What would you do with $1 million? For most people, it is a daydream. For some lucky School of Business and Economics students, it is their amazing reality.
Students in the Applied Portfolio Management Program (APMP) have become millionaires of sorts. Although they do not have the luxuries the term implies, they have the privilege of managing an investment portfolio worth more than $1.2 million.
“Managing real assets forces the students to deal with the realities of the market—uncertainty, noise, imprecision—and perhaps more importantly, their emotions, as they make the decisions to invest funds.”
APMP was started in 1998 with generous contributions from Michigan Tech alumni and friends. The program began under the direction of Associate Professor of Finance Dean Johnson. In that time, more than one hundred students have moved through the ranks under Johnson’s leadership. The money they invest comes from private donors. The profits go into the Michigan Tech Fund—the University’s official nonprofit fund management and gift solicitation agency—to be used to support student scholarships and for APMP expenses.
APMP is a unique program in a number of ways, including the primary way it functions. “Our portfolio team has a lot of control over this real money,” Johnson explains. “They have an advisory board, but the ultimate decisions are theirs.”
Each year, APMP accepts up to twelve seniors who have gone through a rigorous interview process in order to qualify. These students form an investment team and do extensive research in order to come up with an investment philosophy and strategy. This strategy includes market projections, asset allocation policy, diversification procedures, and stock and fixed income analysis. The preparation that goes into the plan mirrors the setting up of an investment firm, right up to getting investor buy-in from the advisory board before they can put their plan into action.
“The board decides whether or not the investment strategy makes the cut, and the questions during the presentation can be quite brutal,” says Johnson.
Once approved, the students put their strategy into practice in the real world of investment. APMP students meet twice more with the advisory board, at the end of the first semester and at the end of the year, where they receive advice and constructive criticism about their work. In the process, they learn valuable professional and interpersonal skills in order to begin their careers in the investment field.
“We couldn’t do it without the help of our advisory board and other generous supporters of APMP,” says Johnson. “People like Stan Phelps, Larry Durland, Joe Dancy, Je Smolek, and many others provide our students with real investing experience before they enter the workforce.”
Not only is the opportunity that these students have remarkable, the results of their investments are as well. Michigan Tech’s Gold Team portfolio had a 31 percent return this past year, beating the typical market results. This performance resulted in earning them runner-up status at the annual University of Dayton Redefining Investment Strategy Education (RISE) conference and competition. RISE is the world’s largest student investment forum with over 250 universities from more than fifty nations participating. This was the tenth year of the competition, and Michigan Tech has won the value-style portfolio category three of those years.
The APMP students not only win competitions, they win high praise from their advisors and those who provide them with internships and employment.
Larry Durland, the chairman of the APMP Advisory Board, retired from a long and successful career in the insurance industry, including numerous management positions with Equitable of Iowa, later ING. “As I have worked with the APMP, I have become more and more impressed with the importance of the word ‘applied,’” he says. “Managing real assets, rather than applying textbook solutions to paper trades, forces the students to deal with the realities of the market— uncertainty, noise, imprecision—and, perhaps more important, their emotions as they make the decisions to invest funds. The meetings with the advisory board reinforce this, with hard questions from professionals reviewing the portfolios’ investment results. The program produces graduates with true experience— applied, not theoretical—in portfolio management.”
Stan Phelps is the chairman of S. N. Phelps and Company, an investment and securities firm, in Greenwich, Connecticut. He is considered one of the nation’s leading experts on the restructuring of financially distressed companies and on corporate “junk” bonds and other higher-risk financing vehicles. A strong believer in giving back to others, Phelps supports a number of educational institutions. He found out about APMP after seeing a participating student on CNBC’s Wall Street show, Squawk on the Street. He was so impressed that he has provided internships and employment for a number of APMP grads. “We have been very happy with the students. Their background has been excellent, and their willingness to learn the business part of Wall Street, in addition to the academics, is excellent.”
Most Wall Street investors would love to have a financial crystal ball to consult to help them predict the future and, no doubt, would be envious of the APMP “student millionaires” and their success. However, it doesn’t take a crystal ball to see that the future looks bright for these savvy and hard-working students.
“We are immensely proud of the program and the success of our students under the leadership of Dean Johnson and the advisory board,” says School of Business and Economics Dean Darrell Radson. “With ongoing support, this program will continue to be a shining example of the quality education that the School of Business and Economics provides.”
Alums Make Their Mark
APMP graduates who are now working in the “real world” reflect positively on their experience.
Ryan Layton ’04 (APMP 2003–04) is now an investment manager for Wells Fargo. The most valuable thing he learned from APMP? “It’s easy enough to formulate an opinion. The most valuable thing I learned was how to defend it. There are many ancillary skills beyond investment analysis that you develop in APMP: time management, presentation skills, working in teams. You’re running every aspect of the fund: analysis, management, accounting, investor relations. Exposure to all of these was very beneficial to preparing me for my career.”
Brad Person ’06 (APMP 2005–06) is an independent investor and founder of Digital Harbor LLC. Person echoes some of Layton’s analysis of how APMP affected his career. “If one thing had to be named, it would be applying a fundamental analysis to an environment and not necessarily achieving a result or outcome. We’ve seen the past several years bring an array of risks and regulations that have changed the financial landscape. Valuations, strategies, and analyses must each take this adaptive approach to stay viable. APMP highlights this process on a daily basis by applying it to a real-world opportunity. It’s a great experience that pays dividends.”
Jessica (Omtvedt) Chlopek ’06 (APMP 2005–06) is an institutional equity sales associate for William Blair and Co. “I thought it was an awesome and necessary experience if you are serious about pursuing a financial career. My classes were great, but being able to apply the skills is key in the real world. At the time it felt like an overwhelming amount of tasks on top of an already difficult workload. But it all paid off. With my APMP experience, a great internship, new financial contacts, and decent grades under my belt, I was able to land a job at a Chicago-based financial firm called William Blair. Admittedly, I do work a lot—sometimes twelve-plus hours a day!—but I love my job, and I’m proud to say that a small-town Wisconsin girl made it to the big city with the help of APMP, Dean Johnson, and the rest of the Michigan Tech team!”
Amanda Vogt ’10 (APMP 2008–10) is a financial analyst at S. N. Phelps and Company. “I was amazed and surprised after competing at RISE that Michigan Tech gets to manage over a million dollars. Many of the other schools were only managing a couple hundred thousand, where we have the opportunity to invest much more. The program and experience I gained were irreplaceable. Apart from the academic and career benefits, APMP is also a great way to build relationships with your peers who share the same passion for finance.”
Michigan Technological University is a public research university founded in 1885 in Houghton, Michigan, and is home to more than 7,000 students from 55 countries around the world. Consistently ranked among the best universities in the country for return on investment, Michigan’s flagship technological university offers more than 120 undergraduate and graduate degree programs in science and technology, engineering, computing, forestry, business and economics, health professions, humanities, mathematics, social sciences, and the arts. The rural campus is situated just miles from Lake Superior in Michigan's Upper Peninsula, offering year-round opportunities for outdoor adventure.