7 minute read
A Big Payout
The MSU ICP team, along with advisor Dr. Brandon Cline (fifth from left), in McCool's Strategic Finance Lab.
Photo by Logan Kirkland
A Big Payout
By Kirsten Shaw
Recruiters know that the college graduates who are best prepared for the marketplace are those who have already experienced it. Familiarity with the market environment and its potential opportunities and pitfalls shortens the learning curve for new employees, and they quickly become productive.
The TVA Investment Challenge Program (ICP) offers Mississippi State students the kind of finance and investment experience that sets them apart for potential employers.
“I wanted to do something that would help me stand apart from my competition for jobs,” says former participant Matthew Frost, a 2015 finance and marketing alumnus and Corporate Development Manager at Signode Industrial Group in Chicago. “I think anything you can do to show that you’re ready for the job is crucial…. For anyone interested in finance, showing that you’ve already performed many functions of the job through the TVA program makes an employer all the more interested.”
The Tennessee Valley Authority (TVA) began its Investment Challenge Program in 1998, allocating funds for college students to manage in investment portfolios for the agency – providing them with rare real-world experience. Today, millions in assets are managed by student teams at 24 institutions in Alabama, Kentucky, Mississippi, North Carolina and Tennessee.
“With more than $13 million in assets, TVA’s ICP is delivering results by growing into one of the nation’s largest and most successful student-managed investment programs,” remarks Ben Duby, TVA Senior Program Manager, Corporate Investments. “Student teams gain hands-on financial asset management experience that they could never get reading a textbook. They actively manage stock portfolios for TVA, design long-term investment strategies and select investments under the guidance of faculty members and within investment guidelines established and monitored by TVA.”
All schools use the S&P 500 Total Return Index as their benchmark but vary in how their teams are set up. At Mississippi State, the group is usually eight to 10 students, selected through an application and interview process by current team members and faculty advisor Dr. Brandon Cline. They earn one hour of credit their first fall semester and two the following spring. Most stay for two more semesters, though no further credit is earned. Team members are often finance or accounting majors, with some graduate students, but it is not limited. There have also been students with majors in marketing, management, agribusiness, agricultural economics and engineering.
Team member Zack Ishee, an agricultural economics graduate student, is actually in his fourth year on the team. He has served as director, head trader and analyst for several sectors, primarily the industrial and materials sectors.
“The value of the program isn’t in the credit but in the experience we gain,” he states. “Dr. Cline gives us plenty of resources and advice on how to make the best decision, but in the end it’s us making the decisions.”
The group meets weekly. While one student serves as director, decisions are made collectively. The head trader then makes transactions through the team’s online brokerage account.
“There are 11 sectors, or industries, and every student is an analyst for at least one,” says Cline, the John “Nutie” and Edie Dowdle Associate Professor of Finance. “At the meetings, an analyst presents a case for buying or selling. Sometimes it’s a quick decision, or sometimes they want to see more research. The group decides whether or not to engage.”
“TVA treats these portfolios the same as our professional money managers’ by holding performance reviews with schools to get updates on their philosophy, process and performance,” says TVA’s Duby.
During these reviews, TVA typically sends a professional money manager to talk to a team about careers in finance, thoughts on capital markets and/or about an investment strategy. Students can gain insight into investment careers and glean information that will benefit them in various lines of work.
The MSU team is aided by valuable resources. Financial support for professional development comes from the Department of Finance & Economics, the College of Business and the team’s own performance awards from TVA. They meet and work in the well-equipped Strategic Finance Lab – McCool Hall’s trading room.
“One of the big components of our analysis and portfolio management is the Bloomberg terminals provided by donors,” says Cline. “They’re extremely expensive and extremely helpful to us. We’re very appreciative of them.”
The team attends two ICP events each year: a regional conference involving MSU, Ole Miss, MUW, Christian Brothers University and the University of Memphis; and an annual conference in Nashville, TN, for all teams. At both events, teams make presentations on their portfolio decisions, performance and how they assess the risk. Financial awards are presented to those that have outperformed the S&P 500.
The team toured the New York Stock Exchange in March.
Photo courtesy of Brandon Cline
“Students have collectively outperformed the S&P 500 total return of 6.17 percent by 57 basis points annually since inception, an excess cumulative return of 38 percent,” says Duby. “ICP teams have earned over $1.1 million in performance awards for their schools over the life of the program. Mississippi State has outperformed the benchmark the last two years in a row with total performance awards earned by the University of $20,434.”
Cline adds, “I’ve been the advisor for five years, and the team has outperformed the S&P 500 in four of the five. Most money managers don’t do that well.”
Independently, MSU’s team also participates in the Quinnipiac University Global Asset Management Education (G.A.M.E.) Forum in New York, NY. It features well-known economists and advisors from investment banking firms, Bloomberg and other financial firms. Cline also arranges separate meetings for his group at places like the New York Stock Exchange and Goldman Sachs.
“It’s our most professional interaction,” says Ishee. “We get to talk with professionals who have already made it. It gives us experience almost no other students get to have.”
The TVA ICP experience has served alumni well. Matthew Frost has been an Investment Banking Analyst for Stephens, Inc., and for Robert W. Baird’s Consumer Group (Mergers & Acquisitions) – later promoted to Associate at Baird. Currently, he is part of a team that handles Signode’s mergers and acquisitions activity, assessing the market for companies to acquire, maintaining a pipeline of companies that are of interest, evaluating opportunities and working toward closing acquisitions.
“We had to prepare a strong case toward any movement we wanted to make in the portfolio. This skill has probably been the most useful for me post-grad, of everything I learned while in [the TVA Investment Challenge Program…]. In my current capacity in corporate development, I’m often asked to make a case to our own management as to why we should go after a certain target business – or just as often, why we shouldn’t. My initial exposure to these types of experiences came from TVA and was not something you’d find in a classroom.”
Mary Bigler graduated in May 2019 with a degree in finance with a concentration in risk management and insurance, and she is now a Production Associate with All Risks, Ltd., in Phoenix, AZ. Her goal is to become a broker within the company, managing her own team.
“The TVA program, its operation, my participation and the interaction with my team deeply impacted my education and my understanding of the financial industry,” she states. “Though my job does not deal with stocks or portfolios, my experience gained through TVA in the decision-making process, negotiation and discussion of ideas has already been of benefit. I work on a team, and in the short time I’ve been in my position, people are constantly bouncing ideas off each other in finding solutions that best meet our clients’ needs – much like the process within TVA in working on portfolio decisions and allocations aimed at achieving the best possible results.
“Although I no longer deal with stocks and a portfolio every day, TVA taught me more than picking the right stock, it taught me to look for creative ways to add value to any situation.”
Ishee is considering pursuing employment in commodity exchanges after graduation; a PhD is also a possibility. In addition to hands-on investment experience, he knows the networking opportunities are invaluable.
“These different conferences we attend give the TVA student teams a great chance to be put in front of people who most of us would otherwise never meet,” he notes. “The network of past [MSU] TVA members has been very beneficial also. We continue to have students obtain internships and job interviews through alumni who have gone through in prior years.”
As team members past and present laud Cline and his impact on them through the TVA Challenge, Cline points to the value in such a project.
“We’re seeing a big payout in terms of placement of our students, recruitment of our students and the experience and knowledge of our students,” he says.
For him, it is a very worthwhile investment.
