capital markets overview; bcf introduction
DESCRIPTION
Capital Markets Overview; BCF Introduction. Rick Spillane, CFA June 2, 2014. Presentation Outline. 1. My Background 2. Observations about 2014 Capital Markets 3. Introduction to the Babson College Fund 4. BCF recruiting information 5. Q+A. RPI, Chemical Engineer; Harvard MBA - PowerPoint PPT PresentationTRANSCRIPT
Capital Markets Capital Markets Overview; BCF Overview; BCF IntroductionIntroduction
Rick Spillane, CFARick Spillane, CFAJune 2, 2014June 2, 2014
Presentation OutlinePresentation Outline1. My Background1. My Background
2. Observations about 2014 Capital Markets2. Observations about 2014 Capital Markets
3. Introduction to the Babson College Fund3. Introduction to the Babson College Fund
4. BCF recruiting information4. BCF recruiting information
5. Q+A5. Q+A
My backgroundMy background
RPI, Chemical Engineer; Harvard MBARPI, Chemical Engineer; Harvard MBA
Eaton Vance Management, 1977-1987Eaton Vance Management, 1977-1987Analyst and Portfolio ManagerAnalyst and Portfolio Manager
Fidelity Investments, 1988-2007Fidelity Investments, 1988-2007Analyst and Portfolio ManagerAnalyst and Portfolio ManagerDirector of ResearchDirector of ResearchChief Investment Officer (US and Europe)Chief Investment Officer (US and Europe)Head of Strategic Advisers (FidelityHead of Strategic Advisers (Fidelity’’s RIA)s RIA)
BABSON FACULTY 2007-PRESENTBABSON FACULTY 2007-PRESENT
Stock and Bond returns 1925-2012
Rick Spillane, CFA
Data from Ibbotson Associates
Real Returns, 1925-2012US Assets
Bonds, Real Returns 1925-2012
Bond returns have been good, T bills have only kept up with inflation.Note the dip in 1983 for bonds
“Certificates of Confiscation” 1981
Large Stocks (Equities) and Fixed Income Returns 1925-
2012
1999
1973
2012
1975
Equities have crushed inflation and fixed income over the long term.
The Death of Equities 1975
Dot-Com boom 1999
All Assets, Real Return 1925-2012
Small stocks have been even better than large stocks; but a lot more volatile
Don’t Invest like this!
ConclusionsIn the long run, it IS about risk and return
BUT this is NOT science, human behavior influences returns A LOT!
What is the market forecasting for inflation?
10 year rate for US Treasury Inflation Protected (TIPS) Bonds : 0.35%
10 year rate for US Treasury Bond: 2.54%
Inflation rate forecast: TIPS-10 year UST: 2.19%
NOTE: market rates 5/15/14
Short Term Rates: US Market
Item Rate Spread to Tbill, basis points
Spread to inflation, basis points
Fed Funds 0.00%
3 month Tbill 0.03% -216
3 month CD 0.23% 20 -196
Long Term Interest Rates, US Market
Item Rate Spread to Tbill, basis points
Spread to Inflation, basis points
10 year US Treasury
2.54% 251 35
10 year Corporate
2.90% 287 68
10 Year High Yield
5.62% 559 340
Equity Market Valuation US Market 5/15/14
Price/Earnings (P/E) 2014E 15.7X
Dividend Yield 1.92%
52 week high 1902
52 week low 1560
Current 1897
P/E Ratios across the globe
US 16.1
Japan 16.1
Germany 13.5
Hong Kong 10.6
Taiwan 14.9
China 7.9
India 15.4
What is BCF?What is BCF?
BCF runs a portion of the Babson EndowmentBCF runs a portion of the Babson Endowment
23 Students (undergrads and MBA23 Students (undergrads and MBA’’s)s)
The objective is to beat the S+P500The objective is to beat the S+P500 Long/ short portfolio of EquitiesLong/ short portfolio of Equities Fully invested (market timing not allowed)Fully invested (market timing not allowed) Heavy Focus on investment analysis (stock picking)Heavy Focus on investment analysis (stock picking)
MEETINGS ARE MONDAY NIGHTS 6:30 TO 9:00 PM MEETINGS ARE MONDAY NIGHTS 6:30 TO 9:00 PM 6:30-7:30 Coaching session with Exec in Residence6:30-7:30 Coaching session with Exec in Residence 7:30-9:00 Portfolio overview and Stock Pitches7:30-9:00 Portfolio overview and Stock Pitches
One Friday seminar per semesterOne Friday seminar per semester
Executives in ResidenceExecutives in ResidenceWarren Johnson, CFAWarren Johnson, CFA
Hugh CrowtherHugh Crowther
Jim Spencer, CFAJim Spencer, CFA
Rick Mace Rick Mace
Charles Mangum Charles Mangum
Chris StixChris Stix
Mike DunnMike Dunn
Pratima AbichandaniPratima Abichandani
Steve Petersen Steve Petersen
Bill EbsworthBill Ebsworth
HighHigh
LowLow
LowLowProbability Of SuccessProbability Of Success
Impa
ct O
n R
etur
nIm
pact
On
Ret
urn
HighHigh
Investment PhilosphyInvestment Philosphy
Stock SelectionStock Selection
Market TimingMarket Timing
Style TimingStyle Timing
Size Timing Size Timing
Sector SelectionSector Selection
SectorsSectorsExecutive Portfolio ManagersExecutive Portfolio Managers
ConsumerConsumer
FinancialsFinancials
Basic Materials/EnergyBasic Materials/Energy
IndustrialsIndustrials
Healthcare Healthcare
Utilities/TelecomUtilities/Telecom
TechnologyTechnology
Quantitative/Risk Management Quantitative/Risk Management
What do you do?Follow your sector closely
Buy and sell stocks in your sector
Work in a team of 1-3 other managers
Write 3 research reports per semester
Write a Semester Report/Sector Overview
Why you should do thisWhy you should do thisYou will learn a lot about fund management and stock You will learn a lot about fund management and stock
analysisanalysis
You are investing REAL MONEYYou are investing REAL MONEY
You will work hard, but learn a lotYou will work hard, but learn a lot
This is as close to real world investment management as This is as close to real world investment management as possiblepossible
You earn class credits for two semestersYou earn class credits for two semesters
Enhanced Job Prospects in the Finance IndustryEnhanced Job Prospects in the Finance Industry
Recruiting Approach
Fall: recruit 2 year MBA’s, Junior Undergrads with a December graduation date, Evening MBA’s
Spring: Junior Undergrads with a May graduation date and Evening MBA’s
Summer: One Year MBA’s
Key datesSummer
Info session TODAY!Applications due Friday, July 11Interviews Monday, July 14
Application ProcessApplication ProcessApplication on BCF WebsiteApplication on BCF Website
http://cutler.babson.edu/babsoncollegefund/http://cutler.babson.edu/babsoncollegefund/BCFApply.aspxBCFApply.aspx
Send to Karl Honerlow by Friday July 11 at noon.Send to Karl Honerlow by Friday July 11 at noon.
Interviews on Monday July 14Interviews on Monday July 14
You start immediatelyYou start immediately
NOTE: You must take or have taken FIN 7503 NOTE: You must take or have taken FIN 7503 (Equities) if you are an MBA student!! (Equities) if you are an MBA student!!
Questions???Questions???La
st years stu
dents!!!!