Bauer’s student-managed private-investment portfolio marks a milestone
For the first time, the University of Houston C. T. Bauer College of Business’ Cougar Investment Fund exceeded $1 million in quarterly earnings.
The historic milestone was reported for the fourth quarter of 2013. “It has come close before but never broke $1 million,” said Tom George, the Bauer Finance professor who oversees the student-managed private-investment fund, which was created in 2002.
For the quarter, the Cougar Fund was up 12.9 percent. It outperformed the S&P 500, which grew by 10.5 percent over the same period.
George — who directs the AIM Center for Investment Management, where the Cougar Fund is based — said three factors contributed to the rate of return.
“Over the years, the scale of the fund has built to a point where a million dollars wasn’t out of reach as a quarterly earnings number,” said the professor, who has been with the fund almost since its inception. “And then the market as a whole did well. And we did a little better than the market. So you put those three things together, and that was what it took.”
Currently valued at about $9 million, the Cougar Fund is used as a financial teaching tool for Bauer’s MBA and MS Finance students.
Every year, between 16 and 18 students are chosen for the program in a selective process. The students manage the fund for a full academic year. As part of the experience, they take two additional academic courses: Investment Management and Financial Analysis and Corporate Strategy. At the end of the program, they receive the Graduate Certificate in Financial Services Management.
Unlike similar funds at other universities, the Cougar Fund is a privately held portfolio that draws its money from individuals rather than the institution. The investor pool is made up of high-wealth individuals with a close connection to the college—alumni, philanthropists and business leaders.
Because the students work at the behest of real-life clients, they are compelled to weigh their decisions wisely.
“From day one, the Cougar Fund entrusts you with a level of responsibility not usually found while in school,” said Marco Guzmán, who started the program in fall 2013. “It is not uncommon for a single investment to be worth over $250,000. Therefore, when the fund makes a decision based on your work, you better believe we have done our due diligence.”
Indeed, the stakes are high, George said.
“It’s not the same as when you have private investors whom you have to answer to and who can basically make the thing go away if your performance is sufficiently poor,” the professor explained. “So that level of stress adds some realism to this that wouldn’t be there, that isn’t there for most of the portfolio-management programs out there.”
Apparently, that intensity level is working.
Since its inception, the Cougar Fund has enjoyed an annualized return rate of about 7.2 percent, compared to the S&P 500’s 6.7 percent.
At the end of the day, the Cougar Fund’s million-dollar milestone will have a long-term impact that can’t be measured in dollars.
It enhances the fund’s visibility and gives the college a competitive edge in the marketplace. If students are to go on to become successful finance professionals, George said, they need superb valuation skills — something the Cougar Fund supplies them in spades.
When they emerge from the program, he said, “They really know how to do this work at a level that’s going to make them competitive with their peers from any school.”
Describing the Cougar Fund experience as “baptism by fire,” Guzmán said he was overwhelmed at first. But he quickly found his footing.
“After you get a couple valuations under your belt, you start to achieve a certain level of comfort and confidence that feels rewarding,” the MBA candidate said.
“I personally rank this program as one of the best, if not the best, that Bauer has to offer.”
By Wendell Brock