ryanRyan Creel, Chief Investment Officer of the Green and Gold FundUAB’s Green and Gold fund has had an excellent 2016 and continued our goal of serving as an educational student organization while also providing returns that can be used for scholarships in the UAB Collat School of Business. The Green and Gold Fund is a prestigious student-run investment fund at the University of Alabama at Birmingham. We currently manage around $550,000 with a fundamental valuation strategy in an investment portfolio consisting of equity, fixed income, and alternative securities. We are all proud to be a part of an organization that provides us with an excellent opportunity to put into practice the theory and skills we learn in our classes and to interface with the business community of Birmingham.

The US equities market has continued a positive trajectory throughout 2016 despite unprecedented events capturing economic attention throughout the year. The year started with oil prices crumbling and breaking below $30 a barrel, a price not seen since 2001. The S&P took a 10% nosedive in February in response. The reaction itself captured attention as the traditional theory that the economy benefits from low oil prices was proven to be incorrect in the most extreme cases.

As oil prices strengthened, so did the S&P, which regained all its lost ground by the end of March. The world then turned its attention to Brexit: the first major test of a newfangled populist movement that has erupted into the mainstream political patterns of many countries. Bettors and pollsters were dumbfounded when Brexit was proven to be the winner. US equities quickly shaved 5% in the following days; the market then quickly, yet again, regained this lost ground within a week. Without a break, the US presidential election was already on everyone’s mind. After Brexit won out, many people were biting their nails as the election of Donald Trump, originally considered outlandish, seemed like a serious possibility. While most economic pundits and business people feared some loss of international trade, the market reacted positively when Trump was elected as the market seemed to consider a potentially lower corporate tax rate and favorable energy policies more than enough to outweigh the potential loss of international trade. It has yet to be seen how all these events will affect the long-term trajectory of the world economy. With these events dominating headlines, the Fed avoided any rate hikes for fear of unsettling an already on-edge economy. However, the Fed finished the year off with a December rate hike after the incredibly low unemployment figure from November showed significant economic strength.

Over the last year, the Green and Gold Fund has outperformed our benchmark (weighted by the S&P 500 for equities, Barclays US Government/Credit Index for fixed income, and a 7% absolute yearly return for alternatives). The graph below shows the two returns compared over the course of the year:

2016 ggf yearly returns
Some of the biggest contributors to our outperformance over the last year were United Healthcare, Halliburton, and Assured Guaranty. United Healthcare provided a 42% return over the healthcare benchmark. The company seems to have largely benefitted from being one of the first in pulling out of the ACA exchanges. Halliburton has experienced a 37% return over the energy benchmark. The company benefitted from many oil producers upgrading the technology of their oil rigs to lower the cost of producing oil since the price has been relatively weak in the last year. Assured Guaranty provided a massive 50% return over the financial industry benchmark. This was largely the result of the proposed increase in infrastructure spending the new administration has suggested, which increases the supply of municipality bonds that Assured Guaranty insures.

We also continued our important function of helping the members get exposed to individuals within the business community of Birmingham through inviting guest speakers. We are proud to be able to offer this opportunity. Our guests are always able to give great connection to what we do in the Green and Gold Fund and learn in our studies to the various aspects of real business activity. We had several guest speakers this year and plan many more for the next year. Our guests from this year included a Vice President of FHL Capital, a regional investment bank located in Birmingham, a business development manager at Alabama Power, and several Vice Presidents from Highland Associates.

We continued to provide opportunity for continued learning experiences for the fund by hosting educational workshops. We taught each other and the new members how to utilize our 12 Bloomberg Terminals that we have available to use. We also used these workshops to teach valuation practices and theory. We also implemented an advanced spreadsheet for the members of our fund to easily and quickly track our holdings in one place from anywhere. This implementation has had a successful response and helped to engage everyone in our group even more. Going forward, we hope to be able to use this data to create dynamic charts and graphs on our website for everyone to quickly see how our portfolio is performing and what it is comprised of.

Lastly, our faculty advisor, Dr. Rauterkus, continues to serve as a mentor and help guide the fund’s members to success. He continues to teach middle-level finance courses and a security analysis course. He always makes himself available for Green and Gold members and students when we have questions about anything from valuation techniques to career advice.

We are glad you stopped by our site. Don't hesitate to join us at an upcoming meeting or send me an email if you have any questions.

Ryan Creel

Chief Investment Officer