How would you spend a billion dollars?
Now, how would you invest a billion dollars?
A team of graduate students from the Johns Hopkins Carey Business School has an answer for this tricky hypothetical and is putting their plan to the test.
The Real Confidence University Portfolio challenge pits real estate and finance students from schools across the country against one another in a yearlong competition to see whose investment portfolio shows the most growth. Each team has $1 billion in simulated capital to "invest" across public and private debt and equity quadrants. The teams are assessed quarterly using actual data from major investment indexes, and the team with the best-performing investments after a year wins a $50,000 scholarship.
Brooke Harlander from Carey's Real Estate and Infrastructure program captains the six-member Johns Hopkins team. She says the team's strategy for investing included looking at case studies and analyzing current trends.
"We had two people on the team who were very focused on finance, so they took the historical data, compiled it, and analyzed the output," she says in a team profile on the competition's website. "The other four of us split up the different pieces on equity, debt, and market research and where those things were going. … We looked at, especially for the private equity piece by region, all important externals and how that was impacting those cities in those regions."
The keys to their strategy, it seems, are research and diversification—two age-old truisms about investment. JHU ranked eighth out of 16 teams during the first quarter with modest overall portfolio growth of 2.31 percent, but Harlander remains confident. On a scale to 100, she rates her confidence in her team's portfolio an 85. "I would say that we're pretty high up there," she says.
Their portfolio shows promising growth in certain private equity sectors, including hotel and apartment investments in the west and in southern industrial real estate space.
The current first place team, Texas Christian University, enjoyed an overall growth of 8.42 percent, but sank their entire investment into public equity without significant diversification. Risky business.
"We enjoyed watching all schools different investment strategies, but currently a less diversified portfolio in the right sector seems to be beneficial. Even so, we have three quarters left with lots of time for change", says competition organizer Chuck DiRocco, a Johns Hopkins alum.
The competition, in its first year, is sponsored by the Altus Group in collaboration with the National Association of Real Estate Investment Trusts and the National Council of Real Estate Investment Fiduciaries. Follow the competition's blog for updates.