Author: Adam Greenhouse and Richard DeMaria
There is something distinguished about the 13 men and women of Occidental’s Blyth Fund. Maybe it’s their stellar grades and the bevy of extra-curricular activities. Maybe it’s the business suits. Or maybe it’s the hefty hunk of Oxy endowment they hold in their hands: $75,000, and it’s theirs to spend.
Welcome to the Blyth Fund, a student-run portfolio management and finance education group. With active minds and available cash, the cadre of stock-savvy student investors meet bi-weekly to discuss, study and participate in the stock market. Now in its 31st year, the Fund has a long history at Oxy, but remains somewhat of a mystery to the student body at large. The Weekly decided to take an in-depth look at the group-currently in the midst of a recruitment process-and discover the faces behind the Fund.
A ‘Real Life’ Education
Established in January of 1977 with a donation from Richard Link, The Charles R. Blyth Fund-named after the founder of successful investment firm Blyth & Co., Inc. -was created with education in mind. “The primary purpose of this Fund is to provide a certain kind of ‘real life’ educational program for students, rather than contribute to the general funds of the College as such,” wrote the donor in a press statement.
The ‘real life’ education the members of the Fund receive, and the real world implications of the work they do, gives the Fund a level of excitement not found in the classroom, Ben Blatteis (senior) said.
“This is something very real. We are dealing with six figures of the schools money,” he said.
Fund president Jason Kwok (junior) agrees.
“It adds excitement to our jobs . . . dealing with real values and real numbers,” he said. “It’s exciting that the stakes are high.”
The group offers a sort of financial education that Oxy, with no finance or business major, cannot.
“This is kind of a surrogate to learning about financial processes,” Fernando Rodriguez (senior) said.
What’s more, the members of the Blyth Fund do not simply benefit from their education: they control it. The Fund is entirely student-run, and has been since its inception. With no faculty or administrators to steer their meetings, the students of the Blyth Fund are free to invest however they please.
“The provisions of the Fund have purposely been designed to give the students a great deal of autonomy in operating and managing the Fund,” Link said at the time of the Fund’s founding.
Kwok considers this kind of hands-on education to be the Fund’s most compelling aspect.
“It’s the single most distinguishable factor. There is no faculty oversight,” he said. “It’s not necessarily something we can get inside the classroom at Occidental.” Kwok said.
The Fund puts Oxy in a unique position as a liberal arts college. Only Stanford University, one of the three original recipients of the Fund along with Caltech and Oxy, has a Blyth Fund of its own. This rare business opportunity makes the school an attractive option for students like Josh Lu (junior), who applied to the school because of its student-run investment group.
“The Blyth Fund is one of the reasons I applied to Oxy,” he said. “I was researching schools and investment clubs, and this is one of the most unique experiences you can get at a liberal arts school.”
A Diverse Group
Together, the Fund’s 13 students form, in their eyes, a diverse group of investors, each with a different approach to the financial process.
“One of the strengths of the Blyth Fund is that we are all very different students with different backgrounds. We all bring something to the table,” Blatteis said. “We have some different answers about what kind of company jumps out at us.”
“Getting fresh perspectives is important. When you get people with different mindsets, you get to examine a lot of different angles of one company,” Lu said.
Members of the Fund do not exclusively seek economics majors during the recruitment process.
“We try to get people on there who don’t have finance backgrounds,” Rodriguez said.
Likewise, not all the members of the Fund intend to become Wall Street warriors. Evie Hobbs (junior), for example, intends to go to medical school. Nonetheless, this Biochemistry major has found the Fund to be informative.
“I can definitely see what I’ve learned in terms of my research,” she said.
Welcome to Business School
Members stress student autonomy as the distinguishable feature of the fund. But such power would be worthless without proper utilization, a fact illustrated by the Fund’s commitment to bi-weekly meetings.
In these meetings, members focus on the two main goals of the Fund: education and asset preservation. Each meeting, one member teaches a new finance concept to the rest of the members. The goal is to familiarize members with some of the metrics used on Wall Street and instill some of the basic skills needed to quantitatively analyze a company, Kwok said.
“Every week, I look forward to our meetings because they’re opportunities to participate in intellectually stimulating discussions about a topic that we wouldn’t necessarily have had exposure to otherwise,” Kwok said.
While the Fund’s focus on education has contributed to its investment success, Kwok also understands that this practice applies beyond investment.
“It really helps you develop skills that will work for you when you are out of school,” he said. “The skills that we apply and hone in meetings are skills that apply to all fields.”
Creating the Future
Asset preservation, the Fund’s other main goal, is essential to its continued success.
“We need to preserve our assets to ensure opportunities for future Occidental students,” Kwok said.
The Fund remains focused on its assets throughout the year. Twice a week, Rodriguez prepares a statement providing a market update and an update on their portfolio. The discussion continues outside of the meetings as well.
“Whenever I see these guys, we end up talking about the market and our holdings,” Rodriguez said. “I knew I would be dedicated, but I had no idea how engaged I would be in it.”
According to its website, some of the Fund’s current holdings are: General Electric, Yahoo!, Whole Foods, Apollo Group, and Starbucks, among others.
Although the Fund is always concerned with its current holdings, members consistently scour the market for possible additions to the portfolio.
“We have a watch list. If we see a better opportunity to buy or a developing trend, we like to keep an eye on it,” Lu said.
The Fund maintains a structured procedure for introducing potential investment opportunities. The first step is called the snapshot. The snapshot involves one member introducing a potential company and briefly relaying its pros and cons.
“After you disseminate the information about the company, you get to debate it,” Blatteis said. “We all have access to the same information, but different members of the fund all have different opinions on the same company. It fosters that intellectual curiosity we all have.”
Every decision the members of the Fund make about their portfolio is consensus-based and is voted on. This stipulation can lead to some extensive discussion.
“If there seems to be interest in a new company, we debate for as long as an hour. Then we come to a consensus,” Lu said.The Fund concentrates on certain characteristics of every company before deciding to invest in it and add it to the portfolio.
“The most important thing for us is having a good understanding of a company’s business model,” Rodriguez said. “If you don’t like the decisions they make, it’s probably something we try and stay away from. It gives us an edge because we look at some companies that major financial analysts don’t.”
Because the Fund focuses on this aspect of companies, it tends to have a diverse portfolio.
“Our interests span in types of companies and size of companies as well,” Kwok said.
A
lthough the Fund has the ability to pursue many different types of options, Blatteis said, “We have to set a lot of our own guidelines and rules. We set up our own guidelines for what we think is ethical.”
Members said that selecting a new company to invest in has not always been easy. Notably, Rodriguez pointed to a recent debate about Alliant Techsystems, a weapons manufacturing company. He said the company had the right financial qualifications, such as low debt and a product in high demand. After a lengthy debate, however, the members decided not to invest in Alliant Techsystems because of ethical concerns.
“We weren’t willing to put money into a company in this area,” Rodriguez said.
Blatteis agrees that the Fund’s independence leads to a portfolio built on a strong ethical foundation.
“Professional fund managers may invest in oil companies and weapons companies, but we have more freedom to choose the type of companies we invest in,” he said.
A Worthy Investment?
Though the Fund has proved successful at Oxy, other schools have run into financial difficulties. The Blyth Funds at Stanford and Caltech squandered their initial $75,000 donation, and Caltech’s Fund is now defunct. Could a similar thing happen at Oxy? Not likely, says Hobbs.
“Caltech and Stanford each got the same initial $75,000, and then they lost it all, making Oxy unique,” she said. “It says something about Oxy.”
“There have been several major economic events that could have wiped out a lot of funds on Wall Street, but Oxy’s Blyth Fund is still here,” Blatteis said.
Professor of Economics Woody Studenmund has been the Blyth Fund’s faculty advisor since its inception in 1977, and he attributes its continued stability as one reason for its accomplishments.
“That continuity perhaps has been a factor in the success of Oxy’s fund,” Studenmund said. “In addition, students at Oxy just seem to care deeply about the Blyth Fund, and they very much want to keep the fund strong for future generations of students.”
Studenmund does not control the students’ decisions or participate in bi-weekly meetings, but he is available for advice and support, members said.
“Professor Studenmund understands the value of giving us freedom to run our portfolio,” Kwok said.
Time For Transition
Regardless of past successes, the upcoming year brings more uncertainty than usual for the Blyth Fund. The Fund runs on a yearly calendar that resets on April 1, the day when the graduating seniors step down and open their spots up to incoming members. The Fund’s constitution stipulates that the maximum amount of members in the Fund at one time is 12, with two alternates. This April 1, six seniors will move on, leaving six vacancies.
Blatteis does not see losing six seniors as a bump in the road, however. He sees it as an opportunity.
“There is a big chance for us to make changes this year with so many members leaving to improve by leaps and bounds,” Blatteis said. “There are six open spots for students to gain an experience that you wouldn’t find in a classroom. Most people don’t have the opportunity to be a fund manager until they have left business school.”
Come this April, six new students will have the chance to seize the opportunity.
Life-Changing Investment
The six figures of the endowment the Fund controls may appear to be too much to handle for 12 college students with relatively little financial experience. For those on the inside however, the time they invest in the Fund has paid off financially and sentimentally.
“It really inspires me the way no other course here has because I am accountable to my peers,” Rodriguez said.Kwok also feels a sense of gratification from his commitment to the Fund.
“When I’m doing work for the Blyth Fund, it really doesn’t feel like work,” he said. “The Blyth Fund has been the most fulfilling extracurricular activity for me here at Oxy.”
Perhaps the most telling example of the Fund’s significance for the members came from Hobbs.
“When I used to wake up in the morning, I checked my email,” she said. “Now, I check Google Finance.”
Applications for the Blyth Fund are due February 26 at 5 p.m. in the President’s Office. For more information, contact Justin Kwok at jkwok@oxy.edu.
The following retraction appeared in the 02/04/09 print edition of the Weekly: “In the article “More Than Just Monopoly Money” published February 13, 2008, we stated: “The Blyth Funds at Stanford and Caltech squandered their initial $75,000 donation, and Caltech’s Fund is now defunct.” The Original Donation for Stanford resulted in a fund that is still active with a six-figure portfolio.”
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