Smeal College of Business They meet weekly, discussing portfolios, pitching proposals on stocks to invest in and reviewing threats or opportunities for their fund. But these bright, young investors dressed in sweatpants, jeans and T-shirts are not on Wall Street. Not yet anyway. They’re Penn State students managing actual investors’ money in the $4-million-plus Nittany Lion Fund.
Since its inception in January 2005, the Nittany Lion Fund has outperformed the S&P 500— its benchmark—by at least 1.5 percent annually. How do they do it? With a team of more than 200 student analysts who guide the fund’s stock selection and investments and monitor economic trends. The Penn State Investment Association (PSIA) serves as the anchor of the fund’s approximately $4 million in assets, which come from private investors and is not tied to the University.
Modeled after the S&P 500, the PSIA is comprised of 10 economic sectors, including IT, energy, and healthcare. Each sector has an analysis team, led by a lead and associate analyst, which includes up to 10 of the group’s general members from various majors. These analysts research their specific sectors for trends, top performing companies and any other information useful to the PSIA and Nittany Lion Fund. Analysts provide weekly progress reports on their sector and pitch buying or selling stocks from various companies. Members typically stay with a given sector for at least a year, gaining enough experience to become a lead or associate analyst.
According to Steve Murray, a senior finance major, the opportunity to manage such a significant portfolio is invaluable to students. “Being involved with the Nittany Lion Fund provides us with hands-on experience that other schools don’t have access to,” he said. “Being able to say as a freshman or sophomore that you’re managing a six-figure investment within a sector is something many students can’t say.” Murray, who is PSIA’s chief financial officer, said his experience as a lead financial sector analyst is the sole reason he received an offer with Citigroup, the banking and investment conglomerate.
PSIA President Tom Waters, also a senior finance major, agrees that his involvement with PSIA and the Nittany Lion Fund has enhanced his classroom work and prepared him for Wall Street. "There’s a level of detail you get with the Nittany Lion Fund that you can’t get from sitting in a classroom,” he said. “And if you’re a member of the actual fund you get to see a certain cohesion of it all, where you see the holistic process of managing a mutual fund." Waters recently accepted a position with the global investment firm Goldman Sachs.
Murray and Waters, who both joined the PSIA as freshmen, have seen the Nittany Lion Fund reach a peak of more than $5 million to a low point of $3 million during the last economic downturn. And as any savvy investment fund would, the PSIA adjusted appropriately to meet the challenges of the last recession.
“Our advisor likes to remind us that what we do is about people and processes,” said Waters. “So we quickened our process to ensure we react to what is going on (with the market) and deal with our investors to make sure everything is transparent to them.”
Increased transparency involves providing quarterly and annual reports to each of the 68 private investors, who donate a minimum of $25,000. According to Murray and Waters, being accountable to individual investors has provided them with skills and a breadth of knowledge that places them ahead of many of their peers.
"Being a member of the Nittany Lion Fund and PSIA puts you on par with any student at any school in the nation,” said Murray. “We are already starting to build a base of alumni on Wall Street. As that base grows, our program will continue to grow.”
More information on the Nittany Lion Fund.
This article was reported and written by Hassan Sheriff, a Penn State senior majoring in public relations. Sheriff recently completed an internship with the Alumni Association’s Strategic Communications team. He is from Philadelphia.
