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Student investor group generated $2.5 million for Virginia Tech Foundation in past decade

October 28, 2016

BASIS returned $2.5 million of gross monies, as of early October, over the past decade.. The net returns are about $1.6 million, after allowing for fund infusions and expense fees.
BASIS was initially given $1 million to invest in October 2006, an amount that tripled by December and increased to $4.6 million in April 2007.

BASIS, the student group that manages $5 million of Virginia Tech’s endowment by investing in bonds and other fixed-income securities, has generated about $2.5 million in gross returns for the Virginia Tech Foundation during its first decade.

The group, whose name stands for Bond And Securities Investing by Students, recently celebrated the 10th anniversary of its first trade in 2006 by buying a 30-year Treasury bond with a 2.5 percent coupon and a $50,000 face value.

Though its portfolio is a tiny fraction of the university’s $820 million endowment, BASIS provides a valuable experiential learning program for its members, said its faculty advisor, finance professor George Morgan.

The program is based in the Pamplin College of Business but open to any qualified student at Virginia Tech.

Its current 23 members get an experience comparable to what professionals go through — including broad and deep uncertainties resulting from market turmoil that stymie even seasoned traders, Morgan said.

Such challenges, Morgan said, include “responding to capital calls that require selling parts of the portfolio, positioning the securities to account for new monetary policies of the U.S. and other central banks, grappling with an unusually slow recovery from a recession, coping with the potential breakup of the EU (again), and attempting to decipher the effects of a raucous election campaign.”

BASIS students not only have the opportunity to recognize and grapple with the issues before entering the workforce, he said, but they also do so while working in multidisciplinary teams and interacting with students from across the university and many parts of the world.

BASIS students Daniel Murray (center) and Evan Christian make a presentation on the group's investments while  Zarek Stafford (far right) prepares to buy a U.S. Treasury bond.
Finance student and BASIS chief financial officer Daniel Murray gives an update on the group’s holdings to students, faculty, and staff attending BASIS 10th anniversary celebrations in Pamplin Hall recently. Finance major and BASIS CEO Evan Christian looks on while finance major and BASIS analyst Zarek Stafford prepares to buy a U.S. Treasury bond. Photo by Oliver Meredith

BASIS members have included majors from engineering, math, and psychology as well as finance and accounting, and students from Brazil, Croatia, France, and Romania.

The university benefits from the program, too, as the funds returned allow the foundation to support student scholarships throughout the university as well as other initiatives, Morgan said.

The $2.5 million of gross monies, as of early October, returned over the past decade, is equivalent to approximately 500 semesters of in-state tuition in student scholarships, for example, he added. (The net returns are about $1.6 million, after allowing for fund infusions and expense fees.)

“Being a part of BASIS gives you the opportunity to significantly increase your knowledge of the financial markets and apply the concepts and skills learned in the classroom in the real world and at a high level,” said Evan Christian, of Fairfax, Virginia, a finance senior. The BASIS CEO said the best thing about the experience is working with the other members. “Being surrounded by motivated, intelligent people every day drives you to succeed and improve.”

Prioritizing BASIS was the “smartest decision” she made in college, said alumna Christine Smith, who received a finance degree in May 2016 and works as an analyst at RBC Capital Markets in New York City.

“Becoming a part of the BASIS family changed the trajectory of my college and professional career,” she said.  

Morgan noted that BASIS was initially given $1 million to invest in October 2006, an amount that tripled by December and increased to $4.6 million in April 2007.

In 2013, the foundation expanded the scope of our activities by permitting lower-rated bonds and encouraging us to allocate a much higher percentage of the portfolio to corporate credits.”

During the 2014-15 academic year, Morgan said, BASIS traded approximately $4.5 million of securities to adjust the portfolio to meet the new broadened mandate. “It was a colossal undertaking that successfully put us on the path to be able to return more funds to the foundation.”

Morgan noted that BASIS managed to achieve strong positive returns even during the recession of 2008 and 2009.

“The growth of the BASIS fund from $4.6 million to $5.4 million testifies to the tremendous efforts of the students to master the difficult task of managing a securities portfolio in turbulent times,” Morgan said.

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