The  Center  for  Financial  Policy  Annual  Portfolio  Management  Competition  

   Overview    In   an   effort   to   promote   financial   literacy   and  prepare   students   interested   in   entering   the   investment  world,  the  Center  for  Financial  Policy  is  hosting  its  inaugural  portfolio  management  competition  in  the  Fall  of  2014.    Students  will  be  given  a  hypothetical  $10,000,000  to  manage  over  a  two-­‐  month  period.  The  competition  is  open  to  both  full  and  part-­‐time  MBAs  and  M.Fins,  as  well  as  undergraduate  Finance  Fellows.          The   goal   is   to   prepare   students   to   for   careers   in   the   investment   world   and   enhance   their   personal  finance  knowledge.    It  gives  students  experience  in  the  challenges  portfolio  managers  face  with  respect  to  choosing  investments  and  how  worldwide  news  affects  their  investment  choices.      Awards    Six   finalists  will  be  chosen  based  on   the  quality  of   their  strategy  and  overall   return  of   their  portfolio.    The   teams  will   be   evaluated   based   on   the   quality   of   their   initial   strategy   (30%),   their   overall   return  (30%)  and  their  ex-­‐post  analysis  (40%).    The  six  finalists  will  give  a  10-­‐minute  present  to  the  judges  on  December  4th  where  the  judges  will  choose  the  three  winning  teams.        

1st  Place:  $500      2nd  Place:  $300      3rd  Place:  $200    

 Schedule    

• Registration  is  on  a  first  come,  first  serve  basis.    Eight  teams  comprised  of  3-­‐6  students  will  be  accepted.    

• Registration  opens  August  25th  and  are  due  by  August  29th    (visit  the  CFP  website  Initiatives  &  Programs).  

• The  performance  evaluation  period  will  run  from:  September  15,  2014  to  November  28,  2014.  • A  one-­‐page  interim  review  of  each  team’s  trading  strategy  is  due  October  20,  2014.  • The  final  two  to  three  page  report  is  due  November  30,  2014.  • The  awards  and  presentation  ceremony  will  be  held  at  VMH  on  December  4th.    Finalists  should  

have  at  least  1-­‐2  members  present.    All  participants  are  invited  to  this  event.      

 

Website: http://www.rhsmith.umd.edu/cfp Blog: http://blogs.rhsmith.umd.edu/financialpolicy Twitter: @CFPSmithSchool Contact us: cfp@rhsmith.umd.edu  

Judges      

Professor  Russ  Wermers,  Professor  of  Finance  and  Director  of  the  CFP     Professor  Pete  Kyle,  Charles  E.  Smith  Chair  Professor  of  Finance     Professor  Mark  Lowenstein,  Associate  Professor  of  Finance  

Assistant  Director  Kristen  Fanarakis,  Assistant  Director  of  the  CFP     Associate  Director  Nicola  Daniel,  Associate  Director  Department  of  Finance      Competition  Parameters    

Ø Students  given  a  hypothetical  portfolio  worth  US$10,000,000  to  manage  as  they  see  fit  within  the  competition  parameters.  

Ø Teams  should  be  comprised  of  three  to  six  students.  Ø Only  US  publically  traded  securities  can  be  traded  (stocks,  index  funds,  ETFs,  mutual  funds).    Ø Individual  bonds,  futures,  options,  ETNs  or  derivatives  of  any  kind  are  not  permitted.    However,  

fixed  income  ETFs  are  permitted  (e.g.,  JNK  or  HYG  are  permissible).  Ø Short  sales  and  leverage  are  not  permitted.      Ø Short  and  leveraged  ETF’s  are  not  permitted.  Ø Individual  management  fees  or  transaction  costs  will  not  be  included.    Instead,  each  trade  will  be  

assessed  a  50bp  fee.  Ø Teams  do  not  need  to  calculate  the  total  risk  or  tracking  error  of  their  portfolio  Ø There  are  no  restrictions  on  portfolio  weightings,  i.e.,  the  entire  portfolio  can  consist  of  a  single  

stock  or  ETF,  but  teams  may  lose  points  on  their  analysis  for  failing  to  diversify.  Ø For  simplicity  in  the  return  calculations  we  only  measure  price  changes  when  securities  are  

bought  or  sold.    Transaction  fees,  i.e.,  the  bid-­‐ask  spread  will  not  be  accounted  for  in  the  calculation.    

Ø At  the  end  of  the  performance  period  teams  must  submit  a  two  to  three  page  report  outlining  their  initial  investment  thesis,  any  changes  they  made  to  their  portfolios  and  evaluate  why  their  investments  did  or  did  not  perform.  

Ø Students  will  use  a  template  (provided  by  the  CFP)  to  create  and  track  their  portfolios  on  Yahoo  Finance.  Given  time  restrictions  student  will  have  a  1-­‐day  price  “look  back”  period  to  evaluate  where  they  would  want  to  make  a  trade.    Each  team  will  submit  their  initial  portfolios  and  any  changes  to  their  portfolio  on  a  weekly  basis  to  the  CFP  administrator  email.    Execution  prices  will  be  verified  on  a  random  basis.      The  Honor  Code  will  be  strictly  enforced.  

   Background  and  Preparation  

Ø There  are  no  pre-­‐requisites  to  participate  in  the  competition  other  than  an  interest  in  investments  and  financial  markets.      

Ø Registrants  will  receive  an  information  packet  with  portfolio  management  best  practices,  guidelines  and  recommended  reading.  

Ø Students  can  post  questions  to  the  CFP  Portfolio  Management  Competition  Google  Hangout  wall  throughout  the  competition  period.  

Ø The  CFP  will  also  host  periodic  webinars  on  various  investment  topics  and  post  tips  to  the  Google  Hangout.    

 Questions?  Send  them  to:  cfp@rhsmith.umd.edu  

Visit  the  CFP  website  under  Initiatives  &  Programs  to  apply