Carlson Funds Enterprise: The Growth Side of the Story

Wednesday, June 8, 2016

“I’m a full-time student – Carlson is the school”. Once again, I’m in an interview with an investment bank, trying to explain the Carlson Funds Enterprise and that I’m “not a full-time analyst”. Bank of America, Jefferies, Citibank – every time I walk someone through my resume, no one seems to understand what an “experiential learning student managed fund” means. The reality is, no other MBA program has anything like the Carlson’s enterprise program.

Punit Pallav did an excellent job of explaining the Fixed Income side of Funds, which I know only enough about in that I never want to hear the word “duration” ever again. Let me instead impart on you what exactly a Carlson student analyst does…or what I like to call the sexy side of Funds.

The Fund is “funded” by local banks: RBC, Wells Fargo, U.S. Bank, Piper Jaffray, to name a few. The Growth side was created as a true “growth” portfolio, which means our investment guidelines point towards small-cap stocks. If all of the stock market were a giant diamond mind, that has been more or less sucked dry of arbitrage opportunities, small cap stocks are the teeny, tiny gems on the far outskirts of the mine, that are best discovered by unassuming asset managers in quiet offices, or MBA students with tons of time of their hands.

The Fund is managed as a group, however Fixed and Growth operate completely independently of one another, or taking time to meet over a unexpected serendipity, like when Sherwin Williams bought Valspar and we realized we were in on both the debt and equity side. (Net, net we came out ahead, including by placing a few MBAs in their corporate finance group.) Decisions are made en masse: We vote. 

The first semester is spring: Each analyst inherits a stock from the MBAs or undergrads before, with a three-statement equity valuation model, fed by a bespoke revenue model. The academic advisor for Growth is the MBA financial modeling professor, and is available to go over your model in class or one-on-one. In the fall, analysts have to find their own companies, usually from the benchmark Russell 2500, and pitch for the class. We rip each other part, in class and on the forums, picking at details we don’t fully understand yet, and driving to consensus on “buy”, “sell”, “hold/wait”. This is preparation for final presentations to mentors: Actual equity research professionals who give their own opinions on our picks.

During this whole time, our companies are making acquisitions, being acquired by other companies, reporting earnings, missing projections, firing management, replacing board directors, melting under the economic cycles or taking off. Being in Growth means you have to be on top of your stock every single day, because you never know when you might need to send out an email “emergency vote” and sell!

Your final semester in the Fund, you’re put on a sector team: Healthcare, Technology, Finance, Consumer, Industrials and Energy. Teams not only cover their individual stocks, but now work with each other and mentors to balance their sector and propose new names for the portfolio. The same process happens with ripping at each other apart happens, but now you’re working in a group. The final presentations to mentors cap off the Fund, but the reality is the mentors have little say in what is bought:

You’re the ones making the million dollar decisions. That is experiential learning.