A class of senior finance students at the Edwards School of Business has been entrusted with $500,000 to invest and trade in the stock market.
The George S. Dembroski student-managed portfolio trust was launched Nov. 3, as a crowd filled the centre foyer of the business school. The half-million-dollar portfolio is the largest in Canada which allows finance students to invest real money for academic credit.
“We are going to make it part of the fabric of our school,” announced ESB Dean Daphne Taras. “We [have devoted] two full courses from the undergraduate curriculum to this portfolio.”
Since September, third- and fourth-year students enrolled in both newly developed courses have attended lectures together once a week to study investment banking. Now, they will begin to put theory into practice, their professor says, as they have begun to compile reports and will likely start investing by mid-November.
The class is composed of eight groups, each of which is expected to do comprehensive corporate reporting and table buy-and-sell recommendations throughout the year. When a group makes a trade recommendation, there is a debate, a vote is conducted and a decision made. During class time, minutes are taken and made public.
“We designed [the courses] to give students practical training and experience in the selection and management of financial assets, through managing real money,” said finance professor and course instructor George Tannous.
Tannous explained that while finance students at ESB have been taught “the science of investment banking” in the past, with real money they will learn the “art” of trading.
“Dealing with real money, students will feel the joy and victory of good returns, and also the pain of losses,” Tannous said.
A flatscreen monitor outside the classroom will display real-time information about the portfolio once students begin investing. Further, the class will disclose even their losses to the public to ensure transparency, something Tannous said is uncommon.“It’s pretty stressful. It’s really made a big difference in the way that we take a look at picking stocks, and the way we decide what’s good and what’s bad,” said fourth-year finance major Dean Hanson.
Although some finance courses, for example COMM 367, require students to invest thousands in fake securities, Hanson says investing real money has completely changed the game.
“You are a lot more concerned about the outcome when you’ve got skin in the game,” Hanson said.
Early on, the class has been looking at safe, blue-chip stocks such as AT&T, Cameco, Barrick Gold and Viterra.
“The consensus of the class is that the economy is not robust, [meaning] it is going to stay the same for a while before it starts picking up,” said Tannous. “The [overall] recommendation is that we should focus on stable companies. Should anything go wrong, they will be solid and won’t lose. But if the market takes off, we will be ready to move.”
A major factor in developing these courses was to make money, said Tannous. A portion of the income students earn will be reinvested in the portfolio, while the remainder will be used for scholarships and sponsoring ESB events.
But it is also an impressive resource for the school, and for students’ resumes.
According to Kieron Kilduff, Saskatoon branch manager for BMO Nesbitt Burns, having the responsibility of managing a portfolio of this size as a student will stand out at job interviews, and he says it should almost be mandatory if someone wants to pursue a job in the investment community.
“There is no question in my mind that the students who put time into the program will come away with wonderful experience and a keen insight into what is involved in portfolio management,” Kilduff said.
Roughly half of all finance majors eventually go on to careers as investment bankers, said Tannous.
At the end of the school year in March, the portfolio will either be liquidated or possibly managed by masters students, until a new group of undergraduates take over next fall.
Photos: Raisa Pezderic/The Sheaf