The student-managed portfolio, called the Dragon Fund, began in 2007 with a $250,000 contribution from Drexel. The university contributed another $100,000 in 2011 and then $500,000 in May. The fund has gained more than $150,000, due to the investments made by the students.
“The fund has performed quite well. It has beaten its benchmark,” said Daniel Dorn, associate professor of finance, who oversees the fund along with colleague, Ed Nelling, professor of finance.
Students and their faculty advisors recently won a university competition by the LeBow College of Business to come up with innovative classroom educational models focused on technology. The group proposed ways for students to connect with investment professionals outside the school and area for feedback via video conferencing, Dorn said.
The plan will allow students to hear from advisers “in the financial centers of the world,” Dorn said.
The fund, now at $1.06 million, has shown a three-year average annual return of 14 percent. It stands at about 19 percent for the year, as of Monday.
The fund management is “to teach them things about finance, but it’s also there to connect them to industry,” Dorn said. “And it’s there to connect Drexel to its alums.”
A group of student volunteers began managing the fund in 2007, under the guidance of Dorn and Nelling. The professors quickly realized the job was too big to be done on a volunteer basis. They created a two-course sequence – applied portfolio management and advanced portfolio management – for which the students earned credit by managing the fund.
Students started investing rather slowly, which turned out to be good because of the poor economic conditions in 2008, Dorn said.
“A lot of it sat out during the money crisis,” he said.
Students researched and presented ideas for investing to their classmates. They voted on ideas and employed those that got support.
“They’ve been quite good at discriminating between the good and the not-so-good investments,” Dorn said.
The class routinely saw that the investments not chosen fared worse than those selected, Dorn explained.
Drexel alumni visit the class and discuss stock pitches with students. The students also interact with Drexel’s investment office, which is in a sense the client, Dorn said. The investment office manages Drexel’s $600 million endowment.
“They’ve asked tough questions. They said if we give you this money to manage, we’re going to put you through the same paces as other external managers,” Dorn said.
More than 100 students have had a hand in managing the fund over the last six years, Dorn said.
This year, it paid off in a personal way. The students and their faculty advisers, along with the two other winners of the LeBow competition, will split $30,000 in prize money.