Managing to Overcome Market Volatility

In May 2019, the student money management team for the Smith Investment Fund (SIF) couldn’t have imagined the kind of year that lay ahead as they launched its new investment portfolio. But the group’s investment decisions weathered the global financial storms brought on by the COVID-19 pandemic.

The fund significantly outperformed its benchmark, the S&P 500, over the period ending last month, even amid the volatility brought by the coronavirus pandemic, according to SIF’s 2019-20 annual report.

The student-managed group in the Robert H. Smith School of Business has two investment teams: fundamental and quantitative. The fundamental team conducts research on public businesses, and the quantitative team develops systematic trading strategies.

Maryland Smith’s Ryan Thornburg ’19, Harman Gill ’20, Logan Riegel ’20 and Sean Mathew ’21 founded SIF’s fundamental team in 2018 to provide students with hands-on investing and experiential learning.

“We wanted to create a tight-knit community where we would have continuity and be able to build our alumni network,” Riegel said.

The result: A selective club that provides a four-year learning experience for students to take on various research and investment roles. Currently, the team has 15 members, selected from about 90 applicants.

SIF opened its portfolio with holdings in five companies: HDFC Bank, Zooplus, Match Group, Shopify and StoneCo. Over the year, it exited its position in Shopify, realizing triple-digit gains. It also sold its shares in HDFC and StoneCo, explaining in the report that the investors “feel as if our competency in these businesses is not as strong and thus, includes higher uncertainty risk.”

The portfolio of late has contained Match Group, Zooplus and newer positions in Visa and Activision Blizzard.

In the group’s first year of investing, SIF achieved an absolute return of 39.5%, outperforming the S&P 500’s 0.4% return over the same period.

It’s not been an easy time to invest, the group acknowledged in its annual report: “With constant headline news and volatility causing many people to speculate on the recovery of markets and businesses, we take a 10,000-foot view to our macro-analysis and attempt to shutter out noise; continuing to concentrate our thoughts toward the long-term impact on our businesses.”

When equities took a sharp downturn in March amid economic uncertainty brought by the pandemic, SIF’s investments held relatively steady. SIF focuses on strict adherence to risk management and avoiding capital loss through the selection of high-quality businesses.

“Short-term volatility doesn’t scare us, and we believe our businesses will come out of this pandemic stronger,” Mathew said. “When we invest in these businesses, we’re looking over a five- to 10-year investment horizon.”

As for the club’s recently graduated seniors, Gill is headed to work at UBS in New York City, and Riegel will be working at Stifel in Baltimore.

Both said that as new alumni, they plan to give back to the future members of the club, helping to broaden the pathway from Maryland Smith to Wall Street. They plan to increase their connections over the next few years as more SIF members become alumni.

“We plan to develop a large alumni network,” Riegel said, “and keeping that organized will be a very important piece of our club.”