Real Money Means Real Investing for UA Students

Over the past few years, the value of the Rebsamen Trust’s stock portfolio dropped from $1.6 million to a low of about $898,000 after Sept. 11, but it has since rebounded to about $1.05 million.

“If I was getting paid to do this, I’d probably be out of a job,” said Michael Reynolds of Little Rock.

Reynolds is being modest. The portfolio is only down about $500,000 since he and 10 other University of Arkansas students took it over in August, and that’s not bad during what is considered by many to be a recession.

“Part of it was the economy,” Reynolds said. “Last year’s class decided to load up on some tech stuff that blew up in their face.”

Reynolds is one of 11 students enrolled in the “Portfolio Management” class for seniors in the UA’s Sam Walton College of Business. James Rimbey serves as professor and adviser for the six-credit-hour class, which encompasses two semesters of investing and a considerable amount of cringing.

Believed to be one of the oldest trusts of its kind in the United States, the Rebsamen Trust was established in 1971 by Robert Kennedy, a UA professor of finance, through a $100,000 gift from the Raymond Rebsamen family of Little Rock.

The students get to invest real money from the Rebsamen Trust. Although Reynolds is the official “manager” of the trust, all of the students in the class get a say in what stocks are bought and sold.

Reynolds said the trust lost about 10 percent of its value last year and another 10 percent the year before that. During the same two-year period, the Dow Industrial Average is down 3 percent and the Nasdaq exchange is down 59 percent.

Over the trust’s history, however, the student’s have done a pretty good job, growing it tenfold from the initial gift amount to more than $1 million. And the students have been downright shrewd with some of their investments. They bought $838 worth of Wal-Mart stock in 1982. Now, after splits, that purchase has turned into 1,000 shares of Wal-Mart valued at $62,262.

After some prosperous years in the 1990s, it’s been a bumpy ride lately for the student investors.

Reynolds said the students take the class more seriously because real money is at stake, even though it’s not their own money. This way, they get a taste for what it would be like to manage a portfolio for a living.

“It’s fun, it’s good experience, and we enjoy it,” Reynolds said. “We might lose money, but the money we lose will not compare to what we gain in knowledge.”

Reynolds said the class is a good thing to have on a résumé. Business professionals in Northwest Arkansas are familiar with it, and Reynolds thinks the class gives students an extra edge in the working world.

“It’s selective,” he said. “It’s kind of a club.”

The current class took over the portfolio during a tough economic time, but that will give the students better experience dealing with real-world problems, Reynolds said.

“We see how the market reacts better instead of just going through the roof like it did a couple of years ago,” he said.

Arvest Portfolio

In 2000, two more portfolios were set up for UA students to control.

Arvest Bank Group of Springdale gave students the opportunity to manage a $5 million portfolio of fixed investments. The students invest in bonds and must follow the bank’s guidelines for investing. The money, however, belongs to Arvest.

That same year, Ken Shollmier, an alumnus from the business school, and his brother Dudley Shollmier gave the Walton College $250,000 to establish an MBA class that would allow students to manage a real stock and bond portfolio.

“The learning experience that MBA students obtain through their active participation in a real-world business laboratory will make them competitive with the best business students in the country,” Wayne Lee, chairman of the UA’s finance department, said of the graduate class he teaches, which invests money from the Shollmier fund.

Since these two funds are relatively new, they haven’t been on the roller-coaster ride that has dizzied the Rebsamen Trust.

The annualized return in 2001 for the Arvest fund was 7.3 percent, Lee said.

Shollmier Fund

The stock portfolio of the Shollmier investment fund outperformed the Dow Industrial Average and far outpaced the Standard & Poor’s 500 and Nasdaq 100. Of the $250,000 in the fund, about 55 percent was invested in stock and the rest in money market accounts.

Money for that fund was invested first on July 11, 2001. So the figures are based on eight stocks from that time until Sept. 24, when another stock was purchased, then nine stocks through the remainder of the year.

For the period from July 12 through March 6, the compounded return on the Shollmier portfolio was 2.9 percent, compared with -1.3 percent for the Dow, -6 percent for the S&P 500 and -17 percent for the Nasdaq 100.

“When it’s real money, when it’s gone, it’s gone,” said Brock White, a former UA student who worked with both the Rebsamen and Shollmier funds. “You want the trust to continue on for other students.”

White, who received his MBA from the university at the end of last summer, is now an associate financial analyst in the corporate treasury for Tyson Foods Inc. of Springdale. White said working with the two funds “definitely” made him better prepared for the real world.

“You’re more focused because you basically put your money where your mouth is after in-depth analysis,” he said. “You can’t just jump in and out of stocks … It just has more of a sense of urgency to it if you’re dealing with real money, both to the school and to the individual who gave the money.”

White said students handled the funds in different ways. For the Rebsamen fund, stocks were chosen, then research was done. It was the other way around for the Shollmier fund. Analysis was done to see what industries and companies would likely provide good returns — “the big picture, then focusing in,” he said.

White described it as the Peter Lynch style (Rebsamen) verses the Warren Buffett style (Shollmier). “Both have their pros and cons,” he said.