Despite the wild ride for US equities, the student-run Haas Socially Responsible Investment (SRI) Fund outperformed the stock market during its first full year of operation.
The invested portion of the Haas SRI fund returned -11.4 percent during its first full fiscal year, from May 1, 2008, to April 30, 2009, which was one of the worst periods for US equity markets. Including the fund's large cash position — 69% of the more than $1 million fund as of April 30 — the fund's return was even better, at -3.5 percent.
Although the fund lost value, it outperformed the benchmark Standard & Poor's 500 Index, which tanked by nearly 40 percent during the same period. If the students had invested in the S&P 500 in the same amounts and times as when they bought their individual stocks, the S&P 500 index return would have been -15.1 percent.
"While it's never fun to be down, I think we've done a good job managing the fund in these turbulent times, as the invested portion of our account is easily beating the S&P 500," says Matthew Blair, MBA 09, one of the fund principals. "All of our stock ideas are long-term in nature, so it will take a few years to get a handle on how the fund is performing."
In addition to Blair, the fund’s second portfolio management team consisted of Ben Biddle, Megha Doshi, and Brandon Purcell, all MBA 09; and Eugene Pauksta, Mike Simmons, and Aiphi Wang, who graduated from the Master's in Financial Engineering Program this year.
They were joined in the spring semester by first-year MBA students Anup Anajpure, Jenny Hsieh, Amanda Murnane, Brendan Nemeth-Brown, Jeffrey Olson, Adam Valainis, and Harvey Villarica, and first-year MFE students Russell Elliott and Phillip Gillespie.
The Haas SRI fund is the first student-managed investment fund at a top business school to use socially responsible criteria. The fund launched in fall 2007, thanks to donations from three Haas School alumni.
Since last May, students have invested in 10 companies, including such well-known names as Nike, PG&E, Cisco Systems, and Berkshire Hathaway. The fund also invested in some lesser-known companies, such as recycling firm Darling International, which the students describe in their annual report as having "a dominant position in one of the most disgusting industries imaginable: the rendering and recycling of animal waste products and grease."
To make their investment decisions, the fund principals met at least 2 hours each week to discuss stocks ideas. After an idea was formed, one or two principals would read more about the company, analyze financial statements, research the industry, build a financial model, and often reach out to company representatives. The students then would create a comprehensive report and present the stock to the whole team for questions and perhaps a vote.
For more information about the Haas SRI Fund, visit haas.berkeley.edu/responsiblebusiness/HaasSRIFund.html.
Lloyd Kurtz, an adviser to the Haas Socially Responsible Investment Fund, meets with four of the fund's principals (from left to right): Megha Doshi and Matthew Blair, both MBA 09; and Eugene Pauksta and Aiphi Want, both MFE 09.