GM #2 Sept. 16th - University Securities Investment Team

General Meeting 2 9.16.2014

Agenda • Announcements • Portfolio Update • Market Update • Lecture: Careers in Finance • Pitch: WFM

USIT General Meeting 2 9.16.2014

Officer/SCG positions • Need to meet new officers • What do I do now?

USIT General Meeting 2 9.16.2014

Pitch sign ups/Lecture • Pitch sign ups for the 30th, 7th, and 14th • Lecture Topics • • • •

LBOs Financial Crisis Employment Is a college degree worth the cost

USIT General Meeting 2 9.16.2014

Fall Portfolio Challenge Register at usiteam.org/events •Build and manage your own portfolio •Compete with other McCombs students •Top three winners receive prizes in May

$5

entry fee

Announcements Technical Workshops Every Thursday 7-8 CBA4.328 This Week: Multiples Analysis

USIT General Meeting 2 9.16.2014

Announcements

USIT General Meeting 2 9.16.2014

Portfolio Update

Portfolio Update • FNMA (6.96%) – volatile • ACC (6.44%) – Insider selling; giving pass previous gains • BBRY (6.2%) – Announcement of Passport; Earnings coming up on Sep. 26; Acquired Movirtu • GY(4.5%) – Analyst downgrade

USIT General Meeting 2 9.16.2014

Fannie Mae- 6 month

USIT General Meeting 2 9.16.2014

ACC- 3 month

USIT General Meeting 2 9.16.2014

Company Overview - ACC •

• • • •

Largest student housing company • 1st publicly traded student housing REIT Real Estate Investment Trust • Distribute 90% of income as dividends • Does not pay corporate income tax $4.2 billion worth of developments Partners with universities to build both on and off campus properties Headquartered in Austin

Market Update

Market Performance

USIT General Meeting 2 9.16.2014

Alibaba IPO  What is Alibaba?  Is it larger than Ebay and Amazon?  2013 transactions totaled $248 bn  More than Ebay + Amazon

USIT General Meeting 2 9.16.2014

Alibaba IPO  Why am I talking about Alibaba?  IPO  Midpoint price range of $155 bn

USIT General Meeting 2 9.16.2014

Alibaba IPO 1. By buying stock in Samsung you get stock in?  A. The Bundesbank  B. A off shore account in Jamaica  C. Samsung  D. A South Korean Pension fund 2. By buying stock in Alibaba you get stock in?  A. The Dallas Cowboys  B. Chinese equivalent of social security  C. Alibaba  D. An agency in the Cayman Islands 3. The largest IPO in U.S. history was?  A. AT&T  B. Visa  C. General Motors  D. Facebook USIT General Meeting 2 9.16.2014

Freedom!!!!!

USIT General Meeting 2 9.16.2014

United Kingdom • Are England and the UK the same thing?

USIT General Meeting 2 9.16.2014

Folks • Who are these people?

USIT General Meeting 2 9.16.2014

Scottish Independence • What’s going on? • Who’s involved • Why are they doing this? • Why does it matter?

YES

NO USIT General Meeting 2 9.16.2014

Quantitative Easing • What is it? • Where is it being employed? • Principal actors? • What’s the big news right now?

USIT General Meeting 2 9.16.2014

May/June 2013

Federal Reserve Assets: Key Dates

Fed hints at tapering

Nov. 2010

Fed enters QE2, buys $600 Fed announces QE1 and starts billion in buying up to $1.7 trillion in securities over securities seven months

Nov. 2008

Nov. 2012 Fed begins QE3 $85 billion pm

TWIST

March 2010

June 2011

QE1 ends

QE2 ends

Mortgage backed Securities

2007

2008

Source: U.S. Federal Reserve

2009

2010

2011

2012

2013

2014

Jan. 2014 Fed begins taper

QE Tapering 

Tapering began in January of 2014 and will continue through October 2014.

Fed QE Windown Quantitative Easing 2014 Tapering $90 $80 $70

$60 $50 $40 $30 $20 $10 $0 Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Fed Purchases ($billions)

USIT General Meeting 2 9.16.2014

Japanese Quantitative Easing Japan Central Bank Balance Sheet (Billion JPY)   

 

1999 Japan hits 0% interest rate 2010 Japan starts QE August 2011 BOJ increases balance sheet by 10T October 2011 BOJ increases balance sheet by 5T April 2013: Abenomics begin 130T over two years o Represents ~23% of GDP

Source: Bank of Japan; Trading Economics

26

USIT General Meeting 2 9.16.2014

Monetary Easing in Europe 

In Sep. 2014 ECB announces proposal for 1tn Euros of bank targeted initiatives intended to bring balance sheet to 2012 levels:  Proposed program would be 7.8% of the Euro Area GDP  Largest prong is the purchase of over 500bn Euros worth of covered bonds and ABS European Central Bank Balance Sheet (Euro)

(in millions of Euros)

2008 Source: European Central Bank

2009

2010

2011 27

2012

2013 USIT General Meeting 2 9.16.2014

Introduction to Careers in Finance

Major Fields • Banking • Private Equity • Hedge Funds • Corporate Finance • PWM

USIT General Meeting 2 9.16.2014

Banking • Retail Banking • Commercial Banking • Private Banking • Investment Banking

USIT General Meeting 2 9.16.2014

Investment Banking

USIT General Meeting 2 9.16.2014

Basic Facts • You don’t invest • Long hours • Long weeks • Decent pay • Modeling • Pitch books • Other junk

USIT General Meeting 2 9.16.2014

Fields within Banking • Product Groups • Specialized type of banking

• Coverage Groups • Specialized industry of focus

USIT General Meeting 2 9.16.2014

Investment Banking Geography • NYC • Houston • San Francisco • Charlotte

USIT General Meeting 2 9.16.2014

Investment Banking Career Hierarchy

USIT General Meeting 2 9.16.2014

Private Equity • Financial buyers • Utilize methods such as LBOs • Look for turn around of distressed company • Liquidity event • IPO

USIT General Meeting 2 9.16.2014

Hedge Funds • Asset Management • Small teams • Limited number of large investors • Not accessible to public • Typically not undergraduates

USIT General Meeting 2 9.16.2014

Corporate Finance • M&A • Capital Raising • Work focuses on your company

USIT General Meeting 2 9.16.2014

PWM • Managing money • Very relationship driven • AUM fees • Commission fees • Problematic incentives

USIT General Meeting 2 9.16.2014