Marquette University's Applied Investment Management (AIM) Small Cap Fund Has Consistently Been Among the Top Performing Actively-Managed Funds Over the Past Decade
It is likely that many of you are receiving your second quarter investment performance reports from various funds. We encourage you to look at the long-term net return performance so that you can draw valid conclusions about the funds’ abilities to generate above average performance.
The student-managers in Marquette University’s Applied Investment Management (AIM) program have been able to produce some of the best returns of any passively or actively-managed small capitalization funds. Over the past decade, whether it is 1-, 3-, 5- or 10-year periods, the AIM Fund has been in the top 5% of all actively managed funds. In fact, the 5-year return is in the top 2 percentile.
|This represents the relative net returns of all actively managed small cap funds.|
The dot is the AIM Small Cap Fund and the top line represents the 95th percentile.
Our curriculum is based on long-term fundamental analysis. We don’t take short-cuts or engage in trying to beat the next quarter’s earnings announcement. The students invest in fundamentally sound companies with opportunities to grow revenues and cash flows at rates faster than their industry peers and the overall economy.
We don’t believe in growth or momentum over value – the stocks are only added to the portfolio if the underlying company is well-managed and the valuation methodologies indicate they are under-valued. Nothing fancy, just hours of research on the company, industry, management and future prospects by the students.
Long-term track records like this are not the result of luck – they are based on doing the work and then having the ability to convince thirty other students that the investment thesis is sound. You should take a closer look at the students enrolled and those who have graduated from the AIM program – they know how to conduct financial analysis and have an eye to the future in their ability to identify companies that are likely to excel within their respective industries and markets.
These returns are even better if risk-adjusted performance is examined. The portfolio is sector-neutral meaning that all of the excess return is generated through security selection and not market timing. The beta of the portfolio over the years has been less than the benchmark and the standard deviation has been at the same level. The students hold, on average, 75 stocks and the portfolio turnover is about once every 2.5 years.
Our philosophy and process have been consistent since the AIM program was created in 2005 and we don’t chase fads or 'hot stocks' – we focus on solid, long-term fundamentals. Active management remains alive and well, but discipline and consistency must be maintained in both bear and bull markets.