Lessons in Investing

Former Goldman Sachs partner Blake Mather, advisor to a new Student Managed Fund at UConn Stamford, meets with student managed fund members Di Yang, left, Anshul Manglani, both graduate students, and Lindsey Lozyniak '19 (BUS). (Peter Morenus/UConn Photo)
Former Goldman Sachs partner Blake Mather, advisor to a new Student Managed Fund at UConn Stamford, meets with student managed fund members Di Yang, left, Anshul Manglani, both graduate students, and Lindsey Lozyniak '19 (BUS). (Peter Morenus/UConn Photo)

A new Student Managed Fund program at the Stamford Campus, launched this past fall, allows students in the School of Business to learn about investment strategies and then invest a $500,000 endowment under the watchful eye of investment advisers.

A breadth of diverse backgrounds and opinions in any decision-making process leads to better outcomes. — Blake Mather

A similar program in Storrs has launched the careers of many investment professionals since it was established by the School of Business nearly 20 years ago.

The advisor to the new Stamford program, adjunct professor Blake Mather, is a former partner at Goldman Sachs who recently retired after an impressive career in finance. In a recent interview, he discussed his passion for investing and excitement about mentoring the next generation of financial experts.

Q. What intrigued you about starting the new Student Managed Fund program in Stamford?

A. I’ve been an adjunct, a volunteer, and a mentor with the Stamford finance program for the last four or five years and became familiar with the Student Managed Fund program [at Storrs] and its success. When they asked me if I’d be interested in leading the new Stamford Student Managed Fund program, I enthusiastically agreed.

With anything brand new, there is a certain trepidation. We’re starting from scratch here and just getting our students familiar with the program. Right now seven of our nine students are from the Financial Risk Management graduate program, but ultimately we hope to have two teams – one of undergraduates and the other of graduate students. I guess it will inevitably be compared with the successes in Hartford and Storrs, but that’s the excitement. I think it was the right time, the right place, and the right opportunity.’’

Q. What do you hope to teach your students as they invest the $500,000 endowment?

A. The Student Managed Fund is truly the closest you can get to real-world experience while you’re still in college. It’s an entirely different reality when there’s real money at stake. We run the Student Managed Fund like a private company. I speak to them like co-workers, not students.

I think one of the hardest things anyone can understand is what it feels like to take a loss. You can read about it in a textbook, but you don’t really know what it feels like until you experience it.

Q. You’ve invited some impressive investment giants to visit your class, including Craig Broderick, former chief risk officer at Goldman Sachs; Brian Hurst, principal at AQR; and Gary Weinstein, former COO at Providence Equity Partners. What are you hoping to accomplish with their talks?

A. There are a bunch of people I know well who were willing to commit the time and energy to come and share their experience. But I don’t think this only benefits the students, whom I hope will gain great insight from our guests. It also benefits these financial leaders, who are meeting incredible students they might not otherwise meet. I also believe it benefits the University, as the conduit to bring them together. I hope this is a small piece that helps move the business school in the direction where it wants to go.

Q. What drew you to the financial field?

A. From a relatively young age, I was interested in investing. I grew up on the West Coast, far away from Wall Street, and started at Drexel Burnham Lambert in Los Angeles, and fell in love with it. I think it is because the work is fascinating, every day is different, and opinions count. I also discovered that my colleagues were funny, well-informed, and thoughtful. The days are long, but on Sunday nights I always looked forward to going to work on Monday.

Q. How did you weather the roller-coaster ride of the financial industry?

A. I’ve seen an enormous amount of financial turmoil during my career. I was at Drexel when the stock market crashed; then experienced the Tequila Crisis [in 1994], which saw the devaluation of the Mexican peso; I was in London for the Russian default [in 1998]; saw the the 2000 tech market burst; and witnessed the great financial crisis [of 2007-08], obviously the most significant event of them all. To have three crises in 10 years was unprecedented.

Q. A sore subject, no doubt, but Goldman Sachs was part of the subprime mortgage disaster that led to the 2007 financial crisis. What was it like to work there then, and what do you say to people still angry at the role that Goldman Sachs played in that debacle and the subsequent financial collapse?

A. It was obviously very difficult. I can say honestly that I did not recognize the press version of what was allegedly happening in the actual business where I worked [Leverage Finance], and also did not recognize the press portrayal of the firm. What was depicted was completely contrary to my personal experience over the previous 17 years. Not that it is any consolation to those still angry at the firm, but Goldman suffered irreparable damage to its reputation during the crisis, and culture and reputation are the two differentiating factors that make Goldman, Goldman.

Q. Obviously those financial crises devastated many investors – and possibly changed their views of stock investments forever. What do you say to investors who are reluctant to invest in the market?

A. Not to state the obvious, but there is an enormous deficit in financial literacy in the U.S. The math is fairly irrefutable – if you ever want to retire, you have to have some equity exposure. I do an exercise in my class, trying to drive this point home. Since I graduated from college in 1986, the compounded annual return from a 60:40 portfolio is about 9.5 percent. Mathematically, it is almost impossible for people graduating from college today to achieve that return with a similar portfolio. When you look at the cost in PV [present value] terms of waiting five years to start investing in your 401k, being under-allocated to equities, or not managing fees and expenses, you get some pretty eye-popping numbers.

Q. What was your favorite trade?

A. You’ll laugh at this. In the early 1990s, I chose AMD stock instead of Intel because of the valuation theories I was taught in business school. It was an absolutely horrible trade, and the stock underperformed for 10 years. It taught me that you can’t outperform the market.

Q. Are people investing money differently now, perhaps with more social conscience?

A. I don’t know if I’m completely qualified to answer that question, but from my perspective, if a company isn’t diverse, isn’t committed to the community, isn’t addressing the environment, I would view that negatively. From a personal perspective, I can attest to diversity being a competitive advantage that leads to better commercial outcomes. It’s pretty simple actually … a breadth of diverse backgrounds and opinions in any decision-making process leads to better outcomes.

Q. Can you, personally, ever truly retire and not be watching the stock market’s daily performance?

A. I do check the markets daily, and I think that’s testament to how much I enjoy it. I still spend a couple hours a day reading the Wall Street Journal and the Financial Press, and revisiting things that I was taught years ago. It’s not a burden. It has just changed from a vocation to a really great hobby.

Q. Is there anything that I didn’t ask you that you’d like to add?

A. If I was given the greenfield opportunity to develop a public university in a place that has a diverse student body, great proximity to New York City, and surrounded by thousands of highly qualified and experienced leaders, I would put it in Stamford, Connecticut! I’m so bullish and optimistic about what will happen on the Stamford campus in the next couple of years, it’s hard to know where to start.