Generating a 28% Return: Investment Advice from Students with the Babson College Fund
A quote from renowned investor Peter Lynch lines a wall inside the Babson College Fund on-campus suite. It reads: “Know what you own, and know why you own it.”
Collaborating from around the world, this group of undergraduate and graduate students lives this phrase. And, much like Lynch’s illustrious investing career, they also have a knack for picking top stocks.
In 2020, the team—which manages a $4.2 million portion of the College’s endowment—produced a 28% return on investment, outperforming the S&P 500 by 1,059 basis points. Based on Morningstar data, the students’ performance would place in the 99th percentile of large cap blend managers.
It’s a remarkable feat certainly, but to this group, which has outperformed the S&P 500 year after year, it’s simply business as usual.
How They Did It
Success starts with beating your benchmark, which for this team at the beginning of 2020 was to yet again top the S&P 500.
Smaller groups of students within the Babson College Fund were assigned specific sectors and tasked with identifying the top companies in each industry. Top-performing bets for the group over 2020 included California Resources Corporation, Clean Energy Fuels Corporation, and Renewable Energy Corporation, the first of which produced a whopping 573% gain.
A number of investments have been made with long-term growth in mind, the group holding some stock positions for two to three years or longer, said Matt Apkarian MBA’20. George Massey MBA’20 attributed the team’s success to a smaller concentration but larger monetary value of holdings.
“Learning virtually wasn’t an obstacle; it was actually a catalyst for better learning outcomes.”
Anay Gawande ’21
“We tend to have a high-quality growth portfolio,” said Patrick Gregory, faculty director of the fund and managing director of the Stephen D. Cutler Center for Investments and Finance. “That style worked well in 2020, and allowed the students to identify strong performers. Our process is designed to ensure that only the best ideas make their way into the portfolio.”
Students such as Anay Gawande ’21 worked in the healthcare sector of the fund. He was tasked with managing about $600,000 of the College’s endowment. “It transcends just being a class,” he said.
“We as students are considered experts in our sector,” said Tavleen Arora ’21. “It’s our responsibility to understand what’s going up, what’s going down, and why.”
Keeping Connected
On paper, you might guess March 2020’s worldwide transition to remote learning and work would have presented a challenge to the group. But at Babson College, and for the Babson College Fund team, that could not be further from the truth.
Being virtual allowed students to connect on a more frequent basis with executives in residence such as Jim Spencer ’73, who has worked with the group for 15 years and previously hired six students from the program.
“Learning virtually wasn’t an obstacle; it was actually a catalyst for better learning outcomes,” said Gawande, who at a time collaborated with peers in Boston, Miami, and Toronto, all from India.
Gregory has long considered investing a craft, one best taught by mentors through an experiential learning program such as the Babson College Fund.
Alexandra Tutecky ’21 took it one step further.
“BCF simulates an office. You have to learn how to work with people who have different skill sets than you,” she said. “It’s about garnering relationships and presenting an idea in a way that everyone can understand it.”
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