SEED, BASIS enhance students' understanding of their finance course work
Through two investing groups, Virginia Tech students, primarily in the Pamplin College of Business, are managing more than $10 million of Virginia Tech's endowment.
Unlike most other student-investor programs in universities across the country, Virginia Tech’s students run the funds on their own — not as part of a course — with guidance from faculty advisers. Organized in teams by function, students research, discuss, and execute their trades. They recruit and train new members and give annual oral and written reports to the Virginia Tech Foundation.
SEED (Student-managed Endowment for Educational Development) launched in 1993 with $1 million. Today its students run a $5 million-plus equity portfolio that is believed to be the nation’s largest that is managed by students as an extracurricular activity. Finance Professors John Pinkerton and Mike Kender are the group’s advisers
BASIS (Bond And Securities Investing by Students), established in 2006 with about $2.5 million, manages more than $5.5 million in bonds and other fixed-income securities. One of only a handful of bond-only student-investor programs in the nation and the only one autonomously run by undergraduates, BASIS is guided by Professors George Morgan and Derek Klock.
Though both programs are extracurricular, they are also distinctly educational enterprises with strong ties to the finance classroom and curriculum. By giving qualified students investing experience and exposure to industry professionals, they reinforce concepts and theories learned in class, enhancing students’ understanding of their course work.
“BASIS has provided me with lots of in-depth knowledge of the fixed-income market, which has made my finance classes more relevant,” said Dana Hummel, a junior studying finance from Fairfax, Va., who is the sector head for industrial and utilities for the group. “When I can relate a topic in class to a news story I read or a chart I analyzed for BASIS,” she said, “it makes me excited to learn more and makes class more enriching.”
Matt Milroy, a senior in finance from Chesapeake, Va., who serves as SEED’s chief investment officer, said he has gained a new point of view for solving problems. “As a member, you learn how to break down constantly evolving and complex problems. That skills set has helped me approach classroom assignments and challenges in an entirely different way.”
Alex Schegolev, a senior from McLean, Va., who is double majoring in accounting and finance, serves as co-CEO of BASIS. He said he has gained “valuable experience” in many aspects of fixed-income markets. His communication, leadership, and teaching skills have been honed, and “I developed an even stronger work ethic and an appreciation for competitive environments.”
SEED seeks to outperform the S&P 500 annually by 100 basis points; BASIS seeks to beat its Merrill Lynch investment-grade bond index. Both groups have “generally matched their respective benchmarks over time, with varying periods of either over-performance or under-performance,” said John Cusimano, the university’s associate treasurer and director of investments and debt management.
This variation in performance has been “especially evident over the past four years, as global events have increased market volatility and the correlations among financial securities.” But, he adds, “I actually think the students learn more about the mechanics of portfolio construction during these difficult periods of under-performance.”
Perhaps the most visible success of the programs has been in job placement. Students’ beefed up credentials give them an edge in the highly competitive internship and job markets. The placement record for BASIS was particularly remarkable in 2011, given the economic turmoil, Morgan said, with 100 percent of graduates again hired and all but a few of the returning students securing plum internships at such employers as GE, Citi, and Credit Suisse. SEED internships at Citi, Morgan Stanley, UBS, and Capital One, Kender said, all turned into full-time jobs for the students.
Christina Todd, who gradudated in 2009 with a degree in finance, interned at Goldman Sachs and credits her SEED participation for helping her secure that internship and land a job at BB&T, where she is currently an assistant vice president in business services and portfolio management. “I had more confidence going into interviews than I would have had without SEED. It really helped set you apart from other candidates.”
Other benefits have emerged, as well. SEED and BASIS alumni and other successful graduates are now supporting the programs. Donations, job placements, and internships have all grown as a result. The two programs have collectively received more than $250,000 in pledged gifts toward their operating expenditures, Cusimano said, including the purchase of many more Bloomberg terminals for use by all students.
Josh Allen, who graduated in 2007 with a degree in finance and who was on the inaugural BASIS team, said the program offers students an opportunity beyond investing. “Members are required to be disciplined, pay close attention to detail, and think strategically. These skill sets are far more than portfolio management skills — they are life skills.”
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Alumni of both SEED and BASIS say the real-world lessons they gained have been invaluable to their careers.
- Matt Milroy, a senior in finance from Chesapeake, Va., who serves as SEED’s chief investment officer, had no prior investing experience. “Through SEED’s mentorship process, I developed a passion in the financial markets,” said Milroy, who will join Citi as a full-time analyst after graduation.
- “BASIS allows you to work with some of the most highly motivated and intelligent students at the university. And it offers networking opportunities, including trips to New York and Charlotte,” said Alex Schegolev, a senior from McLean, Va., who is double majoring in accounting and finance and serves as the group's co-CEO. He also will join Citi full time after graduation.
- “BASIS helped me gain the knowledge to do well in finance,” said Dana Hummel, a junior studying finance from Fairfax, Va. “It has also provided me with a close-knit circle of students and professors who encourage each other to succeed.”
By the numbers
- 2: Percentage of Virginia Tech’s endowment being managed in total by SEED and BASIS
- 12: Number of Bloomberg terminals in Pamplin Hall
- 100: Percentage of BASIS graduates hired within two months of graduation in 2011
- 15 to 20: Hours a week each SEED and BASIS member must be prepared to work
George Morgan, finance professor and one of two advisers to BASIS, said a big part of his role with the group is to know when to intervene and, more importantly, when to step aside.
“Our main function is to ensure that the guidelines that the Virginia Tech Foundation expects us to follow are in fact followed in our purchases, sales, and ever-changing portfolio structure. BASIS members generally make decisions on their own, but we’re constantly involved in discussions and in overseeing the education and growth.
“It’s a challenge to determine when to step in and when to step aside. Sometimes you have to let students make some mistakes to learn from them, but we never want to allow mistakes that have a significant negative effect on the foundation's returns.”
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