Despite the rocky economy since 2008, a team of Lipscomb University finance students turned in a winning portfolio in the 2010 TVA Investment Challenge competition. The Lipscomb team produced the highest three-year returns of any participating Southeast university and placed second this year in one-year returns in the annual competition.
Last year, Lipscomb won its first, first-place finish in the 25-university competition that uses investment funds provided by the Tennessee Valley Authority to institutions in TVA’s region. The annual competition allows students to act as portfolio managers for those funds, giving them a real-world experience with dramatic feedback based on gains and losses.
In 2010, a team of graduate students and senior finance majors out-performed the S&P 500 three-year return with a rate of 6.72 percent. The S&P return was -2.82 percent for that time period. For its one-year return rate, the Lipscomb team earned 31.14 percent, while the S&P 500 brought in a return of 15.01 percent.
Lipscomb’s portfolio returns beat out teams from other well-known universities such as Vanderbilt, Mississippi State and Belmont universities and Georgia Institute of Technology.
“For any investor in the financial markets, the best bet is to choose the portfolio manager who performs the best year after year after year, and among the TVA Investment Challenge universities, that would be the finance students at Lipscomb’s College of Business,” said Turney Stevens, dean of the Lipscomb College of Business. “We are very proud of these outstanding students and believe they have proven they will be successful financiers, entrepreneurs and executives of the future.”
Last year marked the 12th year of the TVA Investment Challenge, and Lipscomb has competed in the competition since 2003. Upon entering the program, Lipscomb received $400,000 from TVA to manage. Beyond a few restrictions placed by TVA, the students make all of the decisions about what and when to buy and sell, said Jeff Jewell, associate professor of business administration and faculty advisor for the finance team.
Each year the universities with the best financial returns win cash prizes. The rest of the profits head back into the TVA’s Nuclear Decommissioning Trust Fund.
The Lipscomb TVA team previously won performance awards in 2003, 2004, 2007 and 2009. Since entering the competition eight years ago, Lipscomb teams have earned an average annual return of 13.60 percent. This compares very favorably to the S&P 500 return over that same period of 6.66 percent.
Lipscomb has beaten the S&P 500 benchmark six out of eight years since entering the competition. The team’s cumulative return from 2003-2010 was 177.44 percent compared to the total return of the S&P 500 of 67.50 percent.
Business students who have worked with the portfolio at some point during 2009 are graduate students Jeff Barnes, Katrina Brown, George Harvey, Seth Howell, Adam Terry, Andrea Timberlake, Mincong Zhou, Stuart Routon and James Storie, and undergraduate students Dallas Simmons, Carter Thomas, Sarah Stone, Matt Bowling, Alex Dampf and Peter Menke.
“Each year we participate in the program, Lipscomb students build a name for themselves. The program allows them to experience the real-world pressure of big money decisions, and they have been up to the task each year,” said Jewell. “The TVA Investment Challenge effectively shows students how the theoretical is played out in the real world, with both good success and negative consequences.”
In 1996, the TVA Board established the Nuclear Decommissioning Trust Fund to pay for the potential decommissioning of TVA’s nuclear units. Two years later, to diversify the financial management of the trust fund, TVA allocated $1.9 million to create the TVA Investment Challenge Program.