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Capital Markets Overview; BCF Introduction

Capital Markets Overview; BCF Introduction. Rick Spillane, CFA June 2, 2014. Presentation Outline. 1. My Background 2. Observations about 2014 Capital Markets 3. Introduction to the Babson College Fund 4. BCF recruiting information 5. Q+A. RPI, Chemical Engineer; Harvard MBA

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Capital Markets Overview; BCF Introduction

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  1. Capital Markets Overview; BCF Introduction Rick Spillane, CFA June 2, 2014

  2. Presentation Outline • 1. My Background • 2. Observations about 2014 Capital Markets • 3. Introduction to the Babson College Fund • 4. BCF recruiting information • 5. Q+A

  3. RPI, Chemical Engineer; Harvard MBA Eaton Vance Management, 1977-1987 Analyst and Portfolio Manager Fidelity Investments, 1988-2007 Analyst and Portfolio Manager Director of Research Chief Investment Officer (US and Europe) Head of Strategic Advisers (Fidelity’s RIA) BABSON FACULTY 2007-PRESENT My background

  4. Stock and Bond returns 1925-2012 Rick Spillane, CFA Data from Ibbotson Associates

  5. Real Returns, 1925-2012US Assets

  6. Bonds, Real Returns 1925-2012 Bond returns have been good, T bills have only kept up with inflation. Note the dip in 1983 for bonds

  7. “Certificates of Confiscation” 1981

  8. Large Stocks (Equities) and Fixed Income Returns 1925-2012 1999 2012 Equities have crushed inflation and fixed income over the long term. 1973 1975

  9. The Death of Equities 1975

  10. Dot-Com boom 1999

  11. All Assets, Real Return 1925-2012 Small stocks have been even better than large stocks; but a lot more volatile

  12. Don’t Invest like this!

  13. Conclusions In the long run, it IS about risk and return BUT this is NOT science, human behavior influences returns A LOT!

  14. What is the market forecasting for inflation? • 10 year rate for US Treasury Inflation Protected (TIPS) Bonds : 0.35% • 10 year rate for US Treasury Bond: 2.54% • Inflation rate forecast: TIPS-10 year UST: 2.19% • NOTE: market rates 5/15/14

  15. Short Term Rates: US Market

  16. Long Term Interest Rates, US Market

  17. Equity Market Valuation US Market 5/15/14 • Price/Earnings (P/E) 2014E 15.7X • Dividend Yield 1.92% • 52 week high 1902 • 52 week low 1560 • Current 1897

  18. P/E Ratios across the globe • US 16.1 • Japan 16.1 • Germany 13.5 • Hong Kong 10.6 • Taiwan 14.9 • China 7.9 • India 15.4

  19. What is BCF? • BCF runs a portion of the Babson Endowment • 23 Students (undergrads and MBA’s) • The objective is to beat the S+P500 • Long/ short portfolio of Equities • Fully invested (market timing not allowed) • Heavy Focus on investment analysis (stock picking) • MEETINGS ARE MONDAY NIGHTS 6:30 TO 9:00 PM • 6:30-7:30 Coaching session with Exec in Residence • 7:30-9:00 Portfolio overview and Stock Pitches • One Friday seminar per semester

  20. Executives in Residence • Warren Johnson, CFA • Hugh Crowther • Jim Spencer, CFA • Rick Mace • Charles Mangum • Chris Stix • Mike Dunn • PratimaAbichandani • Steve Petersen • Bill Ebsworth

  21. Investment Philosphy Market Timing High Style Timing Size Timing Impact On Return Sector Selection Stock Selection Low Probability Of Success Low High

  22. Sectors • Executive Portfolio Managers • Consumer • Financials • Basic Materials/Energy • Industrials • Healthcare • Utilities/Telecom • Technology • Quantitative/Risk Management

  23. What do you do? • Follow your sector closely • Buy and sell stocks in your sector • Work in a team of 1-3 other managers • Write 3 research reports per semester • Write a Semester Report/Sector Overview

  24. Why you should do this • You will learn a lot about fund management and stock analysis • You are investing REAL MONEY • You will work hard, but learn a lot • This is as close to real world investment management as possible • You earn class credits for two semesters • Enhanced Job Prospects in the Finance Industry

  25. Recruiting Approach • Fall: recruit 2 year MBA’s, Junior Undergrads with a December graduation date, Evening MBA’s • Spring: Junior Undergrads with a May graduation date and Evening MBA’s • Summer: One Year MBA’s

  26. Key dates • Summer • Info session TODAY! • Applications due Friday, July 11 • Interviews Monday, July 14

  27. Application Process • Application on BCF Website • http://cutler.babson.edu/babsoncollegefund/BCFApply.aspx • Send to Karl Honerlow by Friday July 11 at noon. • Interviews on Monday July 14 • You start immediately • NOTE: You must take or have taken FIN 7503 (Equities) if you are an MBA student!!

  28. Questions??? • Last years students!!!!

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