AIM students treated to a presentation by Jim Kitzinger of KLCM on August 30th

Jim Kitzinger is the first speaker of the fall 2017 semester

On Wednesday, August 30th, Jim Kitzinger (CFA, CPA) made his annual visit to Marquette’s AIM class to talk about his firm’s investment strategy and process. He is a Principal and Portfolio Manager at KLCM, an independent, registered investment advisory firm located in Milwaukee, Wisconsin. Mr. Kitzinger has over 30 years of investment experience and is a highly regarded Milwaukee money manager. 

Jim Kitzinger of KLCM in the AIM Room

Mr. Kitzinger discussed KLCM’s equity investment philosophy and process – explaining his firm’s bottom up stock picking approach and their emphasis on deep fundamental analysis. He indicated they tend to focus the most on out of favor and neglected companies – and gave several examples to back this up. True to the principles of a value equity firm, Jim confirmed that free cash flow is the most important criteria they evaluation and that it is central to their valuation approach. He also stressed the importance of protecting the downside, which confirms the importance KLCM places on strong management capable of delivering in all economic cycles. He told the students that they seek out firms that possess a catalyst to drive earnings and to realize untapped value – and have a management team with the experience to navigate weak economic periods.

Dr. Krause stated, “Consistent with the approach taken by the AIM students in the program, KLCM’s process is driven by intensive research; an understanding of company and industry drivers; clear and achievable management objectives; and the goal of seeking favorable risk/reward supported by valuation disciplines. KLCM runs concentrated portfolios of 20 to 30 stocks and will add to and trim positions to take advantage of market volatility and to manage risk. We will hear from many different portfolio managers this semester and I believe that starting with Jim Kitzinger set a high bar.”

Kitzinger meets with students after class

As per his previous visits, Jim loves to talk about the finance industry and social justice within a democratic society. The students had an opportunity to interact with Mr. Kitzinger in more detail after class. Krause stated, “We always appreciate the efforts of local portfolio managers to visit our classroom – these meetings keep the ‘applied’ in the AIM program. And Jim Kitzinger is the first speaker I like to bring in each year – he sets the tone for the semester. We greatly value his time with us and I know that the students thoroughly enjoyed his presentation.”

Germanotta's Investment Banking Course at Marquette Continues the AIM Program's Tradition of Experiential Learning

Jeff Germanotta's Investment Banking Course (FINA 4081) to be Offered in the Fall and Spring Semesters

In 2015, Marquette’s Applied Investment Management (AIM) program formally announced the creation of a second track – Investment Banking andPrivate Equity. 

Dr. David Krause, director of the AIM program, said “We are pleased to add Mr. Jeff Germanotta to our staff. Jeff possesses more than 35 years of experience in investment banking, commercial banking and corporate planning, including extensive experience with commercial services, distribution, industrial and logistics business models. He will teach the investment banking and private equity courses in the Department of Finance.”

This fall – and again in the spring semester – Germanotta will teach FINA 4081: Investment Banking. The course focuses on developing essential skills necessary to succeed in investment banking, private equity and corporate development roles.  Additionally, according to Mr. Germanotta, “It’s a course that is beneficial for students pursuing careers in upper middle market and larger corporate banking environments, as they’ll likely engage with such professionals over the course of their careers.” 

Jeff Germanotta

Through texts, classroom discussion, current events presentations, case study and guest speakers, FINA 4081 provides Marquette finance students the theory, analytical tools and hands on experience to begin careers as analysts engaged in merger and acquisition advisory and debt and equity capital markets services. The course further examines various types of private equity transactions.

Dr. Krause added, “A key element of the learning experience in Jeff’s IB course is the participation of numerous practitioners within the classroom; carrying on the traditional of the AIM program.” 

The guests in FINA 4081 include bulge bracket and mid-market investment banks, speciality investment banks, and senior executives who have undergone leveraged and management buyouts.  Each of these professionals brings a differing career experience.  Their firms also operate in diverse aspects of the financial markets and students learn from the real-world case studies they share. Krause concluded, "Jeff will again be travelling with us to New York City in October when we visit our alumni who work in the investment banking and asset management industry. He's a valuable member of the AIM program and soon you'll hear interesting news about a new Finance Department initiative."

Jeffrey S. Germanotta’s Bio

Adjunct Instructor, AIM Program

Marquette University

jeffrey.germanotta@marquette.edu

http://business.marquette.edu/faculty/directory/jeff-germanotta

Jeffrey S. Germanotta Mr. Germanotta possesses more than 35 years of strategic and financial management experience in private equity, investment banking, commercial banking and corporate planning. His current activities include:

• Marquette University, Milwaukee, Wisconsin, Adjunct Instructor, teaching investment banking and private equity courses within the Applied Investment Management Program (2015 – present).
• Member, Association for Corporate Growth – Wisconsin Chapter (since 2015).
• Limited Partner and Special Advisor to Greenbrair Equity Group LLC; a New York based private equity firm investing in the global transportation, logistics and distribution industries (2013 – present).
• Limited Partner and member of Supply Chain Equity Partner’s Advisory Board, also Investment and Audit Committees. A Florida-based private equity firm established to invest in lower middlemarket North American supply chain service businesses (2010 – present).
• Opportunity International’s Board of Directors; a leading global not-for-profit microfinance organization headquartered in Chicago, Illinois (involved since 2003). Co-head of the Audit and Finance and Risk Committees. He is also a member of the Board of Directors of Opportunity International Colombia S. A.

Prior to his retirement in 2013, Mr. Germanotta was a Principal and Managing Director of William Blair & Company LLC, a Chicago-based global investment-banking firm. While at Blair, Mr. Germanotta was CoHead of the Supply Chain Services practice within the Corporate Finance Department and Co-Group Head for the Equity Research Department’s Business Services and Industrial practice.

As an investment banker, he assisted clients with the formulation and execution of strategic initiatives, including capital raises and M&A activities.

As an equity analyst, Mr. Germanotta was consistently recognized in the Financial Times/StarMine “World’s Top Analysts” rankings.

Mr. Germanotta holds a B.A. in Business Administration from the University of Wisconsin-Milwaukee and an M.B.A. from Marquette University.

After Nearly 12 Years of Managing the AIM Small Cap Funds - How's the Performance?

7.12% Net Annualized Returns for the Small Cap Fund Since September 2005

After nearly 12 years of managing the AIM Small Cap Fund, the students in Marquette's Applied Investment Management program have generated the exact return performance as the average US Small Cap Blended mutual fund (7.12% net annualized return). During this holding period, similar to over three-quarters of the active small cap fund managers, the passive benchmark (Russell 2000 Index) outperformed the fund with an average annual return of 8.07%. 


AIM Small Cap Fund vs. Russell 2000 Index and Average Small
Blend Mutual Fund (as of 7/31/2017) - Click to Enlarge Table

The AIM Fund generated a strong Sharpe Ratio of 0.41 (the statistic most frequently used to measure risk-adjusted returns) during the period versus 0.44 for the Russell 2000 Index. Interestingly, the student-managed fund displayed lower risk levels than the benchmark and the average mutual fund (lower Beta and Standard Deviation). As a result, the AIM Small Cap Fund generated slightly better risk-adjusted return measures than the average small cap mutual fund (Information Ratio, Capture Ratios, and Batting Average). 

The debate about active vs passive equity investing will be discussed during the first several weeks of the fall semester. Marquette is pleased with the overall performance of the actively managed AIM funds - especially following the Financial Crisis of 2008. The administration highly values the opportunities for experiential learning that have been gained by the students within the program. 

Whether future AIM classes will be able to bring the cumulative returns up to the level of the passive buy-and-hold benchmark remains to be determined; however, in the same manner as professionally managed investment firms, the AIM students will attempt to generate positive alpha versus the Russell 2000. The students are appreciative of this opportunity that Marquette has afforded them.

10th Annual Ins & Outs of Wall Street - SAVE THE DATE

Join us for the 10th Annual Ins & Outs of Wall Street

Saturday, October 7, 2017

Click here to check out the Marquette's Homecoming & Reunion events happening that weekend

What the bond markets are saying about North Korea - Not much according to Dr. Krause

Dr. Krause was interviewed by Sabri Ben-Achour, senior reporter for NPR's Marketplace about the bond market today

Flipped Classroom Grant Received by AIM Program

The AIM Program Recently Received a Marquette College of Business Administration Faculty Development Support Grant for a ‘Flipped Classroom’

On July 26, 2017, the dean of  Marquette’s COBA, Brian Till, announced faculty development support awards to various Marquette professors; including Dr. David Krause and the AIM program. The grant submission was for FINA 4320 (the second AIM course which is focused on investment research and valuation). 

Krause wrote that the reason for seeking the grant was to continue to provide relevant curriculum and assessment in an on-line format allowing more time for applied learning and outside speakers during class meeting time. The grant will be received and implemented in the fall 2017 semester.

Dr. Krause stated, “We are thankful for receiving the grant. While we have been employing many variations of the flipped classroom since AIM was created in 2005, it is useful to formalize the process and to receive funding to continue integrating technology into the curriculum. The purpose of this grant is to further the process of working with SS&C Technologies.”

SS&C Technologies (ticker: SSNC) is the parent company of SS&C Learning Solutions (formerly Zoologic) http://www.ssctech.com/li/Home.aspx. The firm offers a deep and rich curriculum of the critical subject areas in investments and the financial services industry. Krause added, “SS&C Learning Institute’s courses provide a strong conceptual foundation and work well with the AIM program – we look forward to working with them this semester and beyond.”

The AIM program has been employing active learning techniques the past decade. Experiential learning has been shown to improve the classroom experience, leading to higher student success rates and greater student engagement. 

Krause said, “Flipping a classroom sounds easy, but an effective flip requires careful preparation and the right on-line curriculum. While a flipped classroom puts greater responsibility for learning on the students, the benefit is that it provides them with more room for relevant, applied learning in the classroom. This leads to a shift in priorities, allowing AIM classroom time to move from merely covering material to working toward mastery of it. The ability to bring in outside speakers and to have more student presentations is valuable.”

Let's again debate active vs. passive investing and the impact on the economy

Devouring Capitalism by Mark Gilbert (Bloomberg) 

Aug 4, 2017

Mark Gilbert is a Bloomberg Gadfly columnist covering asset management. He previously was a Bloomberg View columnist, and prior to that the London bureau chief for Bloomberg News. He is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

Link to article

Do low-cost index-tracking funds really threaten to turn us all into communists? A year ago, Sanford C. Bernstein & Co. warned that “passive investing is worse than Marxism.” 

Today, the most-read story on Bloomberg is about Paul Singer warning that “passive investing is in danger of devouring capitalism.” 

The giant sucking sound in the fund management industry in recent years is the noise of money flowing to passive products. 

The rise of exchange-traded funds has been relentless, and shows no signs of slowing. 

If anything, the shift to passive strategies is accelerating, as this chart based on data compiled by Bloomberg Intelligence’s Eric Balchunas shows. read on......

AIM Fixed Income Fund Performance and Key Statistics as of 7/31/2017

AIM Fixed Income Fund Positioned for One More Rate Rise in 2017

Key highlights of the Marquette AIM Fixed Income Fund:

• Solid short and long-term performance relative to benchmark
• Short duration strategy in anticipation of one more Fed rate increase
• Tilt toward corporate credit
• Low to moderate credit risk (few high yield holdings)
• Exclusive use of ETFs (since 2005)

(Click on the tables to enlarge)

The Performance of the Individual Stocks Added to AIM Funds by Students in the Class of 2018

Of the Stocks Added by the Class of 2018 - 8 are up and 5 are down!

Led by Stamps.com (STMP) which rose nearly 30% today on favorable earnings - the AIM Class of 2018 is off to a good start in their role as managers of the Small Cap and International Equity Funds.



Soon after the students return to campus at the end of August, they will again be pitching stocks on Friday afternoons. Every AIM stock pitched since the program's inception in 2005 can be found on the AIM website (AIM student write-ups). This fall all of the students' oral stock pitches and write-ups will be archived and available for viewing on the website. As always, via a web link, everyone is invited to view the AIM pitches real-time - stay tuned for more information at the beginning of the semester.

Stocks Added to the AIM Funds by the Class of 2018

                 (click on the table below for an expanded view)

Class of 2018 AIM Fund Performance as of 7/31/2017

Marquette AIM Class of 2018 Off to Solid Start

The AIM students in the Class of 2018 are off to a nice start since they began managing the three portfolios on April 1, 2017. The Small Cap Fund is nearly 300 bps above the benchmarks and the International Equity Fund is matching the S&P ADR Index (it is underperforming largely because of the weaker US Dollar). The AIM Fixed Income Fund is lagging the benchmark as rates have not risen at the level expected by the students.

AIM Funds	4/1/2017 -
Class of 2018	7/31/2017
	Return
AIM Small Cap Fund	6.12
Benchmark: Russell 2000 Index	3.22
Benchmark: S&P US Small Cap Index	3.25
AIM International Fund	7.62
Benchmark: Russell Global xUS Index	9.62
Benchmark: S&P ADR Index	7.57
AIM Fixed Income Fund	1.57
Benchmark: BBgBarc US Agg Bond Index	1.88
Benchmark: BBgBarc Aggregate Treasury Index	1.36

Timely Article about Emotional Intelligence and Strategies to Improve Your EQ

Why Your Boss Lacks Emotional Intelligence (EQ)

This is from the HuffPost 7/30/2017

Dr. Travis Bradberry

TalentSmart, President and ‘Emotional Intelligence 2.0,’ Coauthor

Whether you’re a leader now or may become one in the future, you don’t have to succumb to this trend.

FRANCISBLACK VIA GETTY IMAGES

 

Over the past century, the heartless, no-nonsense CEO has become something of an icon—and a cliché—in American society. Hollywood would have us believe that the Machiavellian chief exec is still alive and well.

But that’s just TV, right? How about in the real world? Do businesses still allow these inhumane relics to survive?

To find out, we analyzed the emotional intelligence (EQ) profiles of the million-plus people in our database—workers from the front lines to the C-suite. We discovered that the answer is yes, organizations today do promote the emotionally inept... except when they don’t. Allow me to explain.

TALENTSMART, INC.

We found that EQ scores climb with titles from the bottom of the corporate ladder upward toward middle management. Middle managers stand out with the highest EQ scores in the workplace because companies tend to promote people into these positions who are level-headed and good with people. The assumption here is that a manager with a high EQ is someone for whom people will want to work.

But things change drastically as you move beyond middle management.

For the titles of director and above, scores descend faster than a snowboarder on a black diamond. CEOs, on average, have the lowest EQ scores in the workplace.

The trick is, for every title in the graph above, the top performers are those with the highest EQ scores. Even though CEOs have the lowest EQ scores in the workplace, the best-performing CEOs are those with the highest EQs. You might get promoted with a low EQ, but you won’t outshine your high-EQ competition in your new role.

The higher you go above middle management, the more companies focus on metrics to make hiring and promotion decisions. While these short-term, bottom-line indicators are important, it’s shortsighted to make someone a senior leader because of recent monetary achievements. Possibly worse than metrics, companies also promote leaders for their knowledge and tenure, rather than their skill in inspiring others to excel.

Companies sell themselves short by selecting leaders who aren’t well-rounded enough to perform at the highest levels for the long term.

Once leaders get promoted they enter an environment that tends to erode their emotional intelligence. They spend less time in meaningful interactions with their staff and lose sight of how their emotional states impact those around them. It’s so easy to get out of touch that leaders’ EQ levels sink further. It truly is lonely at the top.

Whether you’re a leader now or may become one in the future, you don’t have to succumb to this trend. Your emotional intelligence is completely under your control. Work on your EQ and it will boost your performance now. Your effort can also ensure that you don’t experience declines as you climb the corporate ladder. Even if your employer promotes you for the wrong reasons, you’ll still outperform your contemporaries.

To help you get started, here are some of my favorite EQ-boosting strategies for leaders. They apply to anyone, so give them a try, even if you’re not a leader (yet).

1. Acknowledge Other People’s Feelings

Assertive, action-oriented executives don’t exactly ignore other people’s feelings. What they tend to do instead is to marginalize them or “fix” them so that they don’t get in the way of action. While some have suggested that this is a predominantly male problem, it can more accurately be described as a “power problem.” People who fail to acknowledge other people’s feelings fail to realize that lingering emotions inhibit effective action. So the next time you notice someone on your team expressing a strong emotion, ask him or her about it. Then listen intently and play back what you have just heard in summary form. By validating their emotions, you’ll help them feel understood so that they can move forward without hindrance.

2. When You Care, Show It

This might be the easiest thing you can do—as long as you actually do it. Good leaders always notice when people on their teams are doing good work, but they don’t often show it. When you appreciate something that another person does, let him or her know about it. Even a quick email or pat on the back goes a long way in this regard. There are people who do great work around you every day. Don’t put off letting them know how you feel about it. Your praise will build fierce loyalty and inspire your people to work even harder.

3. Watch Your Emotions Like A Hawk

The techniques above are extremely effective, but both require an awareness of your own emotions in the moment. You may think you have a world-class poker face, but if you’re like the average executive, your weakest self-awareness skills are “understanding how your emotions impact others” and “recognizing the role you have played in creating difficult circumstances.” In other words, you would become a much more effective leader if you obtained a better understanding of what you feel, when you feel it. Practice this by taking notice of your emotions, thoughts, and behaviors just as a situation unfolds. The goal is to slow yourself down and take in all that is in front of you, so that you can understand how your emotions influence your behavior and alter your perception of reality.

4. Sleep

I’ve beaten this one to death over the years and can’t say enough about the importance of sleep to increasing your emotional intelligence and improving your relationships. When you sleep, your brain literally recharges, shuffling through the day’s memories and storing or discarding them (which causes dreams), so that you wake up alert and clear-headed. Your self-control, attention, and memory are all reduced when you don’t get enough—or the right kind—of sleep. Sleep deprivation also raises stress hormone levels on its own, even without a stressor present. The pressure that leaders are under often makes them feel as if they don’t have time to sleep, but not taking the time to get a decent night’s sleep is often the one thing keeping you from getting things under control.

5. Quash Negative Self-Talk

A big step in developing emotional intelligence involves stopping negative self-talk in its tracks. The more you ruminate on negative thoughts, the more power you give them. Most of our negative thoughts are just that—thoughts, not facts. When you find yourself believing the negative and pessimistic things your inner voice says, it’s time to stop and write them down. Literally stop what you’re doing and write down what you’re thinking. Once you’ve taken a moment to slow down the negative momentum of your thoughts, you will be more rational and clear-headed in evaluating their veracity.

You can bet that your statements aren’t true any time you use words like “never,” “worst,” “ever,” etc. If your statements still look like facts once they’re on paper, take them to a friend or colleague you trust and see if he or she agrees with you. Then the truth will surely come out. When it feels like something always or never happens, this is just your brain’s natural threat tendency inflating the perceived frequency or severity of an event. Identifying and labeling your thoughts as thoughts by separating them from the facts will help you escape the cycle of negativity and move toward a positive new outlook.

Bringing It All Together

Is your employer perpetuating this trend, or are they bucking it by developing high-EQ leadership? Do you know high-EQ leaders who outshine the rest? Share your experiences in the comments sectioN, and let’s have a conversation about this important topic.

Want to learn more from me? Check out Bradberry's book, Emotional Intelligence 2.0.