The March 2020 stock market sell-off was a challenging event for the Hylander Student Investment Fund (HSIF), says Sindy Fabrizio, a first-year Master of Finance student and student investor with the fund. “No one had any idea how long that decline would last, so those few weeks were scary and uncertain.
“Nonetheless, not every student can say they were able to manage a portfolio well through a market downturn, so 2020 was a very good learning experience for us.”
In their 2020 fourth quarter report, the fund’s student managers stated their target asset allocation was 80 percent equity and 20 percent fixed income, and they credit the portfolio’s outperformance in the quarter to this strategy. Their benchmark were 70 percent of the Russell 3000 and 30 percent of the Bloomberg Barclays Aggregate Bond Index.
For the 2020 calendar year, the HSIF portfolio returned 20.84 percent, while the benchmark returned 15.77 percent, reported the investors.
“At the beginning of the [fourth] quarter, … the team decided not to invest in the energy sector … due to the historical underperformance throughout the year. … Instead, the decision was made to overweight technology, consumer discretionary, health care, and communications sectors,” stated the report. The fund outperformed the market portfolio in the technology, consumer discretionary, and health care sectors.
“Given all the market rallies that occurred during the year, posting returns above the benchmark was a challenging thing to accomplish, but the team did this through research and collaboration,” says Fabrizio, who will graduate in fall 2021 and plans to work for an investment firm as an analyst in either the buy or sell side.
“We follow a growth and value investment strategy, with a long-term horizon,” she adds. “As market conditions change and the country continues its recovery, our investing strategy needs to be more flexible.
“For instance, lately we have seen value stocks outperform growth stocks. We’ve learned to be adaptable by looking at value companies but sticking to fundamental quality research.”
What Fabrizio finds most interesting is that “no matter how much investors try to predict the market’s next moves, in the end, in an ‘efficient market,’ returns are unpredictable,” says. “All we can do as investors is know our investments well and analyze in detail our risk-reward trade-off.”