AIMING FOR A Legacy

Twenty years. Forty classes. Just shy of 1,000 graduates. A $150,000 initial portfolio that now totals more than $10 million. The College’s now-legendary Applied Investment Management course, known as AIM, is jammed with numbers. Scott Malpass (MBA ’86,’84), vice president and chief investment officer at the University of Notre Dame, clicked through slides of them one long weekend in June.

Many were stock prices and growth trends for shares in corporations — AIM’s daily bread. Other statistics revealed themselves as indicators of how students, the course, and the University share their success with each other and the wider society.

AIM is the rare class that gives students the chance to manage real money. In this case, the money is a portion of the University’s endowment. When the class started in 1995, the endowment was valued at $1 billion, and students were charged with managing $150,000 of it. Now the endowment stands at $10.3 billion, and the student-managed share is worth $10.7 million.

And although the AIM portfolio has appreciated by $7 million due to the students’ acumen and rigorous analysis, according to Malpass, it’s important to remember that the AIM story isn’t primarily about numbers. It’s about people.

On June 11-13, 2015, more than 300 AIM alums gathered on the Notre Dame campus to celebrate the course’s 20th anniversary, traveling from as far away as China and Brazil to gather with others who’d taken the same one-semester class sometime within the last two decades.

Even the course’s co-founders were amazed at the turnout — and at the institution AIM has become. AIM’s outgrowths already include an advisory board, a résumé recruiting book, a quarterly newsletter and a class endowment. “This course is so different and so wonderful. It’s the best course I ever taught,” Frank Reilly (BS Commerce ’57), retired Bernard J. Hank Professor of Finance, told the reunion guests, receiving a standing ovation.

AIM has also developed a culture of giving back through investment, entrepreneurship and philanthropy. Its graduates share a network, an allegiance, social concerns — and now, an investing institute that will build on its legacy. “The sky’s the limit,” Reilly said, “in terms of what we can do and what we can accomplish.”

AIM at the Start

It’s beyond anything Reilly and Malpass had imagined when they started AIM along with then-finance department chair John Affleck-Graves, now the University’s executive vice president. They’d carefully watched the way the College’s undergraduate and MBA investing clubs looked at stocks. Back then, in the early ’90s, “analysis” amounted to the club members displaying current stock prices on an overhead projector, followed by an informal discussion. The three campus leaders wanted to bring greater rigor to students’ stock analysis.

“We wanted to train the next generation of top money managers and do it the right way with the right fundamental skills and aptitudes,” Malpass said. “So it wasn’t just how to do basic security analysis. It was also learning every part of the work. This is a very demanding class. It takes a lot of time for both the students and professors. But we wanted to look at the students holistically to help them advance.”

They structured the class so the students — referred to as “analysts” — worked just like real-life portfolio managers and stock analysts. Over the semester, each student would deep-dive into investigating two companies, analyzing their balance sheets, various market conditions and other fundamentals. Comparing the stock’s intrinsic value to its market price, they’d present investment recommendations to their classmates, who would vote on whether Notre Dame should buy, hold or sell the stock.

In 20 years, new professors have come on board. Jerry Langley, executive in residence, and Bill McDonald, the Thomas A. and James J. Bruder Professor of Administrative Leadership, now co-teach AIM. Yet the basic structure of the course hasn’t changed. And AIM’s portfolio has consistently outperformed its main benchmark, the S&P 500.

Fewer than 20 other American colleges offered hands-on endowment management courses when AIM was founded. Today, around 200 do. Virtually none of the others, however, include the close involvement of their host school’s chief investment officer the way Notre Dame’s does. The professors select 25-30 students each semester — undergraduates in the fall semester and MBA and MSA students in the spring — from a competitive applicant pool.

Malpass continues to guest-lecture several times per semester, and the rest of his team also gets to know many students well. “The way we structured it, with that collaboration between the faculty and the investment office, was very unusual,” Malpass said. “I’m not aware that any of my peers spend any kind of time doing what I do with AIM.”

Changing Lives, Making Impact

Down to the last person, the reunion was packed with highly successful alumni and guests visiting, laughing and sharing stories of how this single course had affected their lives. The slate of speakers alternated between local and global in perspective. Affleck-Graves and head football coach Brian Kelly updated AIM grads on campus developments. Under Armour CEO Kevin Plank shared how he’d founded his $3 billion company. Decorated Navy SEAL Robert O’Neill spoke about leadership.

Former AIM students have gone on to become senior professionals at some of the most respected investment firms globally, including The Blackstone Group, The Boston Consulting Group, Goldman Sachs, Maverick Capital, McKinsey & Company, Morgan Stanley and Viking Global.

Among the high-profile reunion attendees was Sean Klimczak (FIN ’98), senior
managing director for the Blackstone Group. Klimczak was fresh from being named one of the World Economic Forum’s 2015 Young Global Leaders. Even among the 187 international honorees, Klimczak had often been highlighted, particularly for his work helping double the electrical capacity of Uganda by directing investment in its Bujagali hydroelectric dam.

After earning his degree from Notre Dame, Klimczak had gone on to Harvard Business School, graduating first in his class. But it was AIM, Klimczak made clear, that had helped propel his success. “It opened my eyes to the possibility of investing as a career and prepared me — unlike any other class I’ve taken — for my career in private equity,” he said. Today he oversees Blackstone’s global power, transmission and natural resources investments, improving countless lives.

Other reunion participants had found different ways to give back. Jessica Bonanno (MBA ’14) went into the nonprofit world, becoming director of strategy development and operations for the Democracy Collaborative. The Maryland-based organization is known for incubating worker-owned cooperatives and reigniting disinvested communities through business. Being one of three women in her AIM class toughened her, she said.

Bonanno told Professor McDonald about it over lunch at the reunion. Consulting on a mayor’s economic development strategy recently, Bonanno had presented her recommendations to the local city council. They were skeptical. She stood firm. “There’s not one question they could ask me that I couldn’t handle with grace, because I’ve been grilled by some of the smartest people I know: I’ve presented to the AIM advisory board,” she said. “Those guys do not give up an inch. I’ll never be that intimidated by a presentation ever again.”

A good number of AIM grads had used their skills to launch their own businesses, serving society through entrepreneurship. Classmates Joshua Kempf (FIN ’08), Chris Lund (ACCT ’08) and Edward Preuss (FIN ’08) all started at large capital firms before founding businesses of their own, and classmate Vijen Patel (FIN ’08) has done similarly.

Kempf’s online business-to-business distribution company, Gaveteiro.com.br,
already employs 75 people in Brazil, with hopes of making an even bigger impact. He credited AIM with helping him develop an entrepreneur’s must-have ability to make a deep financial argument for investment. “The process of having a viewpoint and then putting money behind it was something I never had to do before AIM,” he said. “Now I think of everything like a thesis; my whole career as an entrepreneur is built on it.”

Beyond the professional enrichment, AIM changed the course of many personal lives. Many cited “late nights in the BIC” — Mendoza’s basement Business Information Center (now named the Mahaffey Business Library), where classmates researched companies at the Bloomberg terminals — for fostering countless lifelong friendships. At the reunion, alumni indulged in similarly late nights together, this time enjoying music, dancing and wine. Many had helped each other land jobs, or invested in each others’ companies or even personal lives. Kempf, for instance, made one of his classmates a groomsman in
his wedding.

Advancing the Notre Dame Way

At the reunion and beyond, campus leaders reflected on how AIM had enriched not just individual lives, but also the University. Chief among the effects, Malpass believes, is the course’s contribution to Mendoza’s high rankings in noteworthy surveys. Recruiter perceptions and student satisfaction levels figure into those rankings, and Malpass asserts that AIM boosts both.

AIM also expanded Notre Dame’s reputation on Wall Street and the business world beyond. In 1995, around a dozen ND students were placed in Wall Street jobs or internships. Last summer, 220 were. “AIM has created a brand for itself,” Malpass said. “Wall Street is more aware of the rigor of the six-credit course, the amount of work, the training and the exposure to the investment world [the students] receive. They have to show leadership, be organized and be persuasive.
It brings into play a lot of the skills that you need in business.”