Generating Alpha in a Beta World

by Xi (Jessie) Chen and Shengting (Sandy) Luo

Four hours before this photo was taken, we walked into the classroom for our last class at Tulane with excitement.  We were buy-side analysts of the Darwin Fenner Students Managed Fund and fund managers who made investment decisions together. Darwin Fenner Student Managed Fund is one of the most practical and knowledgeable courses we took at Tulane and it contributed greatly to preparing us for a buy-side analyst career path.

During those four hours, we convinced each other that our recommendations would beat the market, debated over certain stocks from time to time, voted for the final decisions, and eventually constructed a portfolio that we are proud of.  Our hard work during the semester gave us the confidence that our portfolio would outperform the market with a lower level of risk.

27 MFIN students were selected to participate in this course this past spring. Most of us were attracted to Tulane’s MFIN program because of this exciting course.  Every three students made up a team to cover one sector of S&P 400.  We read tons of academic research papers and learned from “Investment Gurus” to generate our own investment strategies.  We started to follow the market and follow our own stocks.  All these are things we had never done before.

I still clearly remember how painful it was to read two 30-page academic research papers and write two critiques every week.  However, I also remember how amazed I was when I read some really spectacular papers and could not wait to put them into practice.  Professor Sheri Tice also gave us comments on our critiques that helped us better understand the research papers and think about how to use the methodologies in the Darwin Fenner Fund.

Another thing I won’t forget is the intelligence of my classmates.  We shared our opinions on research and investment gurus. We questioned the stock selection process proposed by each team and took advice from each other. We debated in class and collaborated after class to form a portfolio of our own, and most importantly, we were never bored.

When talking to a wealth management professional, I found out that what we did in Darwin Fenner program is what portfolio analysts and portfolio managers are doing in their everyday work.  It was such a proud and exciting thing that we accomplished as students.  As Professor Sheri Tice said, we are trying to “Generate Alpha in a Beta World.”