2009 Headlines
Johnson School's student-run hedge fund posts slight recovery in second quarter 2009
Cayuga MBA Fund's strong performing short- and long-positions show consumer impact of economic downturn
July 22, 2009 | Ithaca, NY | The Johnson School at Cornell University's student-run Cayuga MBA Fund posted a slight recovery from a challenging first quarter, delivering a return of -0.46%, compared to -1.01% for the HFR Equity Market Neutral Index and a solid 5.16% for the HFR Equity Hedge Index, which reflected the overall market rally and benefited from a strong May performance.
"The second quarter brought much-wanted relief in the equity markets as investors eagerly snapped up what they believed were bargain buys in light of seemingly moderating job losses in May and other optimistic signs in manufacturing and consumer spending," commented Lakshmi Bhojraj, director of the Parker Center for Investment Management. "The Cayuga Fund continues to pursue a strategy of selective stock picking and prudent risk management."
Encore Capital Group (ECPG) was one of the Cayuga Fund's strongest long positions. This company engages in the purchase and management of charged-off consumer receivable portfolios. Its portfolio includes unsecured and charged-off domestic consumer credit cards, auto loan deficiency, general consumer loans, and telecom and healthcare receivables purchased from financial institutions, retail credit corporations, telecom companies, and resellers of portfolios. Not surprisingly, this collection company has benefited from the recessionary environment. In the second quarter, the company's stock price rose 92 percent.
Through its subsidiaries Fidelity National Financial (FNF) provides title insurance, specialty insurance, claims management, and information services in the United States. The company experienced a challenging quarter given the rise in interest rates which hurt mortgage applications and by extension, demand for title insurance. Down 31 percent in the quarter, this was one of the Cayuga Fund's more impressive short performers.
Cayuga Fund portfolio managers continue to believe that a sustained economic recovery is still some time away. With unemployment almost hitting a double digit rate in the U.S. and a recovery in the housing market still seemingly distant, the equity markets will continue to experience volatility as investor rallies are tempered by sobering economic news. Johnson School students remain committed to the Cayuga MBA Fund's strategy of selective stock picking and disciplined risk management.
The Cayuga MBA Fund is an investment vehicle that aims to provide a competitive rate of risk-adjusted return to its investors while enhancing the educational and professional opportunities of Cornell's Johnson School MBA students. It is supported by the analytical platform of the Parker Center, cutting-edge research by faculty members, and extensive participation by student portfolio managers. The Parker Center is a classroom providing real-time stock quotes, international data feeds, and financial analysis software and data valued at more than $1.8 million per year in licensing fees and comparable, if not better, than the resources found at many Wall Street firms.
The Cayuga MBA Fund is managed by 32 portfolio managers, including two quantitative analysts, a trader, and an investor relations manager who, under the guidance of faculty and outside investment advisors, work to fulfill the investment objective of the fund to achieve consistent positive returns that are uncorrelated with equity market benchmarks, and to maintain significantly lower volatility than the broader market.
More information on the Cayuga Fund and the Parker Center can be found online at: http://www.johnson.cornell.edu/parkercenter/.
Contact:
Deirdre G. Snyder
Assistant Director Public Relations
The Johnson School at Cornell University
(607) 255-3494
Dgs37@cornell.edu
Lakshmi Bhojraj
Director of the Parker Center for Investment Research
The Johnson School at Cornell University
(607) 255-1135
Lr10@cornell.edu
