Davis Center-The Dayton Foundation Partnership

The partnership enables Davis Center students to build on their 24-year record of success in managing an investment portfolio that not only consistently outperforms the S&P 500 index but is also the largest student-run portfolio in the United States.

Call to Action

The University of Dayton’s local and regional connections and the Davis Center for Portfolio Management’s involvement in investment education prompted The Dayton Foundation to gauge its donors’ interest in designating charitable funds to an asset pool to be managed by Davis Center students. Responses to the inquiry were immediate and enthusiastic, netting a total of 1.5 million USD, earmarked for Davis Center oversight in the fall of 2019.

Since 1999, student members of the Davis Center have actively managed the Flyer Investments Fund, which was sourced from the university’s endowment and, to date, has generated over 50 million USD in capital gains. The Flyer Investments Fund is the largest student-run investment portfolio in the U.S., providing students with an invaluable experiential learning opportunity.

The Dayton Foundation is recognized as second among all community foundations nationwide in the number of charitable funds under management and third in the number of grants awarded from these funds.

A collaboration between The Dayton Foundation and the Davis Center seemed an ideal match that would introduce students to philanthropy, broaden their client base beyond the university, and deepen their connection to the community of Dayton, Ohio. The partnership is thought to be the only one of its kind in the United States.

Innovation Description

The Davis Center Leadership Team of student managers meets with The Dayton Foundation staff and donors semiannually to update them on portfolio performance, investment strategy, and economic outlook.

The partnership extends students’ experiential learning not only to the ideology of charitable giving but also to the practice of asset allocation. While the Flyer Investments Fund trades only in equities, the foundation portfolio is also invested in fixed income and real assets. In conjunction with the foundation’s institutional consultant, an asset allocation formula was developed to create a balanced portfolio. Continual monitoring of performance and economic indicators alerts the students to any need for periodic tactical adjustments in asset allocation, either to capitalize on current market conditions or to reduce risk—or both.

Student leaders depend on the Davis Center’s established structure to help manage the foundation fund. As an organization, the center consists of approximately 60 undergraduates who serve as supporting analysts for both the Flyer Investments Fund and The Dayton Foundation portfolio, with each working on collaborative-sector teams. Management is particularly reliant on the Economic Analysis Team’s semiannual “Economic Outlook” to guide asset allocation. The center itself is designed to replicate a Wall Street buy-side firm, equipped with technology that includes Bloomberg Professional Services, FactSet, Morningstar Direct, and S&P NetAdvantage.

The foundation’s institutional consultant has also devised a benchmark against which the students can measure performance. The last semiannual client meeting revealed that students had outperformed the benchmark by 250 basis points (BPS) at the one-year mark and by 80 BPS since the benchmark’s inception.

Innovation Impact

As is customary in the industry, the Davis Center is paid a management fee by The Dayton Foundation. Consistent with the philanthropic nature of their client, however, the students standardly donate 85 percent of the fee to charities, such as the Breast Wishes Foundation, the GlobalGiving Ukraine Crisis Relief Fund, and Brigid’s Path, a local organization that cares for both infants and mothers who are affected by addiction.

The Dayton Foundation and Davis Center partnership has heightened students’ awareness of charitable giving, and the learners have enthusiastically embraced the concept. Each class of students (i.e., sophomores, juniors, and seniors) is tasked with researching and choosing a charitable organization to which they’ll contribute, and the management fee is allocated accordingly. The students are passionate about their choices and express satisfaction in knowing they have helped their cause.

As future wealth advisors and fund managers, the students realize that the return on investment will be their primary goal when helping clients finance personal lifestyles, retirements, and more, but their Davis Center experience shows them a broader purpose for the investment process. They become eager to bolster The Dayton Foundation portfolio for its ability to award grants and make a difference in the Dayton region and beyond.

In managing The Dayton Foundation fund, students learn the fundamentals of asset allocation and gain experience in applying them. Donors benefit, too, by interacting with students at client meetings and witnessing their investment successes.

Reference Links

• Davis Center for Portfolio Management, University of Dayton
• Organization Teams, the Davis Center for Portfolio Management
• The Dayton Foundation