Abstract

1. Experiential Learning in Global Asset Management Education:A Principles- and Applications-based ApproachBryan Sudweeks, Ph.D., CFAJim Seaberg, MBA, CPABrigham Young UniversitySeptember 29, 2016

2. Abstract • Our research supports the view that global business, investment, and leadership skills are not fully developed through study but rather are honed through experience. Students experienced in managing global assets are generally more prepared, better able to solve problems, understand the industry and companies better, and are more likely to be offered job opportunities after graduation. This presentation discusses the Asset Management track of the Finance major at a large, private university. The purpose is to share principles, program pedagogical structure, and key tasks of the Valuation, Asset Management, and the Global Finance Investment Internship (GFI2) classes that have led to some success in this area.

3. Objectives A. Understand core principles B. Understand the program pedagogical structure C. Understand the Valuation class tasks D. Understand the Asset Management (AM) class tasks • Understand the International Investment Internship program tasks • Understand the results of the program

4. A. Understand Core Principles • Our view is that global business, investment, and leadership skills are not fully developed through study but rather are honed by experience through: • Applying theories to companies and “messy data” • Rigorous industry and company analysis supported by modeling, forecasting and valuation skills • Development of presentation and other skills including critical thinking • Interaction with practitioners who share their skills • Management of real funds ($1.3mn) and visiting companies both domestically and internationally

5. Principles (continued) • Student focused • The program is based on the needs of the students, not the recruiters or faculty advisors • We are concerned about what happens over their entire lives, not just their first job • Task driven • Tasks are modeled on what occurs in the workplace of top-performing asset management and investment firms • These are real business processes and data sources used in managing real assets

6. Principles (continued) • Vision centric • Our goal is to help students gain the vision of what they want to do for their careers • Once they have the vision of what they are trying to accomplish, building on a foundation of basic skills and ethics, they will use their problem solving and relationship skills to learn what they need to learn • Accountability based • We try to hold students accountable for their analysis, recommendations, and other decisions • Students develop an expertise for specific industries and companies, and then keep other team members informed of any changes to outlook and earnings

7. B. Understand the Program Pedagogical Structure • We have built the program on nine specific characteristics and a three semester program of two different classes (including an optional spring term Global Finance Investment Internship) • These characteristics, combined with our “fundamental value” orientation and our core principles lead to a program that supports learning and enhances the educational experience

8. Pedagogical Structure (continued) • Experienced Industry shareholders • The program was established with experienced industry shareholders who consulted with us on program design, allow us to manage their money, participate in monthly conference calls, and answer questions and give views and feedback • Asset management company structure • The program was developed to mimic a small asset management company where students have job descriptions, a written investment policy statement, investment process, sell strategy, build a Watch List, have buy and sell points for all investmentsand do everything except market and get paid

9. Pedagogical Structure (continued) • Experienced industry professionals • We have developed a cadre of experienced professionals who come each semester and talk about key topics in asset management: practices, investment strategies, sell strategies, trading, fund accounting, performance attribution, etc. • On-campus internship framework • Our student managed investment fund (SMIF) was started as an on-campus internship where students work doing company research for various asset management companies. Student meet three times a week for 4.5 hours total in class and three times that outside of class

10. Pedagogical Structure (continued) • Scheduled networking trips • Students are required to be part of the major finance clubs on campus. Clubs regularly take students (at the student’s expense) to New York, San Francisco, Boston and Los Angeles to visit key asset management and investment banking companies • Structured mentoring program • The program is structured where AM students mentor the younger Valuation students. This process helps younger students see the vision of what they are learning, encourages older students to understand and apply the concepts correctly, and builds a network of students who work together

11. Pedagogical Structure (continued) • Leadership opportunities • The program is organized using a leadership and team structure often used in asset management companies. Two Heads of Research and six team leaders are responsible to ensure that the teams function well and they accomplish their intended objectives • Experienced faculty advisor • This program was established with a faculty advisor who has had experience in the industry prior to devoting full-time to leading this curriculum and teaching

12. Pedagogical Structure (continued) • International Experience (optional) • This program provides an international experience where students, accompanied by faculty advisors, get names of international companies to analyze from local asset management firms; analyze and value the companies; visit them in their home markets, ask questions of management, visit factories and suppliers; finalize forecasts and valuation; and then report back to US-based asset management firms the results of their visits

13. Pedagogical Structure (continued) • The program is a three semester post-Finance core class (with an optional Spring term int’l internship) • Valuation: A one semester class which teaches analysis, modeling, forecasting, valuation and presentation tasks • Asset Management: A two semester class which teaches expectations, selection, valuation and modeling, execution and reporting tasks • GFI2. A term class that teaches internationalization of analysis and thought processes • Combined they give the students 3.5 semesters of experience doing all aspects of global asset management and investment research

14. Pedagogical Structure (continued) • The Valuation class is cross between a traditional and an internship class • We use traditional finance methods to teach the theory and fundamentals • We use internship methods to give students experience in the application of theory to real life • We use Team Leaders from the Asset Management class as Teaching Assistants and Team Members from the Asset Management class as mentors

15. Pedagogical Structure (continued) • The Asset Management class is set up as a small investment management company • Its run like a company • A Head of Research runs the business • Five Team Leaders lead their teams • Teams are divided by specific industries and analysts cover all companies on the Watch List • Students do what an asset management company would do, deadlines and all • Our graduating seniors leave with the equivalent of one year’s experience managing assets

16. C. Understand the Valuation Class Tasks • The Valuation/Internship class was designed around the five key tasks of: • Analysis • Modeling • Forecasting • Valuation, and • Presentations

17. Valuation Tasks (continued) • Analysis • Students apply core Finance theory to financial and industry analysis, using fundamental value as a core investment management discipline • Students learn where to find and how to analyze data using Excel, VBA and major data providers • Modeling • Modeling is the process of understanding how companies are organized • Students begin with small single product companies, then expand their models to larger, more complex companies

18. Valuation Tasks (continued) • Forecasting • Students are taught current methods in forecasting • Students not only forecast the income statement, but a full balance sheet and a simplified cash flow • Valuation • Students are taught the process of determining the value of an asset, whether it is equity, enterprise value or a specific financial asset • Students are directed in which cases specific valuation models may be more appropriate than others

19. Valuation Tasks (continued) • Presentations • Students develop an investment thesis, present their analysis and recommendations in timed presentations to faculty, mentors, and industry shareholders, and defend that analysis in front of others who have reviewed their models and analysis

20. D. Understand the Asset Management Class Tasks • The Asset Management class was designed around the five key tasks of: • Expectation • Selection • Modeling and Valuation • Execution • Reporting

21. Asset Management Tasks (continued) • Expectations • Students are assigned individual industries and companies for research and reporting. Students come up with short- and long-term views on their companies and industries • Selection • Students use Bloomberg and other screening tools to develop a list of companies most likely to be added to the Watch List. They go from the 14,000 publically listed companies to the 30-40 companies that will be analyzed during the semester. We use proprietary screening tools from our industry shareholders to be more effective in this process

22. Asset Management Tasks (continued) • Modeling and Valuation • Students model the company and come up with a valuation and investment recommendation. They develop their investment thesis, determine a buy and sell price, and present and defend their analysis to other analysts. • Other analysts pick through the thesis, review their models, ask questions, make recommendations, and finally vote on whether or not to follow the investment recommendation

23. Asset Management Tasks (continued) • Execution • Students develop buy and sell prices for investment recommendations, including the best ways to gain exposure to the securities. • Reporting • Students track performance and report on performance monthly via a printed report and monthly conference call and at the end of each semester to industry shareholders

24. E. Understand the International Investing Internship (GFI2)Tasks • The GFI2 Internship was designed around four key tasks of: • Selection • Modeling and valuation • Analysis • Management and company visits • Reporting

25. GFI2Internship Tasks (continued) • Selection • Students work with Team leaders and local Utah-based asset management firms to select companies which may be attractive for the program • Faculty and students arrange visits based on the location of the factories/companies and the schedule provided by faculty • Analysis • Students use the skills learned in earlier classes to analyze the business models and key industries • Students analyze competitor companies using tools which can handle international companies

26. GFI2 Internship Tasks(continued) • Modeling and Valuation • Students model earnings and prepare forecasts for companies in either the local currency or US dollar. Students can do analysis in either currency • Students use tools developed in the earlier classes which have been internationalized for this program • Students model revenue and cost drivers for each country and value the companies using multiple valuation models

27. GFI2 Internship Tasks(continued) • Management and company visits • Students visit management and based on the analysis and research done, ask questions of management to ensure thesis is reasonable, refine forecasts, ensure understanding, improve the quality of models, and finalize valuation • Students analyze competitor companies using similar tools • Students come to a conclusion regarding the attractiveness of the company, whether is should be added to the “Watch List”, and if so, at what price it should be bought or sold based on the recommended valuation

28. GFI2 Internship Tasks(continued) • Reporting • Students use the skills learned to finalize their reports including presentations to the local asset management firms • Upon their return, students visit 4-5 local asset management firms and present back their analysis on the companies visited • Local portfolio managers and analysts make suggestions back to the students on how to improve the analysis and the quality of the research

29. Results of the Program • The results have been promising: • Over 400 students placed in investment banking, investment research, asset management, private wealth management, mutual fund research, and other supporting functions • The quality and the names of the companies hiring the students is increasing and improving • The ranking of the finance program has also improved (based largely on efforts of the university, the business school, the finance core and the efforts of faculty, leadership and staff beyond this core) • 70 students have participated in 3 GFI2 trips and have visited 60 companies in 16 countries

30. Conclusions (continued) • Student managed investment funds have been successful in bridging the gap between theory and real world investment situations • Business, investment, and leaderships skills are not fully developed through study but are honed through both domestic and international experience • Observed outcomes have shown that students with experience in SMIFs are generally more prepared, better able to solve problems, and more likely to be offered job opportunities after graduation than those without this experience • Global programs are the next likely step in this progression of SMIFs

31. Conclusions (continued) • We have run our program for 10 years

32. Conclusions (continued)