DIRECTOR�S NOTE

DIRECTOR’S NOTE

Matthew Hurst

DIRECTOR

In calendar year 2021 the Roland George Investments Program delivered on its mission to engage students in superior educational learning opportunities but failed to deliver superior returns. In a word, our performance was “mixed.” In later sections of this report, you will see we underperformed the S&P 500 and the Wilshire 5000 in both our Growth and Value portfolios while outperforming in our Fixed Income Portfolio. In a year like we just had, it might be convenient to adjust our benchmarks to hide our failures, but what has always made RGIP great is that we do not measure ourselves using absolute or even relevant performance; we measure our success on the quality of our student learning, and in that regard, 2021 was one of our best years on record. In this letter I will address the year’s highs and lows and provide an update on what we are doing to continue building the program’s reputation as the premier learning experience among a rapidly growing number of student-managed investment programs.

During calendar year 2021 Stetson continued to operate under COVID protocols that severely limited the events we could pursue. We were extremely disappointed to not be able to take the students to NYC, travel to competitions, host public trustee events or welcome alumni back to our annual homecoming tailgate. Throughout this time, the students showed a tremendous amount of resiliency and maturity. The leadership cohorts in both the graduating class of 2021 and the incoming trustees and portfolio managers are among the most capable and driven students I have encountered in my time at Stetson University. At the time of drafting this report, 23 of last year’s 26 graduating seniors are either gainfully employed or seeking advanced degrees. They truly are a remarkable group, and I am impressed by each and every one of them.

On a program level, RGIP continues to shine brightly, and we are making substantial improvements to both the physical infrastructure of the program and the learning experiences. During calendar year 2021 we secured funding approvals for the new RGIP learning lab and have transferred our brokerage accounts from the custody of a retail broker to that of a prime broker. The new lab will provide a state-of-the-art learning environment, while the new trading platform will provide access to more markets, trading algorithms, and greater exposure to professional portfolio management and financial reporting. Our intention with both decisions was to make RGIP as close to the “real world” as possible in an academic environment. Additionally, we received approval from both the School of Business and the University Curriculum Committees to proceed with the next phase of RGIP in the Advanced Portfolio Management course. This course expands the RGIP experience from two semesters to three and will add financial reporting, derivatives and advanced portfolio construction techniques to the learning experience.

The Growth and Value Portfolios fell short of the corresponding benchmarks with 16.8% and 18.6% annual returns respectively, while the Fixed Income Portfolio exceeded the Bloomberg Aggregate Bond Index by over 6%. In 2021 the market witnessed a dramatic rise in Large Cap Equity, specifically the mega-cap glamour stocks, which represent the largest weighting in major indexes. As a point of comparison, the S&P 500 saw a 28.7% annual return while the Russell 2000’s annual return was only 14.8% - the difference driven by only

The highlights from 2021 demonstrate the Roland George Investment Program is among the elite studentmanaged funds, both in performance and as a learning experience. At the annual Quinnipiac G.A.M.E. portfolio management competition, the RGIP was awarded 2nd place in the Value category and Champion in the Fixed Income Category, continuing a long and growing legacy.

a handful of stocks. The RGIP typically does not hold ETFs and traditionally eschews holding glamour stocks. However, this was one year where passive or naïve diversification outperformed our active management strategies. The primary reason for our underperformance can be attributed to the asset allocation decision. Diving deeper into our asset class holdings, we barely missed the performance of large cap stocks while maintaining a significantly lower beta, and our small-cap stock holdings drastically outperformed, which indicates superior security selection. One area where we made a catastrophic miscalculation was in the holding of Chinese equities. In this area alone, we underperformed the MSCI benchmark by a staggering 27%. Although the performance of the Growth and Value funds underperformed, our overall performance of 16.45% was in line with Schwab’s Moderately Aggressive Benchmark of 16.82%. The aforementioned benchmark consists of a 35% weighting in the S&P 500, 35% in the Bloomberg U.S. Aggregate Bond, 15% in MSCI EAFE (TRN), 10% in Russell 2000, and 5% in the FTSE 3-Month Treasury Bill. The underperformance of actively managed funds was pervasive in the industry last year. As a reference, the S&P Indices versus Active (SPIVA) scorecard, which tracks the performance of actively managed funds against their respective category benchmarks, showed 79% of fund managers underperformed the S&P 500 during calendar year 2021. Overall, the student managers delivered total fund returns consistent with professional money managers and significantly outperformed the real return needed to fund the operating expenses for the program. The highlights from 2021 demonstrate the Roland George Investments Program is among the elite student-managed funds, both in performance and as a learning experience. At the annual Quinnipiac G.A.M.E. portfolio management competition, the RGIP was awarded 2nd place in the Value category and Champion in the Fixed Income Category, continuing a long and growing legacy. The particular programmatic accomplishment from 2021 that brings me the most joy and pride is the achievement of both teams competing in the CFA Institute Research Challenge. The competition is global in scope, with more than 1,100 teams participating each year. At the local (state) level, the competition requires an intensive research paper recommending either a buy or sell decision for a local company. Teams advancing to the local finals and beyond are required to present their findings to a panel of CFA judges and are judged on content, persuasiveness, professionalism and their responses to a battery of questions. Last year both teams from Stetson made it to the state finals with one team taking the title and advancing all the way to the America’s final, putting them among the top 10 teams globally. Last year marked the first time Stetson won the state competition since 2011 and the first time in our history we advanced to the hemisphere finals. Throughout the entire process, the team worked tirelessly on perfecting their research, comported themselves with the utmost professionalism, and recognized in real-time they had achieved something momentous: the learning experience of a lifetime. In a competition where the cream rises to the top, Stetson showed we are the cream of the crop.