It’s one thing to read college textbooks about consequences of investment decisions, but quite another to experience the results using real money.
With that premise in mind, two well-known wealth managers in Indianapolis have donated $100,000 to Indiana University to help undergraduate finance majors see the impact of their choices.
Dave Knall and Jeff Cohen, managing directors of the East 96th Street office of St. Louis–based Stifel Nicolas and both IU graduates and boosters, wanted to extend to undergraduates an opportunity long enjoyed by some of the university’s elite MBA students.
“Any time real money is involved, it makes it more interesting to make investment decisions,” Cohen said. “You may take less risk when you’re going to lose real money.”
Students chosen from junior or senior classes will manage the Knall-Cohen Investment Fund as part of an asset portfolio management class. Through the process, they’ll learn how to conduct equity research and fundamental security analysis while developing a structured process to make financial decisions.
A board of industry professionals, faculty and Kelley School alumni will question the students on how they arrived at their decisions, but the actual investment decisions will remain with the students.
The fund is patterned after the Reese Fund and the Value Fund managed by MBA students in the school’s Investment Management Academy.
The Reese fund has swelled to $350,000 from its $100,000 genesis in 1986. The Value Fund launched with $100,000 in 2004 and now stands at $95,000; earnings from the fund are gifted to the academy annually when the fund is above $100,000.
The academy, founded 30 years ago, isn’t large. It usually has 16 to 20 students from an incoming class of about 225, making a total of 32 to 40.
One second-year MBA student getting his first shot this fall at helping manage the Reese Fund is LaMarr Taylor, a Gary native who earned an electrical engineering degree from Rose-Hulman Institute of Technology, then worked in sales for Caterpillar Corp. and did analysis work for Factset Research Systems Inc. in Nashville, Tenn., before starting at the Kelley School.
Taylor learned to enjoy money management by helping friends and family with theirs, and said the chance to work with an actual investment fund was one reason he choose IU.
“It’s one of the few programs that actually allows students to use real money,” said Taylor, 28.
The academy is helping him break out of his background in heavy equipment to analyze other industry sectors as well as government influence on investment and the economy. The stock Taylor chooses for the fund will depend on discretionary consumer spending because he believes the sector is undervalued.
If he picks a winner, it will look great to an employer; if not, it still will show he has practical experience beyond textbook theories.
Taylor worked for Goldman Sachs and Co. in Chicago and New York, and anticipates returning to the firm after graduating in May.
Not many of the academy grads land in Indianapolis, said Allen “Chip” Snively, a co-director. Most head to such financial centers as New York, Boston and Chicago.
Fifteen years ago, many took jobs in sell-side research or institutional sales in New York or buy-side shops in Chicago, Snively said. Today, fragmentation and technology have spread the jobs around the country.
Indianapolis is becoming more of an attractive destination due to the revitalization of downtown, the advent of sports teams and events, and such improved cultural destinations as museums and high-end restaurants, he said.
Indianapolis also has better jobs available in wealth management. The takeovers of banks culminating in the presence of such institutions as JPMorgan Chase have brought a higher level of sophistication to the business, Snively said.
Moreover, Indianapolis has seen a rise of strong entrepreneurs who attract people who want to help manage their wealth.
“Indianapolis is seen as a progressive city,” he said. “There’s a more sophisticated level of investment.”
While most of the academy students prefer to work in equity research, more are taking positions in wealth management.
Placement rates suffered with the financial crisis.
In most years, placements ranged into the mid-90-percent range, but in 2009, only five of the 15 had jobs at graduation. However, in the 2010 class, just two of the 17 graduating were without jobs.
Graduates who start in the largest cities usually earn $85,000 to $100,000, with annual bonuses typically ranging from 20 percent to 50 percent.•