Sunday, August 13, 2017

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.