GW INVESTMENT INSTITUTE INSIGHTS

The GW Investment Institute (GWII) recently hosted an Alumni Reception in New York City. Held at the elegant venue, The Skylark, located on the 30th floor at 200 W 39th Street, the event was marked by reconnection and insightful discussions.

One of the key elements that contributed to the success of the event was the enthusiastic participation of our alumni community, with over 25 GWII alumni in attendance.

The GWII team extends its gratitude to all the attendees for making this gathering so memorable. Your presence and active participation made the event a resounding success. We are appreciative of your continued support of GWII.

The event also marked a celebration of our alumni’s success. We are incredibly proud of our alumni and their accomplishments in finance. The event was a testament to the strength of our network and the impact our alumni are making in their respective workplaces.

We look forward to the next opportunity to bring together our alumni for another evening of connection. Stay tuned for future events and updates as we continue to foster connections and knowledge-sharing within our community.

Thank you also to GWSB Development and Alumni Relations who supported this event.

Nicolle Ugarte, a senior at the GW School of Business (GWSB) and the Columbian College of Arts & Sciences (CCAS), double majoring in Finance and Political Science, writes this guest blog post. Thank you to the Strategic Investment Group for sponsoring our WIN Conference participation again this year. 

Established in 2016, Cornell’s Undergraduate Women in Investing (WIN) Conference is designed to educate undergraduate students about the rewarding career opportunities available in investment management, where women are vastly underrepresented. Welcoming students from top universities and professionals from sponsoring firms, the WIN Conference provides a unique space for networking, gaining insights from industry experts, and refining stock-picking skills through pitches to investing firm judges.

Rhys Chambers, Elizabeth Ellis, Sandy Isabel Huang Yin, and I represented GW this year at the WIN Conference in Boston. Reflecting on this experience, it has been one of my best experiences at GW; not only did I learn more about the financial industry and the stock market, but I was also able to meet other outstanding women working in the financial sector. 

On the first day of the conference, we started with a networking session, where we met the other participating teams. This was a great experience as we met women from other universities interested in pursuing a career in finance and business. We also discussed the different sectors and stocks we selected for our pitches. After the session, we headed to dinner, where we listened to two panelists who provided insightful views on the current role of Environmental, Social, and Governance (ESG) in the investment business. They also shared about the structure and design of the conference. After a great dinner, we went to our rooms and practiced our stock pitch.

On the second day, we woke up early, headed to the main room for breakfast, and rehearsed our stock pitch with our advisor. After going through our pitch multiple times, we were confident and ready to pitch our stock to the judges. We went to the pitch room and took notes from the other presentations. Soon, it was our turn to pitch. We pitched our stock buy recommendation to the judges, delivering our best pitch yet. We communicated our main arguments and confidently answered the judges’ questions.

After our presentation, we received the judges’ feedback. It was a great experience as we got hands-on experience pitching stocks and analyzing a new sector, which in our case was consumer discretionary, focusing on shoes and sportswear apparel. Although we didn’t win, we did a great job pitching Deckers Outdoor Corp (DECK) and learned quite a bit from the judge’s feedback.

After the stock pitch, we joined the networking session with investment funds and other financial institutions. This session was incredible as we were invited to network with representatives of more than twelve financial companies in the U.S., including Fidelity, T. Rowe Price, Dodge & Cox, and others. During this session, we also got to ask questions regarding job applications, the transition from college to corporate life, and tips for incoming interns. After the network event, we had dinner while listening to the final keynote speaker and the closing remarks of Lakshmi Bhojraj, the Cornell Parker Center Executive Director.

After the event, we checked out from our hotel and squeezed our exploration of Boston into 1.5 hours! Overall, Cornell’s WIN Conference was an outstanding experience as we learned more about the investment industry and networked with remarkable women working in finance. It was also an excellent opportunity for us to represent GW and the GW Investment Institute (GWII)!

Thank you to our mentor, Professor Song, our advisor Kathleen Hinman, and the whole GWII team, Professor Lake and Bojana Jankovic!

Nicolle Ugarte

Focusing solely on financial metrics and valuation models can be alluring when evaluating potential investments. However, assessing the management team is crucial. 

Understanding the Business when Evaluating Management

To provide some fundamental context, investors should work to understand the company’s underlying business model and competitive environment using the Business aspect of the BMPB framework. For example, what product or service does the firm provide, i.e., how do they generate revenue? Who are the major competitors? How large is the total addressable market? 

This grounding in the fundamentals of the business is a critical context for evaluating the aptitude of management.

Evaluating the Management Team

With a basic understanding of the business, the Management element focuses on the human capital leading the company. Some essential questions to answer:

• What is the capital allocation track record of the executive team? Have they demonstrated prior success at this company or in this industry concerning the company’s growth, from either organic growth or mergers and acquisitions? What’s the company’s dividend policy, share buyback program, and debt management on the balance sheet, and do these activities align with shareholders? 
• Are management incentives adequately aligned with shareholders? Or does executive compensation appear skewed too heavily toward the short term?
• Does the management team exhibit integrity, transparency, and accountability with shareholders? Or do they seem only to pay lip service to investors?
• Is there high turnover or departures of critical executives that raise a red flag? Does talent thrive and stick around at the company?
• Does the board include respected leaders who can advise and challenge management as needed?

Why Management Matters

Investors who overlook management diligence and focus narrowly on short-term financials or valuation multiples often regret that decision later. Some reasons that evaluating the management team matters so much:

• Executives make crucial capital allocation decisions that impact long-term business value. Suboptimal choices can destroy shareholder wealth.
• Management sets the corporate culture and morale as vital intangible assets. Talent retention needs better leadership.
• Execs are closest to the business operations and competitive landscape. Investors want managers to think strategically for the future.
• Management guides the investor relations tone and transparency. Secure executives engage openly with shareholders.

Takeaway

Analyzing business strategy is only complete with a robust examination of the management team executing that strategy. The management team’s capital allocation track record, incentives, and the company culture they set provide valuable insights. The GW Investment Institute BMPB framework emphasizes evaluating the management team.

The inaugural GW Ramsey Scholars Investment Summit held on September 30, 2023 marked a significant milestone for the GW Investment Institute (GWII) and The George Washington University more broadly.

The summit brought together GW President Ellen M. Granberg; School of Business Dean Anuj Mehrotra; GWII Director and Vice Dean Rodney Lake; Keynote Speaker, President, and Director of Research at Sands Capital, Perry Williams; and the five cohorts of accomplished students who have steered the GW Ramsey Student Investment Fund to exceptional growth over the past five years.

Reflecting on the fund’s journey, Rodney Lake expressed satisfaction at the fund’s performance, stating, “None of us could have anticipated this level of success when the fund was initiated nearly two decades ago” (GW Today interview).

In her address, President Granberg commended the value proposition offered by initiatives like GWII, underscoring their role in enhancing the quality and relevance of higher education. “The question is how are we going to offer value that merits the cost,” she said. “I think [the GW Investment Institute] is one of the best examples of the value-creation proposition I have come across in my time” (GW Today interview).  

A highlight of the summit was the gathering of five cohorts of Ramsey Scholars. These scholars, spanning diverse academic, professional, and personal backgrounds, shared their experiences with GWII courses highlighting the impact that GWII had on their career trajectories. The summit also served as an opportunity for networking and knowledge exchange among Ramsey Scholars and current students.

To conclude, the 2023 GW Ramsey Scholars Investment Summit was a celebration of the success of GWII and the transformative potential of experiential learning. Thank you to everyone who joined us. We look forward to the next GW Ramsey Scholars Investment Summit on October 19, 2024.

Note: The quotes presented in this blog post were derived from a published article by GW Today.

In an interview conducted by Rodney Lake, Director of the GW Investment Institute (GWII), Dr. Randy Graves, an esteemed alumnus of George Washington University (Class of 1978) and former Director of Aerodynamics at NASA, shared about his time at GW and his decision to leave a lasting legacy through a generous donation to GWII.

Reflecting on his time at GW, Dr. Graves spoke about the profound impact the university had on shaping his education, career trajectory, and personal growth. He reminisced about pivotal moments, influential mentors, and transformative experiences that led him to the forefront of NASA’s Aerodynamics division.

Central to the conversation was Dr. Graves’ belief in the importance of giving back to institutions that have enriched our lives. He emphasized the symbiotic relationship between education, innovation, and philanthropy, highlighting the crucial role universities play in shaping future leaders and fostering groundbreaking research and discovery.

Dr. Graves’ decision to support GWII demonstrates the ripple effect of investing in future generations. His legacy gift serves as a testament to the enduring impact of education and the profound influence of individuals who choose to pay it forward.

Dear Friends and Supporters of the GW Investment Institute,

As we embark on another exciting semester at the GW Investment Institute (GWII), I wanted to take a moment to update you on our latest endeavors, achievements, and upcoming events. A Warm Welcome to Our New Students The fall semester of 2023 began with great enthusiasm as we welcomed a new cohort of students to GWII classes and the community. It has been a pleasure to meet these bright minds and learn more about their aspirations in the world of finance. Our Educational Offerings This semester, GWII is proud to offer three classes, engaging 45+ undergraduate students and over $2.7 million in Assets Under Management (AUM). These classes provide students with the opportunity to gain practical experience in investment management and develop critical skills for their future careers. Applied Financial Securities Analysis Undergraduate students in this class manage the GW Phillips Student Investment Fund, a diversified listed equity portfolio with over $2.6 million in AUM, as of 09/18/2023. We have two sections of this class — I teach one and another is taught by Professor Christine Song. Investing in Real Estate Investment Trusts (REITs) Undergraduate students in this class manage the GW Real Estate Student Investment Fund, a diversified portfolio of publicly listed REITs with over $145,000 in AUM, as of 09/18/2023. In this class, our students hone their skills in security analysis specific to REITs and real estate. I also teach this class. Quarterly Report Our students continue to outperform the benchmark (S&P 500 Index), please see the most recent quarterly report as of June 30, 2023 with market commentary by GW senior Leon Kamenev.  Cornell’s Women in Investing Conference We’re gearing up to send a team of four talented undergraduate women to Cornell’s Women in Investing Conference (WIN) in Boston on September 28th and 29th. Rhys Chambers, Elizabeth Ellis, Nicolle Ugarte, and Sandy Huang Yin are excited to represent GW among eleven other U.S. schools.

Please accept my sincere gratitude for your unwavering support. Your commitment and contributions play an instrumental role in providing our students with invaluable experiential learning opportunities. As we navigate through this semester, I am confident that the GW Investment Institute will continue to thrive, thanks to the dedication of our students and the support of our esteemed community.

I look forward to the exciting developments and achievements that lie ahead.

Best regards,

Rodney E. Lake
Director, GW Investment Institute

During the quarter that ended on June 30, 2023 the GW Investment Institute (GWII) hosted 14 industry professionals across four finance classes, held two stock pitch days, completed the spring 2023 semester classes, and held the annual GW Ramsey Scholars Ceremony to award the top 10 students in GWII classes with $50,000 total. The following commentary was written by Leon Kamenev, a GW undergraduate student, graduating in 2024 with a double major in Finance and International Affairs.

Full Report: GWII Quarterly Report June 2023

Overall, equity markets performed positively, with the S&P 500 up 8.7% over the past quarter. Markets reacted positively to lower inflation numbers. The year-over-year CPI in June decreased to 3.0%, the lowest in two years. The Federal Reserve paused its rate hikes during the quarter. It kept the range of the Federal Funds rate between 5.00% and 5.25%. Other economic indicators such as a strong labor market and consumer spending figures have caused recession fears to quell and fuel further optimism for markets. 

Not all sectors have benefited from the rally this past quarter. Energy (-0.89%) and Utilities (-2.53%) were the laggards, most likely due to lower oil prices and slower growth in China and Europe. Financial Services (5.33%) have rebounded from their poor performance in Q1 2023 as a result of the turmoil in the regional banking industry. Communication Services (13.06%), Information Technology (17.20%), and Consumer Discretionary (14.58%) were the leaders in the index, due to the positivity surrounding developments in Artificial Intelligence (AI) and strong consumer resilience. 

For the quarter that ended on June 30, 2023, the GWII’s Student Investment Funds in aggregate outperformed the benchmark with a return of 9.8% vs. 8.7% for the S&P 500, while also outperforming the benchmark in the past one year at 24.7% vs. 19.6% for the S&P 500.

During an interview on May 4, 2023, following the GW Ramsey Scholars Ceremony, William Ahrens, a sophomore and GW Ramsey Scholar, had a conversation with Mr. Russ Ramsey, Chairman of the GW Investment Institute (GWII) Governing Board and CEO of Ramsey Asset Management. They covered a range of topics including the inception and impressive growth of the GW Ramsey Student Investment Fund since 2005. Mr. Ramsey shared insights on the fund’s investment framework, the exceptional performance of students, and offered a glimpse into the future trajectory for the GW Investment Institute, emphasizing the significance of continuous learning and making meaningful contributions in one’s chosen field.

William Ahrens: Take us back in time to when you first came up with the GW Ramsey Student Investment Fund in 2005, how did you decide to give that first million dollars which went on to become the foundation for the GW Investment Institute?

Russ Ramsey: In 2005, I professionally was shifting from the sell side to the buy side. I’d been very fortunate to put together, co-found, and co-lead what ended up being the largest investment banking firm in Washington D.C. – Friedman, Billings, Ramsey (FBR). In the early 2000s, I had shifted my focus to building an alternative asset business and using primarily a long short equity strategy with the firm. By 2005, we were two or three years into building our standalone Chief Investment Office at The George Washington University. Chief Investment Officer (CIO) Don Lindsey, Rodney Lake, and I, along with a team that we had built, had taken the reins of actually putting together a portfolio, particularly a portfolio of equity managers. We had observed, which is true then and is still true today, that a shockingly large percentage of professional equity money managers don’t outperform their benchmarks. And in our case, we were primarily focused on the S&P 500. The CIO of the time was very much a top down kind of thinker. Ethan McAfee, who was another person who this fund wouldn’t be here without, was the Director of Research for Ramsey Asset Management. He had been trained at T-Rowe Price and had actually had some experience at a student run investment firm at his alma mater. He had some very strong views about what was the right way to construct and build a portfolio and compound capital. And from that, we decided to do what we believe in, which is to have a straightforward construct of the academic literature, primarily books that Charlie Munger and Warren Buffett had recommended over time. Let’s come up with a straightforward construct for the industry groups and the portfolio. And let’s give the students the skills to build a portfolio and be unconstrained in terms of the capital, so it would be permanent capital and see how we did. That was the thesis, that was the theory of the case.

William Ahrens: It’s been almost 20 years at this point and the fund and the GWII have grown from a million dollars to $7 million. What does that mean to you in seeing the continued success and the going concern of GWII?

Russ Ramsey: From that first class, and from that first premise: I think we can declare the thesis a victory and a win. Because investing is like any competitive sport and dynamic, there is no finish line. So every year you have another set of results that build on a previous year’s set of results that build on a string of continuous results. But unlike a lot of other places, we aren’t changing the benchmarks, we aren’t changing the rules, we aren’t changing the construct, it’s the same. It’s rinse and repeat. Now, obviously, through those markets, you know, we can give a soliloquy about all the things that have happened from the Great Financial Crash to the Flash Crash May to the recovery to the advent of big tech and the destruction of bricks and you can go on and on.

What I think has been proven by the methodology is we can pick good businesses at fair prices when run with very skilled managers with the right incentives, they can grow and compound in value, and you can sleep at night and build the portfolio. The students are unconstrained by all the noise that does get in the way of professional money managers outperforming: too much short term trading, too much focus on consensus earnings and beating earnings, too little real focus on long term thinking, too much worrying about monthly returns, daily returns, client meetings, and getting fired, all the things that go into constraints. I think we have demonstrated that the students do a better job than most of the professionals.

William Ahrens: It’s quite the achievement and quite the claim and it’s shown by the performance data which is really fascinating. The methodology works as seen in the case with a traditional fundamental approach that GW Phillips and GW Ramsey Student Investment Funds implement. But what’s next for GWII? Where’s the growth, how could the methodology be applied to other areas, for example with quant?

Russ Ramsey: Like any good team, we’ve gone from, sort of one voice, mine and my wife’s, to a real board and real leadership, amazing stewardship by Professor Lake. And in many respects, it’s going to be the collective view of all the stakeholders. We were just there at the beginning–Don Lindsey, Ethan McAfee, Rodney Lake, myself—we were pioneers, we were there at the beginning. No enterprise is successful without many partners and many people who care deeply about building intellectual capital that can be shared with the future citizen leaders of the world, here and elsewhere.

And by the way, we’re open architecture. Because without classes, we’re happy to share this with any other university, any other enterprise that wants to bring that to their own sort of special place. So in terms of the future, I think we should continue to be thoughtful about secular dynamics and changes that we can build classes around, where we either have some strength or can build some capability. And I think that’s how the quant fund came about. We have a wonderful alum, who felt like he wanted to share what he had built in and it complements perfectly kind of this bottom up fundamental [analysis], company by company, portfolio by portfolio, with really, very much a top down quantitatively driven strategy that Aron [Kershner] was part of building at Goldman Sachs. And so, what a gift. 

And so going forward: we don’t do derivatives, we don’t do any other types of macro strategies. Never say never, I think we should always be open as entrepreneurs to areas where we can bring some practical real world application if we believe in that construct. And we believe it’s repeatable and believe that it’s a pillar that our students should want as part of their foundation going out and that’s not everything, right. There’s dozens of strategies and dozens of asset classes which we should not spend any time focused on because it’s not something that we can take a 20 year view and say, this is something that is here forever and applicable, and hopefully can be used for generations to come in the future.

William Ahrens: It’s a really special day today with the GW Ramsey Scholars Program, $250,000 in awards, almost a quarter of the initial seed investment of $1 million back in 2005. What advice would you have for GW Ramsey Scholars as they take their experience at the GWII and their time on campus and go out into the real world and to become practitioners and decision makers?

Mr. Ramsey: My advice to new graduates would be to be a sponge. Take these pillars that you have learned in your academic coursework, and then just find those mentors and find those strategies, find those asset classes, find the areas that you just can’t sleep at night because you’re so excited about learning and applying.There’s no good or bad, there’s no right or wrong, there’s no good or evil–it’s about where you can apply and bring your skills to build a career and to grow and add value. 

There’s just one question I think everyone should wake up in the morning and ask themselves: How am I going to add value today, am I going to make a deposit or withdrawal? 

I think everyone should wake up doing that in whatever their chosen field is. And I predict that applying that simple sort of approach will lead to a very successful career and outcome.

William Ahrens: Anything else to add?

Mr. Ramsey: It’s just a pleasure to be back here. As I shared at the GW Ramsey Scholars Ceremony, I don’t get on campus that much anymore. And the true highlight is to see why we should all be so optimistic about our society’s future and our country’s future because these young minds are going to be amazing professionals.

On May 4, 2023 the GW Investment Institute awarded $50,000 to our top 10 performing students from our classes from this past academic year. These students are now distinguished as GW Ramsey Scholars and have joined 40 other GW alumni with this designation. In total, including this year’s group GWII has awarded $250,000 to 50 GW Ramsey Scholars. We look forward to continuing this program established by our chairman Russ Ramsey and his wife Norma. 

“We started this [GW Ramsey Student Investment Fund] 18 years ago and now that we’re in the fifth year of the Ramsey Scholars it brings a couple things to mind: one, the value of compound returns which we all learn in the class and two, I’m amazed at the enthusiasm and skill and knowledge and the impressive nature of these scholars every year. They continue to impress me and I can’t wait for the future.”    – Russ Ramsey, GW Investment Institute Chair

Check out the video (done by Willow Newcomb) for more info:

GW Ramsey Scholars Ceremony video, May 2023

During the quarter ended March 31, 2023 the GW Investment Institute (GWII) hosted 15 industry professionals across four finance classes, continued to integrate FactSet into class curriculum and worked with BlackRock to introduce a new cohort of students to their Aladdin technology. Additionally, on March 24 the GWII held the 2023 Annual Conference – Quant Investing for over 60 attendees with alumnus Aron Kershner as the keynote speaker. The following commentary is written by Alyssa Shen, a GW School of Business senior, graduating with a B.S. in Finance and B.S. in Economics. Alyssa is the Co-President of the GW Finance and Investment Club and is an incoming investment banking analyst at Citigroup.

Full Report: GWII Quarterly Report March 2023

At the start of the quarter, equities and fixed income reacted positively to falling inflation (CPI 5.1%), signs of slowing monetary tightening, and China’s economic reopening. Inflation was the focus of 2022 and now is beginning to ease in Q1 of 2023 following lower energy prices and rate hikes. In March, the collapse of the Silicon Valley Bank and Signature Bank shook the financial sector, leading to major sell offs in the U.S. and European markets. The Fed increased the federal funds rate by just 25 basis points. As businesses rebalanced their inventories and pulled back spending, GDP growth slowed to 1.1% year over year, below expectations of 2.0%. Further, the geopolitical backdrop remains challenging with the continued war in the Ukraine and tensions between the U.S. and China. 

The S&P 500 closed the first quarter with a growth of 7.5%, bringing the year over year decline to 9.6%. Consumer Discretionary (+16.2%), Technology (+21.6%), and Communication Services (+21.3%) rebounded drastically in Q1, with Consumer Staples (+0.7), Real Estate (+1.9%), Industrials (+3.5%), and Materials (+4.3%) sectors remaining positive. Energy (-4.4%), Financials (-5.6%), Health Care (-4.31%), and Utilities (-3.2%) were the greatest laggards.

The quarter ended in March 31 2023, the GWII’s Student Investment Funds in aggregate outperformed the benchmark with a return of 12.2% vs. 7.5% for the S&P 500, while also outperforming the benchmark year over year at -5.5% vs. -7.8% for the S&P 500.