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Risk & Reward

December 14, 2009

Risk & Reward

By Chris Albert

The board of directors is listening intently to a fellow member about a decision they need to make. At risk are thousands of dollars, if not tens of thousands. They might lose it all. Or, they could reap great rewards.

Risk & Reward banner - PLU students ride the economic roller coaster and find out what it’s like to invest real money in the market and what it takes to show gains.

PLU students ride the economic roller coaster and find out what it’s like to invest real money in the market and what it takes to show gains.

This isn’t Wall Street – it is PLU. But the decisions the student members of the investment fund are making are very real. And so is the money.

The students that are part of the Mary Lund Davis Investment Fund at PLU have been able to gain invaluable experience using the same tools and concepts investors use on Wall Street. It is one of the many unique ways students in the School of Business can apply lessons learned in the classroom to real-life situations.

“In the class can you simulate risk?” asks Kevin Boeh, a professor in the School of Business and adviser to the club. “We don’t have the experiments yet to simulate that. I think, as much as possible, the students take it from theory to reality.”

He should know—Boeh has worked on Wall Street.

The club has a long history at PLU. In 1982, Mary Lund Davis set up a fund of $25,000 with the primary focus of giving students an opportunity to gain experience in investment management through real-life investing.

Through investment decisions students made, the fund grew to a high of about $160,000 by the fall of 2007, but then, like many investments, the bottom dropped and the fund dwindled to a low of $64,000 by last fall. Only a year later, the students have built the fund back up to about $110,000.

“It was definitely an interesting time,” said fund president Kevin Floyd ’10, a senior majoring in economics and business, with an emphasis in finance. Floyd knows there would be no way a professor or a class could simulate a financial meltdown like that of the past two years. But fund managers at the Mary Lund Davis Investment Fund did.

“That’s the real beauty of this,” he said.

And for Floyd, there is another beautiful thing – he got a great job out of it, too.

As a senior, Floyd landed a gig at the Tacoma-based financial powerhouse Russell Investments. He has no doubt that managing a real portfolio helped him get the job. “It’s important to have actual experience,” Floyd said.

This is the type of thing PLU’s School of Business does very well. Through its internship programs, professional clubs, and numerous opportunities to meet and work with mentors in the business community, students do get every chance to roll up their sleeves and get that essential hands-on experience.

That was certainly true for Liz Anderson ’10, a business major with an emphasis in accounting and public relations director for the fund. She was part of the fund last year when the economy tanked. She, like  other members of the board, jumped in and tried to figure out what to do.

“You really have to keep on top of things,” she said.

And they did.

According to their adviser, the students made sure they weren’t becoming reactionary investors. “They have to use analysis,” Boeh said. “That’s the way they should do it. They’re not doing it based on gut reaction.”

As much as Boeh implores students to use the knowledge they’ve learned, the decisions are still in their hands. “It’s not meant for me to be telling them what to do,” he said.

And sure enough, thoughtful and thorough analysis helped rebuild the fund this last year.

“The beauty is they stayed invested and the portfolio is back,” Boeh said. “How do you do that in a class?”