Student-Managed Portfolio Produces Results

Members of Collegiate’s Darr-Davis Investment Advisory Board Practice Investment Strategies Firsthand
 
“You guys aren’t using real money, right?”.

Laughter erupted among the four co-presidents of the Darr-Davis Investment Advisory Board when Scott Phillips ’18 recalled a friend’s posing the question. Real money is exactly the point, but, nearly 30 years after its inception, the workings of this student board remain murky for many outside its ranks. Thanks to a unique endowment, given in honor of Susan Darr ’89 and Catherine Davis ‘89 by Mr. and Mrs. J. Harwood Cochrane, students on the board manage a sizeable portfolio of stocks, and allocate its income to support other clubs. Last year’s seniors took the experience to new heights, launching innovative changes, connecting with alumni and discovering the beauty of giving back.
The gift initially took shape as a competition in 1990 between Mr. Cochrane and a group of students, to see who could perform best in the stock market. The students triumphed, so he turned the investment management over to them. Now, roughly 30 juniors and seniors on the Darr-Davis board invest a portion of the overall endowment. The value of their fund is reset to $100,000 every two years, and each new class, whose members are selected by the student leaders, is entitled to invest 25 percent of the portfolio. Every year, therefore, there’s a spring sell-off and a fall buying spree. The goal is to outperform the Standard & Poor’s 500 Index.

“If we beat our benchmark, we had a good year,” said Rob Wedge, Upper School economics teacher and the group’s faculty advisor. “We’ve met our goal every year but one.”

That was 2008. Since the economic downturn, however, the investments have performed well enough to allocate more than $20,000 per year to student clubs and activities, such as international trips for Model United Nations, volunteer programs run by the Collegiate Community Council, open gyms, publication of the Flame and others.

“It’s a domino effect,” said co-president Emily Mendelson ’18 in a meeting last spring. “We’re able to support other clubs by doing something that we love.”

The leaders of those clubs file an application and go before the Darr-Davis board “to explain why they need money,” said Sam Roberts ’18, another co-president. “We don’t want to allocate without understanding what the deal is.”

The fact that this experience is extraordinary is not lost on the group.

“I’m finding more and more that’s it’s really rare that a high school has an opportunity like this,” said co-president Wescott Lowe ’18. “Colleges are lucky to have something like this, where you’re able to invest real money — a lot of it — and learn about the stock market through group work.”

Making hard choices as a group is an indisputable bonus lesson. When Amazon stock skyrocketed, for example, many rounds of discussion preceded a vote to change the board’s investment guidelines. Because no stock was to exceed 6% of the portfolio and the Amazon stock had surpassed that value, the students voted to increase the maximum percentage to 10. But Amazon’s value kept rising. Voting, ultimately, to sell one share of stock rather than amend their guidelines again, was eye-opening in its complexity.

“It’s hard to part with that kind of return,” Mr. Wedge acknowledged with a smile.

Even before the excitement of Amazon’s soaring climb, last year’s seniors had decided they wanted more. Wescott orchestrated a trip to Manhattan to meet with investment bankers in the summer of 2017. Leaving jobs and vacations to hop trains and planes to the city, Mr. Wedge, Wescott, Emily and Jane Carlton Gremer ’18 blazed a path of their own design through the financial district. They met with executives at Merrill Lynch, Bank of America, Morgan Stanley and the New York Stock Exchange, among other stops — but one of the highlights turned out to be a dinner with Collegiate alumni Harrison Roday ’09 and Morgan Tarrant ’09.

Mr. Wedge had reached out to the former Cougars, who now work at American Industrial Partners and Bloomberg, respectively. Mr. Roday had been a co-president of Darr-Davis and Mr. Tarrant had been a teammate in a program called the Federal Reserve Challenge.

Over the meal, they discussed aspects of investing that the students had never considered. Mr. Tarrant got them thinking not only about the business of the companies they invest in, but also about their assets. The real value of Macy’s, for example, had shifted from retail to real estate holdings. Soon they were talking drone hubs and other alternative uses of space.

“[Morgan and Harrison] had so much insight on the economy and the future of business. It was amazing,” Wescott remembered.

The group’s biggest takeaway, however, may have had nothing to do with stocks. As they made their way home, Mr. Wedge recalled, the students marveled that so many busy professionals had had time to meet with them. They made time, he explained.

“No matter how busy your life is, you should always make time for the next group of people coming along.” Harrison and Morgan, Mr. Wedge remembered, “were ready to go. They were ready to share their stories with these guys. It was really cool. It warmed my heart.”

For Mr. Roday’s part, “that was a no-brainer,” he said.

In 2008, the one year that the Darr-Davis board failed to meet its benchmark and the economy appeared to implode, he was a club president.

“Witnessing the financial crisis as a junior in high school,” Mr. Roday said, “was a formative experience for me. I had family and friends whose jobs were incredibly stressful during that period. … We were cognizant of what was happening on paper to our investments, but the real fear was that the lives of ordinary Americans would be irreparably damaged.”

Being on the Darr-Davis board and taking micro- and macro-economics, he added, “helped me understand the big picture.”

Now, nearly a decade later, Mr. Roday volunteers for the nonprofit Minds Matter, teaching writing to high school students from low-income families. He hopes that his early investment choices will enable him to pursue more service activities in the future.

Regardless of whether the market is soaring or crashing, the Cochranes’ gift has generated incredible learning experiences. Last year’s group rolled out impressive innovations. They divided themselves into small groups responsible for following different sectors of the market. They began holding interviews for new-member applicants in order to gauge their interest, commitment and presentation skills.

Mr. Wedge’s admiration for the students is clear.

“I’m really thankful in my role as advisor that I get to work with such an exceptional group,” he said. “They’ve really kept me on my toes.”
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