Babson College FundBabson College FundRick Spillane, CFARick Spillane, CFAOctober 25, 2012October 25, 2012

Presentation OutlinePresentation Outline

1. My Background1. My Background

2. BCF 2011/20122. BCF 2011/2012

3. Investment Philosophy3. Investment Philosophy

4. New Recruiting Strategy4. New Recruiting Strategy

5. Q+A5. Q+A

My backgroundMy background

RPI, Chemical Engineer; Harvard MBARPI, Chemical Engineer; Harvard MBA

Eaton Vance Management, 1977-1987Eaton Vance Management, 1977-1987 Analyst and Portfolio ManagerAnalyst and Portfolio Manager

Fidelity Investments, 1988-2007Fidelity Investments, 1988-2007 Analyst and Portfolio ManagerAnalyst and Portfolio Manager Director of ResearchDirector of Research Chief Investment Officer (US and Europe)Chief Investment Officer (US and Europe) Head of Strategic Advisers (FidelityHead of Strategic Advisers (Fidelity’’s RIA)s RIA)

BABSON FACULTY 2007-PRESENTBABSON FACULTY 2007-PRESENT

What is BCF?What is BCF?

BCF runs a portion of the Babson EndowmentBCF runs a portion of the Babson Endowment

22 Students (undergrads and MBA22 Students (undergrads and MBA’’s)s)

The objective is to beat the S+P500The objective is to beat the S+P500 Long/ short portfolio of EquitiesLong/ short portfolio of Equities Fully invested (market timing not allowed)Fully invested (market timing not allowed) Heavy Focus on investment analysis (stock picking)Heavy Focus on investment analysis (stock picking)

MEETINGS ARE MONDAY NIGHTS 6:30 TO 9:00 PM MEETINGS ARE MONDAY NIGHTS 6:30 TO 9:00 PM One Friday seminar per semesterOne Friday seminar per semester

HighHigh

LowLow

LowLowProbability Of SuccessProbability Of Success

Impa

ct O

n R

etur

nIm

pact

On

Ret

urn

HighHigh

Investment PhilosphyInvestment Philosphy

Stock SelectionStock Selection

Market TimingMarket Timing

Style TimingStyle Timing

Size Timing Size Timing

Sector SelectionSector Selection

Page 6

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Europe ($)

Japan ($)

Japan ($)

Emg Mkts

Emg Mkts

Commo-dities

Emg Mkts

Small Value

Emg Mkts

Japan ($)

Large Value

Real Estate

Large Value

Large Growth

Emg Mkts

Commo-dities

Real Estate

Commo-dities

Emg Mkts

Real Estate

Emg Mkts

Europe ($)

Emg Mkts

Bonds

+79.8 +100.3 +43.0 +40.4 +65.0 +29.1 +59.9 +29.1 +74.8 +21.8 +38.3 +35.7 +35.2 +38.7 +66.4 +49.7 +15.5 +32.1 +56.3 +31.6 +34.5 +34.4 +39.8 +5.2

Emg Mkts

EAFE EAFE Japan

($) Commo-

dities Bonds

Small Growth

Small Caps

EAFE EAFE S&P 500 Commo-

dities S&P 500

Europe ($)

Japan ($)

Real Estate

Small Value

Gold Small Growth

Emg Mkts

Commo-dities

Emg Mkts

Gold Cash

+77.2 +69.4 +24.6 +35.2 +38.3 +8.9 +51.2 +18.4 +32.6 +7.8 +37.4 +33.9 +33.4 +28.9 +63.1 +25.9 +14.0 +26.1 +48.5 +26.0 +21.4 +32.6 +27.7 +1.8

EAFE Europe

($) Gold

Small Value

Large Growth

Cash High Yield

High Yield

Europe ($)

Commo-dities

Large Growth

Large Growth

Small Value

S&P 500 Small Growth

Small Value

Bonds Bonds Small Caps

Small Value

Japan ($)

Real Estate

Commo-dities

Gold

+56.2 +44.5 +23.8 +29.5 +35.9 +7.8 +46.2 +15.8 +29.8 +5.3 +37.2 +23.1 +31.8 +28.6 +43.1 +22.8 +8.4 +10.3 +47.3 +22.2 +25.6 +34.7 +21.2 +1.8

Japan ($)

Emg Mkts

Commo-dities

EAFE S&P 500 Large Growth

Small Caps

Large Value

Japan ($)

Cash Small Growth

S&P 500 Large Growth

EAFE Commo-

dities Bonds

High Yield

Real Estate

Small Value

Small Caps

Gold EAFE Europe

($) Commo-

dities

+43.5 +28.6 +23.8 +28.3 +31.5 -0.3 +46.1 +13.8 +25.7 +3.9 +31.0 +23.1 +30.5 +20.0 +40.9 +11.6 +5.3 +5.2 +46.0 +18.3 +17.8 +26.9 +14.4 -30.5

Large Growth

Large Value

Emg Mkts

Commo-dities

Europe ($)

Gold Small Value

Real Estate

Small Value

Europe ($)

Small Caps

Large Value

Europe ($)

Large Value

Convert Large Value

Cash Cash High Yield

Europe ($)

EAFE Gold Large Growth

High Yield

+32.9 +20.0 +14.8 +27.9 +29.1 -1.9 +41.7 +12.2 +23.8 +2.7 +28.4 +21.6 +24.2 +15.6 +36.4 +7.0 +3.8 +1.6 +35.6 +21.4 +14.0 +23.9 +11.8 -26.2

S&P 500 Gold Cash Small Caps

Large Value

Convert Large Growth

Convert Small Caps

Large Growth

Small Value

Europe ($)

Small Caps

Convert Large Growth

Cash Small Caps

High Yield

EAFE EAFE Europe

($) Small Value

EAFE Small Value

+32.2 +19.6 +5.5 +24.9 +25.2 -2.5 +41.2 +12.0 +18.9 +2.7 +25.8 +21.6 +22.4 +11.7 +33.2 +5.9 +2.5 -1.4 +35.3 +20.2 +9.9 +23.5 +11.6 -28.9

Large Value

Real Estate

Large Growth

Large Value

Small Growth

S&P 500 Real Estate

Emg Mkts

Real Estate

S&P 500 Convert Small Value

Real Estate

Bonds EAFE Small Caps

Gold Emg Mkts

Europe ($)

Commo-dities

Real Estate

Large Value

Small Growth

Japan ($)

+31.5 +19.2 +5.3 +23.2 +20.2 -3.2 +35.7 +11.4 +18.5 +1.3 +23.0 +21.4 +18.9 +8.7 +27.0 -3.0 +0.7 -6.0 +34.8 +9.1 +12.2 +22.2 +7.0 -29.1

Small Caps

S&P 500 S&P 500 Small Growth

Small Caps

Europe ($)

S&P 500 Small Growth

Large Value

Real Estate

Europe ($)

Small Caps

Convert Japan

($) Small Caps

Gold Emg Mkts

Convert Japan

($) Large Value

Large Value

Small Caps

Bonds Convert

+31.1 +18.5 +5.2 +20.4 +16.2 -3.4 +30.5 +7.8 +18.1 +0.8 +22.1 +16.5 +14.4 +5.1 +21.3 -5.4 -2.4 -6.2 +34.6 +16.5 +7.1 +18.4 +7.0 -34.6

Small Value

Convert High Yield

S&P 500 Bonds Large Value

Convert S&P 500 Gold High Yield

Commo-dities

Convert Small Growth

Cash S&P 500 High Yield

Large Value

Japan ($)

Real Estate

Japan ($)

Large Growth

S&P 500 Convert Small Caps

+31.0 +17.7 +5.0 +16.8 +14.5 -8.1 +26.9 +7.7 +17.7 -1.0 +20.3 +11.6 +12.9 +4.9 +21.0 -5.9 -5.6 -9.8 +32.5 +16.2 +5.3 +15.8 +5.6 -33.8

Small Growth

High Yield

Europe ($)

Europe ($)

Convert High Yield

Large Value

Bonds High Yield

Small Value

High Yield

High Yield

High Yield

High Yield

Europe ($)

Convert Convert Small Value

Large Value

Small Growth

S&P 500 Commo-

dities S&P 500

Large Value

+31.0 +17.4 +4.1 +16.4 +13.8 -9.6 +24.6 +7.4 +17.1 -1.5 +19.2 +11.3 +12.8 +1.9 +16.2 -6.2 -5.9 -11.4 +30.0 +14.3 +4.9 +14.5 +6.2 -36.8

High Yield

Large Growth

Bonds Convert Small Value

Emg Mkts

Bonds Large Growth

Convert Small Caps

Bonds Small Growth

Bonds Small Growth

Large Value

Europe ($)

Small Growth

Large Value

Large Growth

High Yield

Small Value

Small Growth

Cash S&P 500

+28.7 +15.4 +2.7 +14.2 +12.4 -10.6 +16.0 +5.0 +14.8 -1.8 +18.5 +11.3 +9.7 +1.2 +7.3 -8.1 -9.2 -15.5 +29.7 +11.1 +4.7 +13.3 +5.2 -36.5

Convert Bonds Large Value

High Yield

EAFE Real Estate

Europe ($)

Commo-dities

Small Growth

Large Value

Real Estate

Emg Mkts

Cash Gold Cash S&P 500 S&P 500 EAFE S&P 500 S&P 500 Small Caps

Convert High Yield

Large Growth

+27.3 +15.3 +0.5 +12.5 +10.5 -17.3 +13.7 +4.4 +13.4 -2.0 +18.3 +6.0 +5.3 -0.5 +4.7 -9.1 -11.9 -15.9 +28.7 +10.9 +4.6 +13.3 +1.9 -38.4

Bonds Small Value

Convert Real Estate

Cash Small Growth

EAFE Cash S&P 500 Gold EAFE EAFE EAFE Small Caps

High Yield

EAFE Europe

($) Europe

($) Convert Convert

Small Growth

High Yield

Large Value

Small Growth

+22.1 +7.4 -2.4 +11.4 +8.4 -17.4 +12.1 +3.5 +10.0 -2.2 +11.2 +6.0 +1.8 -2.5 +2.4 -14.2 -19.6 -18.1 +27.9 +7.5 +4.2 +11.9 -0.2 -38.5

Commo-dities

Cash Small Value

Large Growth

Japan ($)

Small Caps

Japan ($)

Europe ($)

Bonds Convert Cash Cash Emg Mkts

Small Value

Gold Large Growth

Large Growth

Small Caps

Gold Gold Cash Large Growth

Small Caps

EAFE

+10.0 +6.2 -7.1 +11.3 +1.8 -19.5 +9.1 -4.2 +9.8 -2.2 +5.6 +5.2 -11.6 -6.5 +0.9 -22.4 -20.4 -20.5 +22.1 +4.6 +3.0 +9.1 -1.6 -43.1

Cash Small Caps

Small Caps

Bonds High Yield

Small Value

Cash Gold Large Growth

Small Growth

Gold Bonds Commo-

dities Real Estate

Bonds Small Growth

EAFE S&P 500 Commo-

dities Large Growth

High Yield

Japan ($)

Japan ($)

Real Estate

+7.7 +5.7 -8.8 +7.9 +0.8 -21.8 +5.6 -5.1 +2.9 -2.4 +1.0 +3.6 -14.1 -18.8 -0.8 -22.4 -21.4 -22.1 +20.7 +6.3 +2.7 +6.3 -4.1 -40.8

Real Estate

Small Growth

Small Growth

Cash Real Estate

EAFE Commo-

dities EAFE Cash Bonds

Japan ($)

Gold Gold Emg Mkts

Small Value

Japan ($)

Japan ($)

Large Growth

Bonds Bonds Bonds Cash Small Value

Europe ($)

+5.9 +3.6 -10.5 +6.3 -1.8 -23.4 -6.1 -12.2 +2.9 -2.9 +0.4 -4.6 -21.7 -25.3 -1.5 -28.3 -29.5 -27.9 +4.1 +4.3 +2.4 +4.8 -9.8 -46.1

Gold Commo-

dities Real Estate

Gold Gold Japan

($) Gold

Japan ($)

Commo-dities

Emg Mkts

Emg Mkts

Japan ($)

Japan ($)

Commo-dities

Real Estate

Emg Mkts

Commo-dities

Small Growth

Cash Cash Convert Bonds Real Estate

Emg Mkts

+5.8 +2.0 -10.7 -15.3 -2.8 -36.0 -10.3 -21.4 -12.3 -7.3 -5.2 -15.0 -24.0 -35.7 -6.5 -30.6 -31.9 -30.3 +1.0 +1.2 +2.0 +4.3 -18.1 -53.21985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

The Periodic Table of Investment Returns

Annual data from 1986 through 2008

SectorsSectors

Executive Portfolio ManagersExecutive Portfolio Managers

ConsumerConsumer

Basic Materials/EnergyBasic Materials/Energy

IndustrialsIndustrials

Healthcare Healthcare

Utilities/TelecomUtilities/Telecom

TechnologyTechnology

Quantitative/Risk Management Quantitative/Risk Management

What do you do?What do you do?

Follow your sector closelyFollow your sector closely

Buy and sell stocks in your sectorBuy and sell stocks in your sector

Work in a team of 1-2 other managersWork in a team of 1-2 other managers

Write 9 research reports per semesterWrite 9 research reports per semester

Write a Semester ReportWrite a Semester Report

Visits/ Guest SpeakersVisits/ Guest Speakers

Teams met with a counterpart at Fidelity this Teams met with a counterpart at Fidelity this fallfall

Guest speakers at the meetings. In the last Guest speakers at the meetings. In the last year the following have been guest speakersyear the following have been guest speakers Fidelity CIOFidelity CIO Hedge Fund managers (3)Hedge Fund managers (3) President of NorthfieldPresident of Northfield Fed official, former BCF studentFed official, former BCF student

Executives in ResidenceExecutives in Residence

Warren Johnson, CFAWarren Johnson, CFA

Hugh CrowtherHugh Crowther

Jim Spencer, CFAJim Spencer, CFA

Rick Mace Rick Mace

Charles Mangum Charles Mangum

Chris StixChris Stix

Mike DunnMike Dunn

Pratima AbichandaniPratima Abichandani

Why you should do thisWhy you should do this

You will learn a lot about fund management and stock You will learn a lot about fund management and stock analysisanalysis

You are investing REAL MONEYYou are investing REAL MONEY

You will work hard, but learn a lotYou will work hard, but learn a lot

This is as close to real world investment management This is as close to real world investment management as possibleas possible

You earn class credits for two semestersYou earn class credits for two semesters

Enhanced Job Prospects in the Investment Enhanced Job Prospects in the Investment Management IndustryManagement Industry

New Recruiting New Recruiting ApproachApproach

Designed to “even out” the number of students Designed to “even out” the number of students on the fund during the year so everyone does on the fund during the year so everyone does not stop and start at the same timenot stop and start at the same time

Fall:Fall: recruit 2 year MBA’s, Junior Undergrads recruit 2 year MBA’s, Junior Undergrads with a with a DecemberDecember graduation date, Evening graduation date, Evening MBA’sMBA’s

SpringSpring: Junior Undergrads with a : Junior Undergrads with a MayMay graduation date and Evening MBA’sgraduation date and Evening MBA’s

SummerSummer: One Year MBA’s: One Year MBA’s

Key datesKey dates

Fall 2012: Fall 2012: Info session October 24Info session October 24 Applications due November 30Applications due November 30 Interviews December 7Interviews December 7

Spring Applications due April 4, 2013Spring Applications due April 4, 2013 Summer Applications due July 17, 2013Summer Applications due July 17, 2013

Application ProcessApplication Process

Application on BCF WebsiteApplication on BCF Website http://cutler.babson.edu/babsoncollegefund/http://cutler.babson.edu/babsoncollegefund/

BCFApply.aspxBCFApply.aspx

Send to Karl Honerlow by Friday November 30, Send to Karl Honerlow by Friday November 30, noon.noon.

Interviews on December 7thInterviews on December 7th

You start immediatelyYou start immediately

NOTE: You must take or have taken FIN 7503 NOTE: You must take or have taken FIN 7503 (Equities) if you are an MBA student!! (Equities) if you are an MBA student!!

Questions???Questions???