New asset management initiative brings alumni support, real money to enhance Kellogg School finance strength through experiential learning

By Romi Herron
Updated with correction: May 16, 2007

After more than two decades on Wall Street, Avi Nash '81 has become convinced that it's easy to make investment mistakes.

"It is easy to confuse good luck with smarts," says Nash, retired Goldman Sachs partner and now head of his own management consulting firm, Avi Nash LLC. "When things go well, we think we are brilliant. But sometimes when something does work, it's actually a rising tide lifting all boats."

But such good fortune benefits from analysis of what really drives earnings, says Nash. This is what the Kellogg School's new Asset Management Practicum will provide to students this spring when the innovative experiential finance course begins.

Thanks to an endowment of more than $3 million for portfolio management, and a targeted fund of $8 million, Kellogg students will face real market dynamics as they try to invest this money wisely.

"This is clearly action learning," says Robert Korajczyk, the Harry G. Guthmann Distinguished Professor of Finance, who is leading the course. "Experiential learning is one of the Kellogg cornerstones."

While students won't quite have a personal financial stake in the game, says Nash, they will be investing real dollars, tracking and analyzing the results. "They will learn the difference between a good company and a good investment and how to make better decisions under uncertainty."

Those are the lessons that Korajczyk expects students to glean.

"Students will blend academic research with practical insights from visiting practitioners and day-to-day portfolio management," says Korajczyk, who also is director of the Zell Center for Risk Research at Kellogg. In addition, students will learn how to execute trades to minimize costs and have invaluable exposure to investment styles, factors of client servicing and risk minimization." The one-year minimum commitment gives students opportunities they cannot find elsewhere or replicated in a pretend portfolio.

The practicum also will forge stronger connections among investment practitioners in the finance industry and Kellogg students, broadening placement opportunities for graduates, Korajczyk says. He adds that most peer schools do not offer courses where an actual cash portfolio is a core element. Kellogg can do it because of alumni and faculty support and expertise.

	Jerome Kenney '67
	Avi Nash '81  Photo © David Neff
	Jeff Ubben '87
	Malcolm Jones '82

Kellogg donors made this practicum possible through their contributions — intellectual as well as financial — sharing their research and insights as Kellogg began developing the offering. "Alumni, serving as mentors in roles of securities analysts, investment managers and trading strategy analysts, will provide feedback on the students' stock analysis, make recommendations to construct the portfolio and determine execution strategy," says Korajczyk.

Jeff Ubben '87, a founding partner of Valueact Capital and former chairman of Martha Stewart Living Omnimedia, is among those supporting the course. He says he invests both his money and influence in ventures offering the greatest return potential. The Asset Management Practicum meets his rigorous criteria.

His involvement in the school's Investment Management Club (IMC) as a student helped feed his interests in finance, as did Professor Lawrence Revsine's accounting class. Armed with the fundamentals, he developed a common-sense approach as part of his investment philosophy.

"Never underestimate the value of common sense in this business," he says. "The key is to ask yourself, 'Why is that guy selling his stock to me?'"

Often, short-term fears drive volatility. "I am a long-term investor," says Ubben, who also is an active one, involved in the companies whose stock he holds. "I'm not just sitting in front of a screen watching the ticker. If I can own 15-20 percent of a company and move the board and influence events and the capital allocation process, to me that's the most important part of investing," he says.

Ubben will have an influence in the Kellogg initiative too, providing feedback during the course, enabling him to raise recognition for the school's strong finance program.

Another backer is Jerome "Jerry" P. Kenney '67, who in his 41st year in the investment industry sees the field as "rapidly expanding and one of the most important areas in the country's entire job market." The Merrill Lynch vice chairman believes that financial education is critical not only for professionals, but for all Americans. As proof, one need only review statistics indicating a paucity of personal savings in the U.S. "Asset management education is a capability we can export worldwide," says Kenney.

Equally enthusiastic for the Kellogg practicum is Malcolm Jones '82, principal of Trinity Partners. "This effort will provide power for students' careers and reflect extremely well on Kellogg," says Jones.

Jones says he has ventured occasionally into alternative investments and recognizes that the later stages of the asset management curriculum — derivatives and hedge funds — will prove particularly compelling.

"If you are going to pay for active management, you should expect to be rewarded for it," he notes. But in large-cap growth equities, active managers have struggled to consistently beat benchmarks, Jones says. "Understanding of selling short versus long is a whole new world. I have observed very good long-only portfolio managers who were not nearly as successful when they started to do a short hedge fund. Short-selling is a skill — it's not just selling something you don't like."

Looking ahead to an investment career, Lance Garrison '07, IMC co-chair, sees the Asset Management Practicum adding strength to the learning experiences available in IMC, a club in which members meet biweekly to review stock pitches and a $300,000 portfolio.

"The Asset Management Practicum represents a tremendous opportunity for Kellogg students to participate in investment analysis," Garrison says. "It provides fundamental skills along with dynamic faculty and the expertise of Kellogg alumni whose influence reaches all corners of the investment world."

Kenney says the program's timing could not be better.

"American culture is no-cash-down [where] dazzling temptations and technology reinforces the consume-more-early concept," he says. "People don't realize until it's too late that they haven't saved any money. They need to learn about avoiding fad investments, and avoiding buying a bigger house than necessary."

But saving, he adds, while essential, is not the same as investing, which involves building a sound asset diversification.

"People need to be educated on the value of this," Kenney says. "With the new Kellogg program we will produce an educated group with a clear advantage who will advise others around the world."