Johnson’s MBA Face Off Team Vaults to #2
From cellar to contender—how does the Cornell team do it?
November 22, 2011
Experience managing real money helped Johnson’s team in MBA Face Off develop an investment strategy and execute it well enough to vault from last to second place in the CNBC portfolio management contest. As of close of trading on Monday, November 21, Johnson’s 10-member team had an average portfolio value of about $1.18 million, putting it in second place, behind the University of Chicago, with an average value of $1.23 million.
Johnson had languished in the early weeks of the competition, but came on strong in recent days, due to two changes: an aggressive investment position and a high degree of collaboration and trading coordination among team members. As student portfolio managers for Johnson’s $10 million, market-neutral hedge fund, the Cayuga MBA Fund, team members are accustomed to working together to manage real money—experience they exploited to gain ground in the MBA Face Off.
The contest hit a bump in early November, when trading was suspended and portfolios re-set, due to a technical glitch in the trading platform. Johnson’s team members used the pause in trading to select stocks, develop a team strategy, and pick up their pacing. Team members settled on a much more aggressive approach, utilizing leverage, and synchronized their trading to maximize returns, said Kevin McGovern, MBA ’12.
“It started with a strong move on Thursday, November 10, to go long aggressively and bet on the market going up the next day,” McGovern said. “We were right, and we went from being in sixth or seventh place and roughly 85k behind the leader, to second place and 12k behind the leader.”
A change in the team’s approach to both generating investment ideas and executing trades was critical to Johnson’s surge in the contest, said Jeremy Bohne, MBA 12.
“While idea generation is a component of the investment process where individual contribution is very important, it is also key that the implementation of the investment strategy be uniform across the team,” Bohne said. “The high degree of transparency and collaboration that took place is not only one of the reasons that I chose to attend Johnson, but a reason for our success in this competition”
The MBA Face Off ends with the close of trading at 4 p.m. EST on Friday, November 25. In the remainder of the holiday-shortened trading week, the Johnson team expects to continue calling the market successfully and trading aggressively, with the aim of overtaking frontrunner Chicago Booth.
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