Real money. Real risk. High stakes yield high payoff for Notre Dame AIM grads

Author: Mendoza College

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Notre Dame is committed to developing the most promising financial analysts. So much so, we put our money--$5.6 million-- where our mouth is. That money, part of the University's overall multi-billion dollar endowment, comprises a live stock portfolio that is managed by our finance undergrads and MBA students as part of our Applied Investment Management (AIM) course.

Co-founded by Scott Malpass, a Notre Dame MBA graduate and the University’s vice president and chief investment officer who oversees the endowment, the AIM program presents analysts with the unique opportunity to gain real-world experience involving real-world finances.

As an AIM participant in 2007, Matt Quarrello, now a credit index trader at UBS Investment Bank, admits he found the challenge somewhat nerve-wracking at first. “It wasn’t just that I was responsible for money that wasn’t mine, it was the fact that it was money Notre Dame depends on to serve the greater good,” says the 2007 MBA grad. “At the same time, knowing I was working with real money—knowing that my decisions would directly impact the University’s endowment—drove me to work that much harder.”

And that is precisely the point.

“By anyone’s standards, our AIM course involves a great deal of work,” says Notre Dame Executive in Residence Jerry Langley, who teaches the six-credit course. “But that work, which is rooted in the intrinsic evaluation of stocks, creates analysts with superior skills that have earned us a reputation on Wall Street. Our students are very highly recruited.”

And with good reason: our AIM course mimics the portfolio management process of a hedge fund manager with a specific emphasis on comprehensive equity research. AIM students manage two stocks—one that already exists in the portfolio and one of the analyst’s choosing. Then they are required to develop regular reports that include company and industry overviews, earnings estimates, relative value comparisons and discounted cash flow models. Together, these reports culminate in the analyst’s recommendation whether to buy or sell. The analysts then collectively vote on what stocks to buy or sell for the portfolio, and the designated analysts assist in trade execution.

“The experience went far above my expectations,” says Barry Kessler, who, after earning his Notre Dame MBA in 2008, went on to become an associate at energy investment bank Simmons & Company International. “Not only did presenting financial analysis to the class and instructors add to my understanding of financial concepts, but analyzing business and economic drivers of companies made the experience more tangible and impactful.”

After producing economic and performance reports that capture other key aspects of portfolio management, students present their findings and decisions to the AIM Advisory Board, a select group of AIM alumni and Notre Dame Board of Trustee Investment Committee members.

“That kind of experience isn’t something that can be taught in a classroom–it’s real life,” says Quarrello, “It’s one of the things that gives you an edge, which is a ‘must’ in such an ultra competitive industry.”