Investment game teaches students about global macro investing

Trustee Fritz Folts '82, right, and Will Barnes '15 discuss investment strategy in Shain Library's Charles Chu Asian Art Reading Room.
Trustee Fritz Folts '82, right, and Will Barnes '15 discuss investment strategy in Shain Library's Charles Chu Asian Art Reading Room.

Will Barnes ’15 had his eye on gold. He wanted to invest, and he wanted to win.

The market for gold had been down for a while; he had a feeling it might soon start to turn. He considered the risk, and he went for it: He pulled his investments from the Russell 2000 ETF (exchange traded fund) and switched to gold.

“That was a bold move,” trustee Fritz Folts ’82, vice president and chief investment strategist at Boston-based Windhaven Investment Management, Inc., said to Barnes recently, as the two discussed investment strategy in the Connecticut College library.

The move paid off: Barnes finished third in the Peggotty Investment Club’s first-ever participation in a global macro investment game. The game gave members of the club an opportunity to learn about a type of investing that is very different from Peggotty’s regular investing activities. Through the club, students manage a portion of the College’s endowment valued at over $77,000. Primarily, they are conducting bottom-up, fundamental analyses of individual companies and sectors, then purchasing company stocks to invest in over a period of at least two years.

The investment game requires a very different approach, Folts explained. It challenged the students to make hypothetical investment decisions based on entire asset classes and geographies across the entirety of the global capital markets. “It is a global macro investment approach where investment decisions are ‘top down,’ and the students are investing in index vehicles that represent a variety of different asset classes and geographies,” Folts said. 

The investments might not have been real, but the prize was. Folts, who sponsored the game, wrote a check for $500 in the name of each the three top finishers to the charity or non-profit of their choice.

The game is similar to a version that Folts’ company has utilized as a way to educate all of its employees about the basics of the company’s investment strategy, regardless of what they actually do at the firm. After interning with Folts at Windhaven last summer, Peggotty Club member Adam Rimmer ’14 was inspired to bring the game to campus. Rimmer and Folts developed the rules, then tapped Patrick Russo ’14 to create the spreadsheet to track the results. (“That guy can make a model in 10 minutes,” Folts said of Russo.) 

The rules were fairly simple: Each participant constructed a portfolio by choosing three index Exchange Traded Funds (ETFs) from an approved list, then followed the performance of the holdings over a six-month period. Two of the holdings could be traded once a month; one could not be changed. The final score was calculated based on the portfolio return (amount gained or lost) minus the max drawdown, or the largest drop in value during the duration of the game. “The idea is for the students to not only seek returns, but also learn how important it is to manage risk when making investment decisions,” Folts said.

“This was a great learning experience, especially for some of the younger members of our club,” said Martina Rudolf ’14, an economics and international relations major who finished second.

Rudolf, a native of Switzerland, said the global aspect of the financial industry is part of what drew her to the field in the first place. She got involved in the Peggotty Investment Club as a sophomore to learn more about the industry and connect with other students interested in finance and economics.

“It’s a really fun way to learn financial terms and get acclimated to the field,” she said.

Finishing second in the macro investment game was a great way for Rudolf to cap her academic career at Connecticut College. She graduated last month and has accepted a position as a business analyst with Virtusa, a financial services consulting firm based in New York City.

Rudolph is directing her $500 to New London’s Safe Futures, which offers services and support to people who have been impacted by domestic violence and sexual assault.

Mathematics and economics major Sean Paquette ’15 finished first in the game, and he is directing his prize to the activity fund at his grandmother’s nursing home. 

“It is incredibly generous of Mr. Folts to sponsor this investing game,” Paquette said. “I did not have much investing experience prior to the game, so this was a great opportunity for me.”

Barnes, an economics and government double major, said his strategy for the game was informed in part by the Chinese politics and emerging market economies courses he took this year. He is interning this summer at Infrastructure Capital Management, a small, New York-based private equity firm. His prize money will go to Cure Alzheimer’s Fund in memory of his grandmother, Josephine Barnes.

The opportunity to work with real investments inspired Barnes to join the Peggotty Investment Club, something that doesn’t surprise Folts.

“I’m thrilled that they run real money,” Folts said. “It is a completely different experience when there is real money on the line. You are so much more engaged.”

Folts says he hopes to work with the Peggotty Club to run the game again next year. For Barnes, a rising senior, that means another opportunity to go for gold.

June 12, 2014