This is the story of Bryant's Archway Investment Fund and its 2020 year. More in-depth information can be found in the Fund's Annual Report.
For more than 15 years, the student portfolio managers of Bryant’s Archway Investment Fund (AIF) have applied the investment principles they’ve learned in the classroom by managing a real-life investment portfolio and making real trades. This past year, the AIF faced what was perhaps its greatest test as the students successfully navigated a financial market in turmoil due to the worldwide coronavirus pandemic.
“The COVID-19 pandemic presented a number of challenges, including the transition to virtual learning in the spring term, and a hybrid learning model for the fall term,” notes Professor of Finance and Department Chair Asli Ascioglu, who has overseen the AIF since 2015. “That is difficult enough for a normal course, but in this case the students also dealt with extremely complex health, economic, and financial market developments that were truly unprecedented in their impact on investment portfolios.”
Prepared to excel
Established in 2005 with an initial $200,000 cash investment, the AIF is now a multi-asset program with separate equity and fixed income portfolios worth more than $2 million. Unlike the student-managed funds at many other institutions, the Fund is tightly integrated into the Finance Department curriculum, serving as a capstone learning opportunity for students preparing to begin investment careers.
“I think that it first hit me when the assignments moved from five-page essays to $8,000 trade orders. ...You begin to understand what it means to have this real fiduciary responsibility.”
For most of the Spring 2020 semester, the Fund proceeded as it always had, with the Archway students translating the skills and strategies they had had learned to managing the fund. Though they are well-prepared for the responsibility, they found, it could still require an adjustment.
“I think that it first hit me when the assignments moved from five-page essays to $8,000 trade orders,” remembers Cole Hollis ’20, who was a portfolio manager for the Equity Fund in the spring 2020 semester and now works as an Operations Settlements Analyst for Goldman Sachs. “That was literally an assignment – a normal, day-to-day thing that we were doing. You begin to understand what it means to have this real fiduciary responsibility.”
Even then, none of the students fully realized the task ahead of them as the coronavirus spread and began to affect the economy and daily life. Hollis remembers a macroeconomic presentation at the beginning of the semester that offered a broad look at the U.S. and world economy. “I distinctly remember that there was a single slide with stats about COVID-19 on it, but that was it,” he says. “It was on people’s radar, but we couldn't really prepare for what happened.”
“It was their job to get out their pencils and see what was really happening.”
“Directionally, yes, the students had a sense of what was coming. In terms of magnitude, though, not even close,” affirms Professor Kevin J. Maloney, Ph.D., who teaches the Archway Fixed Income Portfolio Management course and co-teaches the Archway Equity Portfolio Management class with Professor Ascioglu.
That would begin to change as the students prepared for Spring Break and the global pandemic worsened. “It was the Friday before break and we were preparing for class and checking the market, and we realized that everything was getting out of control,” Hollis says. “One of my colleagues kept repeating, ‘Everything is crashing.’”
Navigating a new world
When classes resumed a week later, the Archway students had entered a seemingly very different world. Bryant had gone virtual with the students learning from home and the portfolio managers were forced to confront a new, uncertain financial market.
“You have to think about all of the same things you normally think about, but the context was very different than the context from even two weeks earlier.”
A decade-long economic expansion ended with the onset of COVID-19, causing the global economy to contract sharply. A strong labor market and healthy consumer spending collapsed as the world went into lockdown by the end of March. Supply chains were stressed as the demand for necessity goods outpaced the supply on store shelves. Nearly every industry suffered drastic, unexpected change.
Undaunted, the portfolio managers prepared to get back to work. “It was their job to sharpen their pencils and see what was really happening,” Maloney says.
A learning laboratory
To decode the tempestuous market around them, the students fell back on the extensive education in finance they had received over the course of four years at Bryant. The fundamental concepts, notes Maloney, remained the same, even in a drastically altered context. “You had to think about all of the same things you normally think about, but the context was very different than the context from even two weeks earlier,” he points out.
"There are things you say, ‘This is never going to happen,’ and then we would see them happen that day.”
In some ways, that chaos was the perfect learning environment for the Archway Fund. “The portfolio managers are not just managing the Fund, they are actively learning new things at the same time they are applying what they’ve already learned,” explains Ascioglu. Both she and Maloney take great care to ensure to use the market conditions the students see around them as teaching tools. “Every semester I change the way I teach, because the market is dynamic,” she notes. “There is no textbook to follow because a book cannot match the market.”
That was especially true in a time of such upheaval. “There are things you say, ‘This is never going to happen,’ and then we would see them happen that day,” Ascioglu remembers.
Risk and reward
As markets changed around them, the students kept a cool head. “In our Securities Analyst course, Professor Goolgasian [Chris J. Goolgasian, CFA, CPA, CAIA, Adjunct Professor of Finance] emphasized that when it comes to investing, you need to act with your mind and not with your heart,” says Hollis. “We had to remember that we were managing for the long-term, not making emotional decisions in the heat of the moment.”
“Investment has two elements: risk and return,” points out Ascioglu. “They always go together, so our students need to be able to make informed decisions. Through their Archway experience, they learned what it truly meant to be a disciplined investor.”
“A class like Archway lends itself to this because there are no immediate right answers. The right answer shows up after the fact, so it's all about making informed judgments.”
Able to virtually access the range of analytical and research tools available to them through Archway, the students turned to the intensive analysis that had served them well before the pandemic. They also relied on their Archway professors, industry-tested finance professionals who drew from their experiences during 2008 market crash. “The Archway faculty are incredible mentors,” says Hollis. “They’re constantly giving us feedback and requiring us to defend our perspectives, our research, our investment theses, and everything that happens in between.”
“They make you sweat a bit,” he laughs. “But that’s important, especially in times of adversity.”
“We always tell our students that we are their guides and risk managers,” says Ascioglu. “We have never said no to any stock pitches, or any decision they make, be it selling, buying or changing things. The only thing we did is ask them questions, to make sure they fully understand what they are proposing.”
Through judicious stewardship, the Fund recovered. “We lost almost 11% in March,” Ascioglu remembers, “but then in April we made almost all of it back.”
“You can never be 100% prepared, because the world is always changing. You have to be able to adjust with it – and really back up your arguments.”
The fall semester
In the fall semester, the fund switched hands to a new class of portfolio managers who had closely followed the markets, and the AIF’s response to them, in their Securities Analysis course, and were ready to tackle the challenges facing them.Though the students were able to return to campus thanks to Bryant's adoption of Hy-flex technologies and adherence to rigorous safety measures, they still faced an uncertain financial world.
The students had to re-examine a pandemic-era landscape where everything from supply chains to commerce to simple laws of human contact had changed and determine how those changes affected the financial world. “One of the things we’re always trying to get students to do is think about the assumptions they're making that they don't even realize they're making,” says Maloney. “A class like Archway lends itself to this because there are no immediate right answers. The right answer shows up after the fact, so it's all about making informed judgments.”
“I think my professionalism really advanced from being in that environment. ... If you can manage funds during that volatile time period, you can manage them anytime.”
That requires strong critical thinking, notes Melissa Hernandez ’21, a member of the Archway Executive board in the fall 2020 semester – something her Bryant experience had instilled in her and her fellow Archway students. “You need to do your research, but a lot of people have access to the same resources,” she points out. “That’s when your critical thinking skills become so important because those are all your own – that’s where you find your unique insight.”
It also meant understanding new trends like buying into electronic gaming stocks such as Activision Blizzard to take advantage of a population in lockdown or investing in PepsiCo rather than Coca Cola with the understanding that PepsiCo’s distribution model put it in a better position to weather the shuttering of stadiums and restaurants..
“You can never be 100% prepared, because the world is always changing,” states Hernandez. “You have to be able to adjust with it – and really back up your arguments.”
In the end, the Archway Fund managers’ hard work, critical thinking, and adherence to the lessons they had learned paid off. The portfolio had a positive excess return during both the spring and fall semesters and both the Fixed Income and Equity portfolios beat their benchmarks. “The students did a good job of thinking about industries and individual companies that were well-positioned to take advantage of the changes in consumer behavior and other factors,” says Maloney.
“It was a very rich environment to teach in. The lessons the students learned that year are going to be remembered for a long time.”
“We are enormously proud of their efforts, and of the excellent investment performance they delivered in the two portfolios,” affirms Ascioglu. “We did not get one question from the Bryant administration during this time about the Fund’s performance,” she notes. “They trusted us, which gave the students a great deal of confidence.”
Just as importantly, the Archway Portfolio Managers gained the experience of a lifetime. “It was a very rich environment to teach in,” Maloney states. “The lessons the students learned that year are going to be remembered for a long time.”
“I think my professionalism really advanced from being in that environment, because you are dealing with real money in a unique situation,” Hernandez notes. “If you can manage funds during that volatile time period, you can manage them anytime.”
For Hollis, his time with the Fund was a key advantage that turned employers’ heads. “Just the fact that we're able to just have this under our belt is a real testament to what Archway students are capable of,” attests Hollis. “My time in Archway definitely helped me stand out in front of employers. When they saw that I, as a student, was a portfolio manager during a pandemic they were like, ‘Oh, my gosh! You were actually in this!’ And I was able to tell them, ‘Yes. Yes, I was.’
“I will carry that with pride for a long time."