Huntsman Alumni Magazine

Spring 2014

Learning By Doing

A group of finance students manages $5 million for Zions Bank

When the course work lasts 24/7, the time spent in class doesn’t need to be long. At least that’s what students in Professor Paul Fjeldsted’s Investing Practicum class have found this year.

Paul Fjeldsted

"The best way to learn is by doing."

- Professor Paul Fjeldsted

In August, the class was tasked with the opportunity to manage $5 million for Zions Bank. Although the students were given guidelines, rules, and advice, they were free to invest the millions into the bonds of their choice through the Zions Direct bond store and auction platform.

The students had six months, October 1 to March 31, to generate a return on the money.

How the money was used

The 10 students began strategizing in August where they learned from Huntsman alumnus Dan Ricks, institutional investment officer at Zions Bank, and other Zions representatives about strategies and rules. The two directions from Zions were simple: don’t lose money, and remember it’s easier to buy a bond than to sell a bond.

Since Zions Bank could have put the $5 million in a bank account that earned approximately .25 percent, the students set a goal to earn approximately .70 percent by the end of the six months.

“It was pretty daunting at first,” said Zach Maxfield, one of the portfolio managers in the class. “Still, it gave us a drive to learn as much as we could about bond investing while being careful not to make significant money-losing mistakes.”

The students allocated the money into three bond sectors with associated teams: corporate bonds, municipal bonds, agency bonds, and government obligations/Certificates of Deposit (CDs). The class also created positions for portfolio managers and a risk analyst to ensure the class kept on track with its overall strategies.

The most difficult part of the class comes at the end; it may be worse than most finals.

Zions Bank offers this opportunity to only four schools in the world: Utah State University, Brigham Young University, Westminster College and University of Oxford.

“It is a completely different story when selling a bond compared to buying a bond,” Ricks noted.

Any bond that had not matured by March 31 had to be sold. The liquidation strategy began with the students splitting all bonds that were long-dated into two sections of shorter-dated and longer-dated bonds and then assigning teams for each. This meant each team could strategically plan for the problems that arose with their specific bonds.

“The bond market can get really complicated,” said Brooke Siler, corporate credit team lead for the class. “It has been very valuable to have the Bloomberg terminals here at the Huntsman School to make everything a little less opaque.”

Why Huntsman School of Business

Zions Bank offers this opportunity to only four schools in the world: Utah State University, Brigham Young University, Westminster College and University of Oxford.

“Utah State University has wonderful professors of finance and exceptional students,” said David Hemingway, executive vice president and chief investment officer at Zions Bancorporation. “Zions Bank is pleased to help them learn about the capital markets while managing part of the bank’s bond portfolio.”

And while none of the students have professional exposure to bond investing, they didn’t let it hold them back. The fact that their teacher, Paul Fjeldsted, ‘86, spent more than two decades on Wall Street with Salomon Brothers and Citigroup, was a boon for the students.

“We climbed the learning curve as quickly as we could,” Maxfield said. “We asked questions and got involved in the process. I feel it’s the desire to work hard and gain any knowledge we need to get the job done that sets us apart.”

Students in the Huntsman School’s finance major are being recognized for their achievements. Recently the Chartered Financial Analyst (CFA) Challenge team from USU took second place in a state competition, losing out only to a team of graduate students from the University of Utah. This past summer, 18 students received internship offers from Goldman Sachs operations division in SLC, with others receiving offers in their research and finance division.

Students

“The students are hard-working, self-motivated and really followed their own intuition on this project,” Professor Fjeldsted said. “They were very conscientious about risk and put the controls in place they needed to balance risk and return.”

What’s Ahead

Huntsman students used Zions Direct, Zions’ bond store and auction platform, all online. There were thousands of offerings for the students to bid on and sell to in order to fit their objectives.

“Having the students do the investing through our online platforms teaches them the direction bond buying and selling is moving,” Ricks said.

As well as learning the innovative technologies in the industry, this type of practical experience gives students a competitive advantage in the market place.

“The best way to learn is by doing,” Professor Fjeldsted said. “Completely managing a bond portfolio with real money is an extremely valuable experience for our students, and it will help set them apart in their careers. We are grateful to Zions for this rare opportunity to provide our students with a form of work experience in an academic setting.