Smith’s Mayer Fund Celebrates 20 Years
“The good news,” says Mayer Fund portfolio manager Ryan Turner, “is this year we made over $300,000. The bad news is we don‘t get to keep a penny of it.”
Turner is one of the 2014 Mayer Fund’s 11 fund managers, all second-year MBA candidates who collectively manage the 20-year-old fund’s investment portfolio. The oh-so-real money they make is added to the fund’s total assets, but what students get to keep is the invaluable hands-on experience in fund management, priceless industry contacts and a networking system that will serve them throughout their careers.
The Mayer Fund began in 1993 as the Terrapin Fund when then-Dean William Mayer ’66, MBA ’67 gave three MBA students the responsibility of managing $250,000 of the College of Business and Management Foundation’s money. Michael Michalisin, MBA ’94, was one of them, and he says it changed the course of his career: “One, it opened doors to networking within and ultimately breaking into the investment community, and, two, it convinced me that I actually like doing this stuff.”
Michalisin went on to become a director and portfolio manager at MacKay Shields, managing equity mutual funds and institutional assets, then at Timberfence Capital Partners, where he is now a managing partner. “I'm very grateful that Maryland and Dean Mayer gave me and my classmates Mike Hahn and Mike Devlin the opportunity, and I've been especially thrilled to watch the program grow to its current well-established state.”
Michalisin is just one of many Mayer Fund graduates who went on to rewarding careers in the finance industry. As John Boyle ‘76, executive director of J.P. Morgan Private Bank, put it, “The practical lessons learned actually managing a portfolio not only reinforce academic experience but differentiate Maryland MBAs from other students as they interview for Wall Street.”
Lane Wiggers ‘99, managing partner of the Cordam Group in Malvern, Pa., agrees. “The Mayer Fund validated me,” says Wiggers. “It gave me the confidence to compete with the new MBAs from the Ivy League, and it definitely gave me an advantage in my first job.”
Professor Emeritus Richard Kolodny, then-chair of the finance department, set up an independent study project to examine investment funds in other schools. “There weren’t many at the time,” he recalls. Kolodny proposed to do something similar at Smith. “The whole thing was exciting and rather unusual, but Bill Mayer, who had recently been a member of the investment community — the CEO of First Boston Corporation — immediately saw the value for the students, and he was right.
“It’s been a great success,” says Kolodny. “Between contributions and appreciation, the student fund managers have done quite well. The size of the fund has been increased more than tenfold, and every time I’ve checked the statistics, they’ve basically equaled or outperformed most of the averages.”
Today, the number of student fund managers has increased from three to 12, and the size of the Mayer Fund has grown from its original $250,000 to more than $3 million.
Sarah Kroncke, MBA ’00, senior lecturer in finance and Mayer Fund alum, is now its faculty advisor. “Over its two-decade history, the fund has more often than not exceeded its benchmark, the S&P 500.” While beating the benchmark is the objective, it is not the be-all-and-end-all. “The primary goal of the fund,” she says, “is education.”
As for the Mayer Fund’s best picks, Kroncke says, “In 2013, we did well with Kroger, but over time, our biggest ‘winner’ has probably been Apple.” Adds Turner, one of the current managers: “This year’s winners are Amerisourcebergen Company and Vf Corp., both up more than 34 percent, and Cigna, up 32 percent.”
The Mayer Fund is a highly competitive program. Prospective fund members apply by submitting a report, which is read and evaluated by the current fund members, after which several dozen applicants are called in for an interview. Reducing that number to the final 11 or 12 is also the task of the current fund’s scholars.
Structurally, the program is a seminar. At the weekly meetings, student equity analysts present their investment suggestions and portfolio managers manage the choices in line with the fund’s guidelines. The portfolio managers are also the liaison between current and former fund members, fund alumni and prospective employers.
The equity analysts cover 10 sectors: consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunications services, and utilities. Each sector measures its results against those of the other sectors, as well as the S&P benchmark. By the time the students finish the program, they have come as close to “real-world” conditions – and experiences — as any academic program can simulate.
“This isn’t play money,” says Bill Song, MBA ’08, a portfolio manager in 2007–08. “So every decision the students make is personal for them and is scrutinized very carefully.”
The current fund members echo Song’s “not-play-money” comment. Equity analyst Joyce Yuchiao Tseng, says, “I chose to apply for this program because it provides a real world investing experience and great teamwork experience.” Turner says much the same thing: ”It was one of the few options where you could manage real money, and when you’re working with real money, you put a lot more effort into it.”
Barney Guacheta, another equity analyst covering the Energy and Utilities industries in the current class, had a pragmatic reason for seeking to enter the program after a 12-year career on Wall Street. “I came to grips with the fact that I was still not technically sound in all things finance. I wanted to get my MBA to shore up my weaknesses, and I wanted to join the Mayer Fund to hone the skills that I've already learned.”
Guacheta describes the experience as “challenging and rewarding. You have to learn an industry. Learn the revenue and stock price drivers. Learn the businesses environments they operate in and learn what's going to move these stocks. After you're done with all the top-down analysis, your next challenge is modeling a company’s success in the environment you believe exists today and will exist tomorrow.
“It's worth it, though. What I'm getting out of it is great peer support from people with like interests, but where I've really benefited the most is in knowing that I can understand and create a financial model with confidence. By taking this course, I'm certainly facing some of my demons head-on.”
The grand finale of each year’s Mayer Fund class is a two-day trip to New York City, during which the second-year MBA candidates meet former Mayer Fund students and with investment banks, asset managers, or people who work in corporate finance. Traditionally, a networking session is held on the night the team stays overnight, but this year’s trip was different. On Dec. 5, a formal reception was held honoring Bill Mayer and celebrating the fund’s 20th anniversary.
In speaking with Fund graduates, one point keeps coming up, and that is the value of the program when it comes time to interview for a job. As Wiggers puts it, “My having been in the Mayer Fund was a big part of the conversations when I was interviewing with investment banks and private equity shops. It gave me a talking point that other folks didn’t have, and definitely helped to differentiate me from them. I can’t overstate the career benefit — especially in that critical first job out of business school — of being able to compete with some Ivy League names because you’ve had this unique Mayer Fund experience.”