By Bob Woods

 

Students at Georgetown McDonough learn that participating in investment groups pays real world dividends.
Investing in Education

 

Sina Chehrazi got almost everything he wanted from his freshman year at Georgetown -University’s McDonough School of Business, which he had chosen over other top schools primarily because of its reputation as a center for international studies. A first–generation Iranian-American from California, -Chehrazi had traveled abroad in high school and arrived in D.C. in the fall of 2008 with a nascent fascination with globalization, as well as an interest in investing. His first-year courses scratched those itches, but even early in his college career, he sought real-world application of his academic lessons.

 

Chehrazi (BSBA ’13) found what he was looking for as a sophomore when he co-founded a hedge fund that invests exclusively in Qatar. He’s not alone, either. Dozens of Georgetown McDonough undergraduates and MBA candidates participate in other student-run investing groups, including one that manages alumni and endowment funds and another formed last year to compete in CNBC’s Million Dollar Portfolio Challenge. These students recognize that sitting in a classroom and learning theory is undoubtedly valuable, but the opportunity to apply their knowledge by managing an actual investment portfolio is priceless.

“I had a hunger to learn about investing, how the real world works,” says Chehrazi, now a junior majoring in international business. “I wanted that kind of experiential knowledge to complement the basic theoretical knowledge I was getting in school.” In January 2010, he came up with an idea how to make that happen. Bearing a $1,000 grant he had received as one of 15 students across the country selected for that year’s Compass Fellowship — a nonprofit program dedicated to advancing social entrepreneurism — Chehrazi approached Dave Greek (BSBA ’13), a classmate whom he knew was also a budding investor.

“I told Dave I had an idea, that students can invest and manage people’s money in markets around the world, not for profit, but hopefully to gain returns for the investors. And with the money we make, we could create education opportunities for those within the fund, including an international scholarship program.”

Greek grew up on a farm in Prince-ton, N.J., where a high school economics teacher piqued his interest in investing when the class played a mock stock market game one semester. He had since established a small but successful portfolio, mostly energy and technology companies, and Chehrazi’s notion complemented the next step he wanted to take. “I had invested in ETF globally based bonds,” says Greek, also a junior majoring in international business. “I was really interested in getting more involved in emerging markets, so when Sina told me his idea, I thought, ‘This is perfect.’”

That spring they launched the Zeeba Investment Group, borrowing a Persian word for beauty and serenity. Although the group is not affiliated with Georgetown McDonough, it certainly displays the entrepreneurial spirit of the school’s students. They used the $1,000 grant to cover the costs of setting up an LLC and for all the required paperwork, such as U.S. State Department forms allowing them to invest overseas. It turned into a six-month process that proved much more arduous than either of them had expected. “Just setting up the company was the steepest learning curve, but definitely the most rewarding,” says Greek, who is currently studying in Barcelona and has relinquished his role as the group’s chief investment officer.

The decision to focus on the small Middle Eastern emirate of Qatar is based on both students’ shared interest in global investing, as well as on that nation’s favorable economic policies. According to the U.S. State Department, despite the recent international financial crisis, Qatar enjoyed the world’s highest real GDP growth rate in 2010, estimated at 19 percent, fueled largely by its booming gas and oil business. Plus, Qatar’s successful bid to host the 2022 World Cup soccer tournament will accelerate large-scale infrastructure projects, including a metro system, a new international airport, hotels and resorts, athletic facilities, and a 25-mile causeway linking Qatar and its eastern neighbor Bahrain.

Before the hedge fund was ready to begin trading, Chehrazi and Greek recruited fellow Georgetown McDonough undergraduates to help them with the research, marketing, fundraising, and communications duties. The Zeeba Group today includes 24 students (three are studying at Georgetown’s School of Foreign Service in Doha, Qatar). No one receives a salary, all returns go back into the fund, and everyone must invest at least $250 of his or her own money, with additional money coming from
families and friends. The group is expanding to other markets, too, including Latin America and Asia.

At the beginning of this year, Zeeba had nearly $60,000 in assets under management and was down overall in 2011 by
9 percent. “Considering that we had been down 19 percent during the year, that was a bright spot,” Chehrazi says. “The Arab Spring had a significantly negative impact on the fund,” he adds, referring to the massive citizen protests and political upheaval across the region. Although Qatar’s monarchy remained essentially unscathed, financial markets throughout the Middle East were in deep flux.

There was a silver lining for the Zeeba team, nonetheless, in the chance to understand how actual world events affect the markets. “Learning why investments can go haywire and what to watch for was a tremendous education in itself,” Chehrazi contends.

 

Georgetown McDonough graduate Michael Psaros (BSBA ’89) couldn’t agree more. “Investing groups are a wonderful way for students to learn how to put real capital at risk, which is something that I didn’t have the opportunity to do as an undergraduate,” says the co-founder and managing partner of New York-based KPS Capital Partners and a member of Georgetown McDonough’s Board of Advisors. “You can study textbooks, attend classes, and read business journals, but until you personally have skin in the game, you don’t understand what it’s like to have actual capital at risk. It will teach the students about the interrelationship between politics, the economy, and the markets. I applaud them for having the courage to invest their own money, and I believe it will be extraordinarily beneficial to them in their careers, as well as personally.”

The Arab Spring wasn’t as critical a consideration for the nearly 100 full-time Georgetown McDonough MBA students who run the Graduate Investment Fund. The fund currently manages close to $350,000, sourced about evenly between alumni donations and the school’s endowment. Although the four or five stocks in each of the fund’s nine domestic and international portfolios may include global companies that do business in the Middle East, its risk is not nearly as high as Zeeba’s.

The Graduate Investment Fund has existed for more than a decade and holds meetings almost every week, says Matt Stoeckle, a second-year MBA student who completed his one-year tenure as president of the fund in December. A manager and several analysts, typically first-year students, are assigned to each port-folio. “Together they determine whether to buy, sell, or buy more shares, then present their recommendations at group meetings, where we make final decisions,” says Stoeckle (MBA ’12), 29, who spent five years in investment banking at Wells Fargo Securities before going back to school. “It’s definitely a real-world exercise that develops real-world skills, and there’s useful overlap with our core courses in areas such as strategy, accounting, and finance. Some students invest on their own, so this is a good way for them to get a different view from other people about the market and what to invest in.”

Stoeckle also led a team of 10 MBA students who applied and were chosen by the school to compete in CNBC’s Million Dollar Portfolio Challenge MBA Face-Off. The business-news cable network has sponsored the investment competition for several years and invited the general public to participate for the chance to win $1 million, though 2011 marked the first time the competition added a student component. Teams of MBA students from Georgetown and seven other schools — Carnegie Mellon, Cornell, Ohio State, University of Chicago, Michigan, Notre Dame, and University of Texas at Austin — were each given a million virtual “CNBC Bucks” to establish portfolios and make mock trades of pre-selected stocks and currencies on the U.S., London, and Australian exchanges. The nine-week competition ran from Sept. 19 until Nov. 25, with the teams vying for bragging rights, plus an iPad 2 for each member of the winning team. The Georgetown McDonough team finished in fourth place, though one of its members, Angel Irazola (MBA EP ’12),  was an individual winner.

Stoeckle was asked to head up the Hoyas team of seven full-time students and three from the MBA Evening Program by Meg VanDeWeghe, a professor of the practice and the faculty adviser for the competition, as well as for the Graduate Investment Fund. “The school was looking for people with a strong finance background and who could work well together,” Stoeckle says. “Ten percent of our investments had to be in currencies, so they wanted students with that type of experience, too.”

Once the team was assembled, they agreed on a diversified strategy and identified several themes to concentrate on: M&A, earnings, leveraged ETFs (exchange-traded funds, which are investment funds traded on stock exchanges), currencies, and commodities. Each student then developed his or her own portfolio and was responsible for compiling and analyzing research and making buy and sell decisions. “We met as a group several times during the competition to share information, and we would email each other anytime to ask questions, exchange ideas, offer suggestions, or pass along news items,” Stoeckle says. The competition featured a daily “Bonus Bucks” contest, giving participants the chance to win up to an extra 6,000 CNBC Bucks for their portfolios by correctly answering three trivia questions.

VanDeWeghe and several other faculty members were available to the students, but otherwise encouraged the team to be independent. “It was great knowing they were there if we needed help,” says Stoeckle, who received a few tips from the school’s communications department before doing a live interview on CNBC. The Georgetown Center for Financial Markets and Policy also supported the students throughout the competition.

Irazola had a particularly strong showing. “There were three performance categories — one for equity, one for -currency, and a third combining those two,” explains Irazola, a third-year MBA Evening Program student majoring in finance who has worked at Merrill Lynch in Washington for 10 years in its wealth management division. “I was the only participant in the MBA competition who ranked in the top three in each category.” Although he was disappointed that the team missed out on the iPads, Irazola did come away with a personal reward. “I’m a Michigan undergrad,” he says, “and I had a pretty serious incentive for beating Ohio State.” In fact, the Buckeyes came in sixth.

 

On a more serious note, Irazola appreciates the opportunity the competition presented him to expand both his academic and professional horizons. “What I did wasn’t too similar to what I do in my day job, which is to invest on value as a long-term approach in diversified portfolios,” he says. “So this experience allowed me to learn a great deal about short-term trading. Part of my success was having a disciplined selling strategy. It’s easy to buy something, but knowing when to sell, when to cut your losses, and when to capture gains is probably a more important factor.”

Irazola sees the contest as an add-on to his MBA education, too, which will culminate this spring. “It was a good exercise in teamwork and team-building,” he says. “I was able to provide some of my professional insight to my teammates, giving them suggestions while not being overbearing and trying to contribute to the success of something larger than myself.”

Those intangibles, his decade at Merrill Lynch, and his MBA studies in finance and international business could be a springboard for Irazola’s career. “I want to explore opportunities in institutional finance, with a focus on South America,” he says, a nod to his global experience last year in Argentina. “This was definitely a résumé-builder for me and something I can talk to folks about in an interview.”

VanDeWeghe, who teaches graduate and undergraduate classes in investment management and fixed income (an investment that yields a regular or fixed return), and was formerly chairman of the board of a $50 billion asset management company, understands firsthand the value of gaining experience inside and outside the halls of academia. “At the McDonough School of Business, we strive to create practical opportunities for our students to apply the theories we teach them in the classroom,” she says. “That includes the CNBC competition, as well as the Graduate Investment Fund. We believe that experiential learning helps prepare our students to be successful executives post-graduation.”

That’s certainly the way Stoeckle assesses his leadership roles in both endeavors. “I think a lot of people go to business school because they want to be a leader or the head of an organization,” he says. “That’s definitely something I’m interested in after I graduate next year. But I also see leadership as a way to help people learn as much as possible. In the Graduate Investment Fund, we are investing real money, but it’s mainly a way to help students learn more about business and hone their skills as they go on job interviews and progress in their careers. In order to do that, you need to be in a leadership position. Hopefully, both these experiences will help me as I continue to develop as a leader.”

 

Bob Woods is a freelance writer based in Madison, Conn. He has covered business, sports, health, travel, and other topics for publications including Sports Illustrated, Fortune, and Newsweek International.

 

“You can study textbooks, attend classes, and read business journals, but until you personally have skin in the game, you don’t understand what it’s like to have actual capital at risk.”

—Michael Psaros (BSBA ’89)

Christopher Lescinsky, Sina Chehrazi, Madeline Molo, David Greek, and Karim Malhas from Zeeba Investment Group

Matt Stoeckle, Samantha Chow, Angel Irazola, Temi Akinola, Sean Baker, Sean Sun, Adam Kelinsky, Christina Oh, Ingrid Velmonte, and Osman Jen represented the school in CNBC’s Million Dollar Portfolio Challenge MBA Face-Off.

Leave a Reply