning of the school,” says ringleader Andrew Parcel (MBA 2011), now a vice president and private wealth advisor at Goldman Sachs. “This seemed like an obvious way to add a tool for recruiting students and improving the chances of finding work in the investment community.”

Under the guidance of Thomas Gilbert, assistant professor of finance, leaders of the MBA Finance Society began drawing up structure, policy and procedures for the fund. The subsequent MBA Classes of 2012 and 2014 dedicated all or parts of their graduation gifts to the initiative. Dean Jiambalvo added to the account.

And late last spring, well ahead of expectation, the fund reached its trigger point of $100,000. Go time.

Founding

With Gilbert away this year as a visiting professor at the University of British Columbia, Young stepped in. And Tristan Toomey stepped up.

Toomey, this year’s Finance Society president, recruited fellow second-year MBAs Aalok Shah, Brennen Ricks and Brett Schulte to serve with him as portfolio managers. They “hired” 13 first-year students as research analysts and commenced building a boutique investment fund from the ground up.

This has required discipline and patience. Before a cent of capital was invested, the team established a viable organizational and spent most of the academic year systematically populating a massive matrix of market data that will become a library for future MBA fund managers.

This analysis trickles down from economy to industry to firm. “In the next stage we’re looking at particular companies that present real alpha because they’re doing something innovative that can provide positive returns in the long term,” Toomey says.

Young adds that the experience has been a de facto capstone of the entire Foster MBA experience.

“If you want to find alpha, you have to understand a company’s business better than the rest of the market does,” he says. “That takes an analytical capability that comes from all the disciplines we teach at Foster. Every one of those checkmarks on the matrix is a framework applied.”

Future

This year’s portfolio managers have made their first investments of the fund—now over $300,000—just weeks before they graduate. “We knew that building continuity was the most important thing this year,” Toomey says.

The legacy will be both a working fund and a class outside the classroom—to be passed like a torch to future Foster MBAs of the finance persuasion.

“If we had done this in a theoretical setting, we could never achieve this level of reality and practical learning,” says Toomey.

“But because we have real money and report to real ‘shareholders,’ ” Young adds, “we have to follow a rock-solid investment thesis that makes sense and has the Foster brand on every trade.”

Dan Poston, assistant dean for graduate programs, notes that the fund, from concept to execution, is an exemplary collaboration between former, current and future Foster MBAs.

“As a sustainable, practical piece of the Foster education,” he says, “the way the fund mimics reality in its design and its management is a beautiful thing.”

Maybe even a grand slam.

Great reads: personal finance

Ask a group of finance and accounting faculty at the University of Washington Foster School of Business to recommend a book on personal finance and you wouldn’t expect to get a list of “Get Rich Quick” titles. Nor did we. Instead, our selected scholars dug deeper, offering more discerning picks to improve your command of investing and comprehension of the financial markets, with a couple of unorthodox choices and one clear favorite:

random-walk-down-wall-streetA Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Burton G. Malkiel)

“A great book that explains why the average retail investor should hold low-cost index funds (as I teach in my core MBA class). Don’t waste your time and money picking stocks since even the pros have a hard time beating the market. I hold the market and I always sleep very well at night!”
Thomas Gilbert, Assistant Professor of Finance.

“Malkiel discusses how capital markets work and explains in intuitive terms why they are as efficient as they are in a really approachable and interesting way.”
Lance Young, Senior Lecturer of Finance and Business Economics

“A classic primer on individual investing, this book is a great read for beginners and more advanced investors alike. Malkiel walks through basic investing strategies in a non-technical and entertaining way. I’ve recommended this book to several family members who were starting out on their own investing.”
Jennifer Koski, Associate Professor of Finance

“Malkiel is a Princeton economist and a long time Vanguard director.  Read the book and learn how to become a true ‘Boglehead.’ Diversify, buy and hold, minimize transactions costs. It really is that simple.”
Rocky Higgins, Professor of Finance

“A classic that provides a great overview over investing and keeping costs under control.”
Stephan Siegel, Associate Professor of Finance and Business Economics

undercover-economistThe Undercover Economist Strikes Back: How to Run—or Ruin—an Economy (Tim Harford)

“Fiscal and monetary policy have become the topic of dinner table conversations since the financial crisis. Harford provides an easy to access book on the different theories on how to create a thriving economy. It’s detailed enough to be useful but not so nuanced as to overwhelm readers less familiar with macroeconomics.”
Jonathan Brogaard, Assistant Professor of Finance

only-investment-guideThe Only Investment Guide You’ll Ever Need (Andrew Tobias)

“I first read this book when it came out in 1978. I then gave it to several non-academics to read, including my mother. It is simple, usually correct, often funny, and free of the jargon designed to make readers feel stupid. These characteristics put it way out front of the class of personal finance books. While the world was much different 30 years ago, I am confident the recent new editions will be very helpful.”
Ed Rice, Associate Professor of Finance and Business Economics

the-big-shortThe Big Short: Inside the Doomsday Machine (Michael Lewis)

“Lewis takes a look at five investors who figured out that the housing market was overvalued in 2005 and the travails they faced in ‘betting’ against the market. This illustrates how difficult it is to find mispriced assets in a capital market and how hard it can be to actually profit from the mispricing if you do manage to find it.”
Lance Young, Senior Lecturer in Finance and Business Economics

how-we-decideHow We Decide (Jonah Lehrer)

“A great book for someone who wants to understand the mental process underlying personal finance decisions.”
Frank Hodge, Professor of Accounting

 

 

financial-shockFinancial Shock: Global Panic and Government Bailouts – How We Got Here and What Must Be Done to Fix It (Mark Zandi)

“Zandi identifies the origins of the subprime financial crisis—the most important financial event since the Great Depression—and examines the impact the crisis had on financial markets, the economy and households.”
Frances Maloy, Lecturer of Finance and Business Economics

 

wall-street-journalThe Wall Street Journal, Money, Bloomberg BusinessWeek

“I really don’t read personal finance books, but I try to accumulate knowledge and ideas through these periodicals which do a pretty good job covering personal finance.”
William Bradford, Professor of Finance

 

dilbertDilbert and the Way of the Weasel (Scott Adams)

“I’m actually recommending125 words of this book by the creator of Dilbert. His Everything You Need to Know about Financial Planning is so sound that I teach it in my class and so concise that it fits in a book recommendation. Here’s the whole thing: ‘Make a will. Pay off your credit cards. Get term life insurance if you have a family to support. Fund your 401(k) to the maximum. Fund your IRA to the maximum. Buy a house if you want to live in a house and can afford it. Put six months’ expenses in a money market fund. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues) hire a fee-based financial planner, not one who charges a percentage of your portfolio.’ ”
Jonathan Karpoff, Professor of Finance

Foster students manage the business end of the UW’s EcoCAR Challenge

UW's eco carA team of UW students recently took second place in the EcoCAR 2 Challenge. Its modified Chevy Malibu traveled 48 miles on an electric charge before switching to its biodiesel engine—making it the most energy-efficient car in the 15-school international competition. A brilliant feat of engineering.

Behind that engineering was some savvy business support from Foster School students. Nicholas Wilson (MBA 2012), Tyler Rose (MBA 2013) and Taj Matthews (MBA 2013) served as business managers for the first stages of the three-year project. Alex Ong, a senior studying finance, took the engineering and design team through to the finals earlier this year at General Motor’s Milford Proving Ground.

The son of engineers, Ong has no formal technical training of his own. “But I’m interested in cars and I knew a few things,” he says. “Enough to get the conversation going.”

His role was to manage the project’s six-figure budget, cultivate and communicate with sponsors, and provide financial reporting to funders and competition organizers—GM, the US Department of Energy, and a wide range of transportation and renewable energy firms and organizations.

In Detroit, the team finished first in eight categories, including quickest acceleration, lowest energy consumption and least greenhouse gas emissions. While his colleagues put the car through its paces, Ong presented the team’s financials to a panel of judges representing the sponsor organizations.

It was a unique experience, this working collaboration of engineering, business, communications and visual arts.

“There’s nothing like it at the UW,” Ong says. “It was an incredible interdisciplinary learning experience where you had to work together with people who have no knowledge of your expertise and vice-versa. Otherwise, the whole project falls flat.

“That’s about as real world as it gets.”

The UW has been selected to compete in EcoCAR 3 beginning this fall. Ong plans to recruit fellow Foster students to better distribute the workload and formalize procedures to ensure continuity over the project’s four-year run.

The team just learned that they get to play with a Camaro this time around.

Senioritis? Bah. Count Ong in.

Undergrads trek to San Francisco to network with employers

Guest post by Zak Sheerazi, assistant director of career development, Undergraduate Career Services

On August 26 and 27, Foster Undergraduate Career Services took a group of students to San Francisco to visit seven companies. This group of Foster students consisted of finance/accounting majors  interested in working in the Bay Area after they graduate.

Each company visit entailed an overview of the company and provided students the opportunity to network with company representatives. During this two-day trek we also had a San Francisco alumni networking night. Roughly 60 Foster alumni from the San Francisco area met up to network with each other and our current students.

Amy Li, accounting/finance major, had this to say about her experience on the trek, “It was a great opportunity that enabled students to have direct interaction with employers and to learn about their jobs from different perspectives. Communication is an essential skill in career development, thus through this form of networking event, we not only explored the diverse career paths we could choose from but also had the chance to build and present our personal brand.”

We would like to send a special thanks to the employers who participated in the SF Trek: Deloitte, EY, KPMG, Piper Jaffray, Prudential Capital, PwC, and Vaquero Capital.

San Francisco Trek
Photos from the company visits and networking night on the San Francisco Trek.

Leaning… forward

Zevenbergen

Nancy Zevenbergen, Leslie Tubbs and Brooke de Boutray lead a proudly perceptive, fiercely aggressive Seattle investment firm

Nancy Zevenbergen (BA 1981) recalls a childhood visit to her uncle George Zoffel’s (BA 1956) credit reporting firm where she found him and his business partner at the front desk reading the Wall Street Journal while a legion of ladies typed credit reports in the back. The image made an impression.

“I thought, if I never learn to type, maybe I’ll get to sit up front and read the Journal someday,” she recalls with a laugh.

That little girl with big ideas is now president and chief investment officer of Zevenbergen Capital Investments, a finance firm of her own making. She and partners Leslie Tubbs (BA 1982) and Brooke de Boutray (BA 1977) manage $3 billion in assets, boldly invested in companies on the uphill slope of significant and sustainable growth.

And they are good, consistently—and sometimes spectacularly—beating the benchmark Russell 3000 Growth Index.

The hard way

Each of these Foster finance alumnae forged her own path via banking—Zevenbergen at Rainier National, Tubbs at Key, and de Boutray at First Interstate—to the men’s club of investing. “In our first jobs,” Zevenbergen recalls, “the glass ceiling was thick.”

So she created her own job. After six years in trust investment, Zevenbergen launched ZCI headlong into the market crash of 1987.

“It was a terrible year,” she says. “But a perfect year to start the firm, because it was the equalizer that decimated everyone. People realized that their money was no safer in a 100-year-old investment firm than it was with an independent asset manager like me.”

Zevenbergen started level, but quickly demonstrated her advantage. And ZCI grew rapidly. In 1992 she hired de Boutray, whom she had met while both studied for their CFAs. She convinced Tubbs, a sorority sister at the UW, to join in 1994.

Cut loose from the strictures of Big Finance, the team was free to invest on its own terms.

Game changers

Zevenbergen says it feels strange reflecting back on a firm that’s perpetually looking forward. ZCI is the aggressive piece of clients’ investment portfolios. Growth is their game.

“Investing is both an art and a science,” says de Boutray. “Because we are growth managers, we open our minds to what can be as opposed to what happened in the past. This approach has served us well.”

This means relying less on historical analysis and more on assessing opportunity. “We’re not venture capitalists,” Zevenbergen adds. “But we share their focus on the people, the concept and the addressable market when we’re consider investing in a company.”

“We look for game changers.”

Among them, Microsoft, Starbucks, Amazon, Apple, Tesla, Netflix, Facebook, Zillow, Google, Chipotle, LinkedIn, Qualcomm— each bought early and held until the waning of growth.

Aside from impeccable timing, the secret to ZCI’s success may be its powers of perception. The women of Zevenbergen Capital are proud of their success in the testosterone world of growth investing. They both accept and embrace their difference from other firms. “It’s Venus and Mars,” Tubbs says.

While men in finance tend to be more analytical, more driven by ego, she says, “we collaborate, listen, observe. These are clichés, but they are also our competitive advantage.”

Where are the women?

Having blazed a considerable trail in finance—especially in the Northwest— Zevenbergen, Tubbs and de Boutray have lately been wondering why they don’t see more young women entering their industry or other male bastions of computer science, engineering and mathematics.

They’ve decided to stop asking and start acting. ZCI has created a number of ARCS Fellowships to promote science-related careers at the UW. They’re also offering internships to Foster students and recently endowed a scholarship fund to support undergraduate women studying finance.

“We believe that funding education brings a richness to our community,” Zevenbergen says. “Instead of just asking where are the women, we want to do something about it.”

Investing in life

Gary Furukawa (BA 1981) is the chief investment officer for Freestone Capital Management, a wealth management firm. Recently, he spoke at the Foster School about his career path, gave an overview of the financial markets and shared his personal insights on a range of topics, including what Freestone looks for in potential employees, books to help you develop your own investing framework and more.

Furukawa started his career with Deloitte & Touche in Seattle as a Certified Public Accountant. In 1982, he joined Smith Barney as a financial consultant, eventually rising to senior vice president. In 1999, he founded Freestone. He has been a highly successful investor along the way, investing in a wide variety of asset classes: distressed real estate (1980s and again after 2008 crisis), private equity (early 1990s) and thrift conversions (1988-present). He was also an original angel investor in Amazon.com and aQuantive.

Top insights from Furukawa’s talk:

  • Most useful courses he took at the University of Washington: English/writing courses, sociology and psychology courses and behavioral finance courses. Furukawa said, “Learning about the flaws in the way you think is very powerful and will help you make better decisions.”
  • Your life = the sum of your decisions.
  • Through your education, you should try different things until you find something you really like. It should be something you have the potential to be good at.
  • Self-knowledge, obtained through reading, thinking and life, is the most important knowledge. Learning really starts after you graduate from college.
  • Wealth is primarily created three ways (in the U.S.): owning a business or owning stock in a successful business, owning real estate for a long time or inheriting money.
  • Your pay check funds your lifestyle, but in order to build wealth you have to save and invest your money.

Watch video highlights, which include his ideal employee traits, investment lessons, recommended reading and life insights.

Gary Furukawa was one of UW Foster School of Business Dean Jim Jiambalvo’s guest speakers at the annual Leaders to Legends Breakfast Lecture Series, which include notable leaders in an array of industries from greater Seattle and around the country.

San Francisco Trek

San Francisco Trek 2013

Foster Undergraduate Career Services team understands the importance of giving our students opportunities to engage with employers outside of the Seattle area. With that said, we are happy to report that Foster Undergraduate Career Services had the opportunity to take a group of Foster students to San Francisco to visit five companies. This group of Foster students consisted of finance/accounting majors who are interested in working in the bay area after they graduate. Each visit entailed an overview of the company, in-addition to students getting the opportunity to network with company representatives. During this two-day trek we also had a San Francisco alumni networking night, where we had roughly 40 Foster alumni from the San Francisco area meet up to network with each other as well as our current students.

When we asked some of the students who attended this trek what they liked best about it, here is what they had to say:

“I loved the networking night at Thirsty Bear. It was beyond helpful to socialize and talk with all the alumni. They were beyond helpful and interested in answering all of our questions.”

“I met several great companies that are on my target company list. These companies let their partners, managers and seniors share their work experience. That is very helpful to me. I knew more about these companies and got in touch with people there.”

“Going to the companies and learning about what is out there was definitely the most valuable part of the trip for me. In addition to and along with that, getting the chance to connect and meet with professionals in the field, particularly the UW grads, was great.”

The companies that we had the opportunity to visit on that two-day trek were:

Educated quest

After proving herself on Wall Street, Kate Kingen is out to reform America’s schools

Kate Kingen

It is likely that no young finance prodigy has ever followed up a promising analyst program at a prestigious Wall Street firm such as Deutsche Bank by going to work for the Newark Public Schools.

Until Kate Kingen (BA 2009).

But then, Kingen has never followed a script. The daughter of Seattle restaurateurs (Red Robin, Salty’s) chose to study accounting at the University of Washington Foster School of Business, earning the Most Outstanding Accounting Graduate Award at the top of a long ledger of accolades. But when an internship with Deutsche Bank’s Mergers & Acquisitions group turned into a job offer, she packed her bags for New York City.

Finance phenom

The analyst program is Wall Street’s trial by fire for the elite young members of a testosterone-fueled fraternity of high finance—“mainly male, very aggressive,” asserts Kingen.

Those who survive write their own ticket. Kingen thrived.

She rocketed to the top of her class at Deutsche Bank, and was named lead analyst on a number of marquee deals, most notably the $9.7 billion announced merger of Deutsche Boerse and NYSE and the $8.8 billion sale of Bucyrus to Caterpillar.

When she emerged triumphant from this two-year crucible, a gold-plated career at an investment bank or hedge fund or private equity firm was hers for the taking.

But Kingen had something more in mind. “I really enjoyed the experience and learned a lot,” she says. “But I wanted to apply my finance skills where they could make the most impact.”

Something more

Kingen had been raised to revere education. So when she was invited by the new chief operating and financial officer of the Newark School District—a Morgan Stanley veteran named Photeine Anagnostopoulos—to help implement sweeping reforms in finance, operations and strategy, Kingen jumped at the opportunity.

“If I wanted to be part of the coming change in education,” she says, “there’s no better place to start than Newark.”

After a 360-degree analysis of one of the nation’s poorest-performing districts, their team cleaned up the nearly $1 billion budget and closed under-enrolled schools. Kingen introduced a more equitable funding model that gives principles more autonomy and developed a graduation tracker that now allows parents, teachers, and students to monitor academic progress.

Going to state

With knowledge of their breakthrough work in Newark, the New Jersey Commissioner of Education hired Anagnostopoulos and Kingen to analyze the critical links between funding and performance across the state. They’re currently studying a cross-section of districts in search of the best practices that can be replicated elsewhere in the state.

“Most studies and reform efforts are focused on instruction—as it should be,” Kingen says. “But I believe that connecting finance and resource allocation to performance is going to be the next big step in education reform.”

Systems education

More than just some quixotic idealist tilting at academic dysfunction, Kingen may be onto something big.

The past year’s efforts are revealing a possible new paradigm: an interdisciplinary “systems” approach to education management that marries the wisdom of pedagogy and social science with the insights of data analytics, organizational behavior, accounting and finance. Its potential to improve student performance is transformational.

Once her work in New Jersey is complete, Kingen is planning to go for an MBA. She’d also like to start a company in this new area of expertise. “When you’re in education reform, you’re working against the clock,” she says. “Because every day you don’t make progress is another day lost for a child. So we need to keep pushing to make these changes.”

It will take some serious pushing. But Kingen—experienced, smart, energetic, ambitious, and appropriately impatient—is more than game.

“I’ve learned that management and finance acumen are sorely missing in K-12 education,” she says. “There’s a huge opportunity. It’s exciting to be at leading edge of something so important.”

Foster finance workshop explores the ABCs of HFTs

Guest post by Jonathan Brogaard, an Assistant Professor of Finance at the Foster School

Jonathan BrogaardIs high frequency trading good or bad for financial markets? In January, the Foster School Department of Finance and Business Economics hosted a high-level summit to discuss how the increasing automation of financial markets is affecting investors, market volatility and order execution.

The discussion brought together Foster finance faculty and senior executives from local investment firms.

As an early investigator of this emerging topic in finance, I was asked to present the leading academic findings.

First, a bit of definition. High frequency trading (or HFT) is the fastest subset of computer-based algorithmic trading. HFTs act either as market makers or exploit inefficiencies in the market. They buy and sell constantly, hold very little inventory at any given time, and end each day with zero positions. In short, they run a volume business, picking up fractions of a penny over and over and over again. This leads to regular—and sometimes extravagant—profitability.

But HFTs are shrouded in mystery. Little is known about these firms and their algorithms that dominate market trading. HFTs are obtuse and generally unregulated. And they have been linked to scary events such as the flash crash of May 6, 2010.

A small group of academics, including myself, study the effect of HFTs on market quality—how well markets operate. The consensus of our findings is that, on average, HFTs are improving the quality of markets. That is, they are adding to price discovery (making prices more informative), increasing liquidity (making more shares available to be bought and sold), and decreasing spreads (the price difference between what a buyer and a seller will pay).

But what are traditional investors experiencing in the markets? Our workshop guests voiced a variety of opinions on HFTs, and shared experiences that will help me and other researchers fine-tune our measurements to better reflect the realities of an increasingly computerized market.

We certainly share their concerns about the lack of understanding around high frequency trading. We have much to learn. Do HFTs increase or decrease the risk of flash crashes? What is their presence doing to investor confidence? Are they beneficial in the market for smaller stocks?

We tend to fear what we don’t know. But high frequency trading is certainly here to stay. So we’re working diligently to shed light on this powerful new force in the financial markets.