Investing in Students Pays Dividends

The student-run Darden Capital Management club makes all investing decisions for five funds with assets totaling more than $10 million. Students research and pitch stocks to second-year MBA portfolio managers, who determine which to buy and sell. In total, each student team, consisting of one senior portfolio manager and three portfolio managers, is responsible for about $2 million of the school’s endowment. Students in Darden's MBS for Executives program have begun a similar program managing some of the program's funds.

Many other business schools have capital management clubs, but most do not grant students the type of investment decision-making autonomy granted by Darden Capital Management, said Associate Professor of Business Administration Richard Evans, the faculty adviser for Darden Capital Management. While other clubs require faculty approval for stock purchases, Evans does not have authority over purchasing decisions — and does not want it. “We want this to be entirely student-run,” he said. Over the past 10 years, Darden Capital Management has outperformed each fund’s benchmarks by about 2 percent each year. Academic research suggests that most mutual fund managers, on average, underperform their benchmarks substantially, according to Evans.

“Having the opportunity to invest the Darden endowment and grow it is one-of-a-kind,” said second-year Darden student Marci Stewart, chief operations officer of Darden Capital Management. Stewart joined the club with an interest in investing, but little experience outside of her personal finances. Picking stocks and learning from classmates’ investment strategies helped her secure a summer internship with Fidelity Investments after her first year at Darden.

Other club leaders report that the investing experience has given them an edge in the very competitive MBA recruiting process. “These companies ask their analysts to make decisions on billions of dollars and it is very difficult to predict how someone is going to react with that amount of pressure on the line,” Jake DuBois, the club’s chief executive officer, said. “Seeing Darden Capital Management on a student’s résumé tells employers that this student has made decisions with real money, sometimes with hundreds of thousands or millions of dollars on the line. That experience is irreplaceable.”