iag | history
by Sreesha Vaman
The Early Years
Fall 1995 - August 1996
I asked Justin Pollack, who was the founder of IAG, to assist with me with this part:
"During the fall of 1995, Harry Hung, a junior in Stern, took the charge of a campaign to start a personal investment club at Stern. Conceptually, this club would allow students to place their own funds, with commitments as little as $20 per month, at risk and pursue a careful investment strategy of picking stocks after a thorough review by club members.
"Previously, another Stern student (whose name is lost to time) led the effort to solicit a blessing for such a program from Dean Diamond, head of the undergraduates at Stern. However, Dean Diamond remained skeptical as a platform that permitted Stern MBAs to invest their own money into a central fund resulted in disaster. In the early 1990s, the MBAs built a fund that invested into speculative derivative products and wound up losing most of the original investment, but more importantly, exposed their limited partnership to potentially significant additional debts.
"Dean Greenbaum, head of student affairs, continually used that unfortunate case as a demonstration that the Stern School could face significant liability if less wealthy undergrads lost their shirts in the market and decided to sue Stern. No matter how insulated the legal structure, any investing program allowed to meet at Stern and by connection, sponsored by Stern, could be held potentially liable for losses by students. This was an issue that would return to haunt us in later years.
"Undeterred by the administration's lack of enthusiasm, Harry rallied roughly five people to join him in the assembly of the framework for a club. To begin, we thought of a clever name, "The Dow Jones Surfers." The vision was to create a log of a surfer riding out the "wave" created on a stock's price performance stock chart. We were confident that the clever name and lure of learning a disciplined approach to investing would lure hundreds of students. Now, if we could only get the administration to permit our investing activities.
"We also began to address another major issue necessary to build a successful investing empire at Stern: membership. At the beginning of each semester, the investing group concept would attract numerous interested students, but they would quickly drop out at the thought of talking about investments in blue chip companies and dividends.
"Most students wanted to learn the ways of Wall Street, not Main Street. As such, I thought the best way to compliment the newfound "funds" in our portfolio would be to place students into different industry research areas and bring all of these groups together to discuss current industry trends and stock picks in each area once a week. The design was intended to get all students participating as research analysts from the beginning, including writing detailed report on various companies in their industry and offering a sort of market gossip wrap-up each week to fuel the fire.
"During this summer, we spent considerable time lobbying Dean Choi, the newly appointed head of the undergraduate program. The timing proved to be crucial. We continued to pitch the concept as a way for Dean Choi to foster the interest of all students in Wall Street, with a built-in mentoring system, as new students would be tutored on investing by upperclassmen. To further the competitive spirit of the program, Dean Choi suggested creating two funds, offering students the opportunity to battle one another for the best performance. As an initial incentive, the investing club would be granted funds from the Dean's discretionary fund indexed to our performance above the S&P 500. These funds would, in turn, be available to the various student clubs at Stern, giving the entire school and interest in our activities.
"There was only one further change: the name had to go. While we had always been looking for a better title for our group, the university had specific concerns over the trademark violation implications that would become noticeable if we used "Dow Jones Surfers" and were eventually featured in a newspaper story or on CNBC. Lacking ideas, we changed the name to "The Market Surfers." The original concept of surfing the Dow became diluted, but we figured we would worry about that later.
"With the start of the fall 1996 semester we kicked off a major marketing drive to attract new students. To rid the group of one-time participants, we held a week of information sessions that dictated our strict requirements and the time commitment it would involve. During this time, we received tremendous interest from over 350 student, or roughly 17% of the entire student body.
"Since we intended to replicate the operations of a mutual fund, we decided to "hire" two fund managers with a complement of research analysts to coordinate six industry groups. Given the response during our initial week in operation, our cockiness reached its height and we decided to interview all candidates for the manager and analyst roles. Of course, given my lack of experience (I had never invested a dime nor had I held a Wall Street job at the time), I made everything up as I went along.
"Somehow, we managed to convince a number of great and highly qualified Sternies to participate in an effort that we suggested would be equivalent to a part-time job in terms of time commitment and experience. To keep us in check, Dean Choi further asked Professor Richard Levich to advise our organization in addition to Professor Rita Maldonado-Bear, who had already been advising the Investment Society. Their counsel certainly provided helpful in the successive months."