UCD GSM Bay Area Finance club By-laws

Bay Area Finance Association
University of California, Graduate School of Management

Bylaws for Governance
Revised: July 20, 2008

Submitted by:
Juliet Hodder: Founder and Co-President
Amit Shah: Founder and Co-President

I. Overview
II. Mission
III. Membership
IV. Dues
V. Meetings
VI. Voting on Finance Association Decisions
VII. Officers and Responsibilities
VIII. Elections of Finance Association Officers
IX. Term of Office, Replacement and Removal of Officers
X. Changes to the Bylaws
XI. Dissolve the club

I. Overview

UCD Graduate School of Management (GSM) Bay Area campus at San Ramon is home to over 180 students with a significant interest in Finance and related fields. The Bay Area is an international hub and financial center that guarantees a wealth of opportunity for GSM students to further their learning and influence in the financial sector. This club will collaborate with the GSM Daytime Finance Association to achieve synergies for their respective members and to create an enriching and educational experience for all its members.

Our goals include facilitating knowledge sharing among GSM students, networking with industry professionals and bring industry recruitment to the UC Davis GSM, connecting students from the three GSM sites, and inviting renowned faculty & industry professional for interactive discussions.


II. Mission
Our mission is to build awareness and generate excitement among students about different careers within the finance function. We aim to expand our classroom educational experience to real world practical learning, to discuss developments in the world of investments and corporate finance, and share knowledge among members. We also aspire to expand the experiences and opportunities available to our members by organizing finance related speaker events, alumni outreach, networking opportunities, social events, and cross-campus programming with the Daytime and Sacramento MBA programs.

III. Membership

The membership of the Finance Association is comprised of current Working Professional Bay Area MBA students at the Graduate School of Management (GSM). Current working professional GSM students who have paid their dues are members of the Finance Association. Membership entitles full access to and support from the Finance Association Board, activities, etc.

IV. Dues

Dues are collected upon admission to the Finance Association which covers the entire time the student is enrolled in the GSM. Membership is allowed on a case by case basis. Dues are determined by the Finance Association Board.

V. Meetings

The Finance Association will schedule meetings on an as needed basis. Minutes will be taken and posted.


VI. Voting on Finance Association Decisions

Decisions of the GSM officers may be made by simple consensus. When a consensus is difficult to accomplish, a vote may be taken following these guidelines:

1. One vote per officer. Only elected officers may vote, though they represent the membership.
2. Simple majority determines the decision.
3. A quorum (six officers) is necessary to vote on any motion.
4. Voting can be done with non-GSM officers present.

VII. Officers and Responsibilities

Club Officers

1. President:
Responsible for representing the Finance Association when required and during GSM sponsored events. Responsible for coordinating Finance Association activities, facilitating meetings, encouraging participation in events, growing membership, oversight and advising of Finance Association Board members, upholding parliamentary procedures , oversight of elections, and direct liaison to current GSM faculty, staff, and students.

2. VP of External Relations:
Responsible for alumni relations, external partnerships, consulting projects, and general enhancement of external opportunities for club members.

3. VP of Communications:
Responsible for internal and external communication, web-site/blog development & maintenance, assisting in elections, and marketing communication.

4. VP of Finance:
Responsible for managing club membership fees, oversight of club budget and fundraising, allocation of resources for club events, liaison with ASM regarding financial matters

5. VP of Events:
Responsible for oversight of events including networking programs, alumni panels, speaker series, finance competitions, fundraisers, and general internal and external programming.


VIII. Elections of Finance Association Officers

Election of the Officers

Schedule: Fall Quarter; New Board convenes on January 1st.
Voters: Finance Association Members in good standing
Procedure: Determined by the Finance Association Board

The Finance Association officers may determine the timeline and the specific procedures used for the elections. The following principles should serve as a guide:

1. One vote per person.
2. Candidates may vote.
3. Only Finance Association members may vote.
4. Voting may be by paper ballot, electronic survey ballet or email ballot.
5. Voting should be anonymous. In the case of email voting or electronic voting, where the identity of the voter is obvious, the ballots should be counted privately by one person or a small number of elections officials.
6. Candidates may be nominated by others or self-nominate. They must accept the nomination before being added to the ballot. Only Finance Association members may be candidates.

Board transition procedures:
The new Finance Association officers should be brought into their new responsibilities with an organized transition program run by the old officers. This process will be determined by the old officers but should include ample assistance and training. Possibilities include a joint meeting of all old and new officers, scheduled one-on-one time, and a social event.


IX. Term of Office, Replacement and Removal of Officers

Officers:
Term begins January 1st and ends December 31st.

Replacement of Officers:
Candidates should run for a Finance Association office only if they are reasonable sure of being able to serve the full term. However, should unforeseen circumstances arise, officers can be replaced if the other Finance Association officers determine it is necessary. A new election may be held to elect a new officer. The Finance Association officers may determine procedures and scheduling.

Replacement of the President:
If the President cannot complete the term of office, the Finance Association officers may hold an election for a new President as specified above, or the duties of the office may be passed to another officer, as determined by a majority vote of the Finance Association officers. The officer serving as the new President may retain the duties of the previous officer position, or a replacement can be elected.

Removing an officer:
An officer may only be removed from office by the unanimous vote of all other officers. This is an extreme situation and must be exercised only if the officer in question has committed a gross dereliction of duty determined to harm the Finance Association.


X. Changes to the Bylaws

Changes can be made through a simple majority vote by the Finance Association officers. Once a change is made, the by-laws may be rewritten. Maintaining a list of changes is not necessary.

X1. Dissolve the club

If a situation arises where the Finance Association needs to be dissolved, all the club assets would return to the GSM to be used for educational or scholarship purposes, or be donated to a non-profit organization.

By-Laws v1.2/2008

Secrets of the Private Equity Trade (From Wharton Article)

Private equity firms manage some $1 trillion of global capital, yet because they are highly secretive, much remains unknown about their internal economics. How do PE firms organize themselves, for example, and how do they capitalize on their success?

Some answers emerge from a paper by Wharton finance professor Ayako Yasuda and Yale School of Management finance professor Andrew Metrick titled, "The Economics of Private Equity Funds." The paper was presented at a recent Wharton conference, sponsored by the Weiss Center for International Financial Research, whose theme was "A Global Perspective on Alternative Investments." The authors gained access to an unusually fertile data set, the private equity portfolio of one of the world's largest limited partner investors. On condition of anonymity, the investor furnished data on 238 different PE funds in which it had invested between 1992 and 2006. Of those 238 investments, 144 were buyout funds and the other 94 venture capital funds.

Stable Fee Revenues

The study's most important conclusions, according to Yasuda: First, some 60% of PE firm revenues come from fixed-revenue components that are unaffected by performance; and second, while venture capital firms tend to earn more than buyout firms per dollar under management, buyout funds are substantially more scalable and, therefore, can earn much more per partner and per employee. In addition, managers of successful funds can command better terms for themselves as they launch new, larger funds.

Most private equity funds take the form of limited partnerships, with a PE firm serving as general partner; the limited partners -- large institutions and wealthy individuals -- put up the bulk of the capital. Each limited partnership typically lasts for 10 years, with terms of the general partner's compensation spelled out at the fund's inception. The general partner's compensation contains a fixed component -- an annual management fee of 2% or more -- plus a variable component that includes carried interests in partnership holdings. Successful buyout firms often lay claim to some of the transactions fees that their funds generate. In addition, the most powerful limited partners -- large state pension funds, for instance -- may also command a share of the carried interest.

Private equity firms stay in business by launching new funds every three-to-five years. If a firm's previous funds have been successful, it can generally earn higher revenues with the new one by setting higher fees, demanding more variable compensation and raising more capital.

But there are striking differences in strategy and practice between venture capital and buyout funds -- the principal components of the private equity industry. To begin with, Yasuda notes, the study confirms what many investors already sense -- that the economics of venture capital and buyout firms are different, even though both depend upon fixed management fees for the preponderance of their revenues. The differences lie not only in the superior scalability of buyout versus venture capital funds, but also in the fundamental skill sets required.

Early-Stage Investing

Venture capitalists tend to be scientists and engineers by training, with the necessary experience in operations, marketing, management and related skills to help small companies grow. Early-stage investing is time- and labor-intensive, notes Yasuda, and even experienced VC professionals have difficulty overseeing more than five companies at once.

The typical venture capital firm has five partners and invests in five companies per year over the first five years of a fund's 10-year life, with the value of each early-stage investment rarely exceeding $100 million. On average, each VC professional is apt to be responsible for one new investment a year during the fund's first five years -- for an aggregate investment of $350 million to $500 million. That professional typically spends the fund's second five years aggressively fostering and monitoring those five companies.

VC funds tend to derive the bulk of their revenues from just 20% of their investments. They depend on hitting a "home run" -- a return five times greater than invested capital -- with one in every five investments. Another 20% of VC investments can be expected to fail or achieve minimal returns, with the remaining 60% returning an average 2.5-to-3 times invested capital -- not a fabulous result, considering the risks, but one most firms can live with.

Larger, more successful VC firms -- like Kleiner Perkins Claufield & Byers, known for such home runs as Amazon, Compaq, Genentech and Netscape; and Sequoia Capital (Google, Yahoo!, PayPal, Apple and YouTube) -- can raise substantially more capital in launching new funds, but they, too, are constrained by the time-consuming nature of VC work. To invest in more small companies with outsized potential, they must hire more VC professionals. Thus, in the world of VC firms, larger scale does not necessarily mean greater profitability.

Less Hand-Holding

The reason buyout funds are much more scalable than VC funds is that they invest in larger, more mature companies that typically need less hand-holding. In Metrick and Yasuda's sample, the median buyout fund began with $600 million in capital and invested an average $50 million in 10 to 12 different companies over its 10-year lifespan. By applying substantial leverage, buyout funds can acquire very large businesses -- on the order of Chrysler, RJR Nabisco or Hilton Hotels.

Because buyout funds invest in businesses already equipped with sophisticated management structures, a buyout firm partner can oversee large investments without a proportionate increase in personnel. The job is not to supply needed management skills, but rather to make sure there is effective management in place, to oversee financial strategy and to help identify new efficiencies.

Buyout partners are usually grounded in finance and operations. And because buyout funds invest in larger, more sophisticated businesses, the typical buyout partner need monitor no more than two or three investments at a time.

The paucity of debt capital available to private equity firms has had relatively little effect on venture capitalists, Yasuda says, because the investments they make are seldom highly leveraged. Right now, venture capital firms are much more concerned about the long-term drought in the IPO market, which limits their ability to exit investments and makes them more dependent upon selling their businesses to larger companies.

The depressed IPO market dates from the post-2000 technology crash, which occurred just after VC firms had launched their largest funds ever. Those funds are now eight or nine years old, Yasuda notes, and will have to exit their investments over the next two years. Should they fail to do so successfully, a number of venture capital firms could themselves go out of business.

By contrast, illiquid credit markets do direct harm to buyout firms because few investments look attractive to them without a heavy dollop of leverage. The buyout firms raised record amounts of equity capital before the debt markets collapsed last summer, and many now find it difficult to put that money to work. The longer the credit markets remain in the doldrums, the higher the odds that some funds will have to return capital to their limited partners or else start investing in a greater number of small- or mid-sized companies requiring greater oversight.

Should that happen, the buyout business might become a lot less scalable, and the economic differences between buyout and venture capital funds may be somewhat harder to discern.

Speaker Series in July - Joel Falcone from PerkinElmer

The Bay Area Working Professionals Finance Association has an exciting
new speaker event scheduled in July!

Our Speaker, Joel Falcone is CFO of PerkinElmer’s Optoelectronic
division. (http://optoelectronics.perkinelmer.com/)


Topic: Joel Falcone (CFO) “ Life as a CFO of a $500M+ Company”

Date: Saturday, July 26, 2008

Time: 12-1.00 Pm Lunch

Location: SRVCC

Room: TBD


Seating is limited please e-mail (RSVP) the Bay Area Finance
Association VP of Events, Alex Flores (alexaflo@cisco.com) or
Soyen Shih (sxshih@ucdavis.edu) or Lucie von Scheliha
(lvonscheliha@ucdavis.edu)as soon as possible to reserve your spots.

Speaker events are free for the Bay Area WP Finance association members.
Non Finance association members are welcome to the speaker events.
Your cost will be $5 for each event.

You can pay the Finance Association VP’s of Finance Ahmed Aly
(ibnadel@hotmail.com) or Damien Mar Chong (dmarchong@ucdavis.edu)

American Finance Association: The American Finance association is an excellent opportunity for students to be part of an academic community that discusses finance and economics theory.

The student membership is only 10$ /year.

The website iss as follows: http://www.afajof.org/

Announcing the GSM Investment Game - Register Now

Dear MBA Bay Area Working Professionals,

The GSM Finance Associations are hosting an Investment Game. The investment competition officially begins on May 8 and will run until June 5. Participants can register at anytime, before or during the competition period. After which time, winners (1st to 3rd) will be selected and announced accordingly.

There is a $5 entry fee to participate in the competition. The fee for members of the Bay Area Finance Association is waived. For non-members, please remit your payment by check payable to "UC Davis GSM Finance Club" or pay Cash to Damien Mar Chong / Ahmed Aly . (Note: The $5 entry fees will be used for UC Davis charity program.)

To join the competition, please register your full name using the following link.

Game ID: GSM_Investments
Open this link and read the competition summary including the rules:

http://vse.marketwatch.com/Game/StartViewGame.aspx?id=GSM_Investments

Click on the 'Join Game' link. If you are an existing Virtual Stock Exchange member, enter your Email address and Password in the login panel and get set to trade. If you are a new user, follow the link to register - it's easy!

Follow the instructions and start trading!

If you have questions or encounter any problems, please contact Colin Crane (MBA Day-Time Program) at 317.430.3813 or Alex Flores at 925.963.5124.

US Economy outlook from CFO perspective

After months of steady decline, the economic outlook can now only be described as bleak. Speaking at CFO's annual CFO Rising conference last month, veteran finance chief Jerry York said, "It's going to be a very bad recession, perhaps the worst I've seen in the 46 years I've been working." A majority of finance chiefs are similarly gloomy.

Optimism among finance executives reached a new low in this quarter's Duke University/CFO magazine Global Business Outlook Survey, with 72 percent of CFOs more pessimistic about the economy than they were last quarter and only 8 percent more optimistic. Pessimists outnumber optimists nine to one. CFOs also expressed less optimism about their own companies than ever before.

Click here if you are interested in knowing more...

History lessons from Bear Stearn crises

How to deal with banking crises

THE decline and fall of Bear Stearns illustrates both an old truth and a new one. The old truth is that when cash is scarce, he who has deep pockets is king. Bear Stearns is still standing only because JPMorgan Chase was solid enough to prop it up. The new truth lies in the Federal Reserve's role as matchmaker of last resort, smoothing the deal with a temporary loan of $30 billion. This shows just how far a financial supervisor's purview now extends. Even though Bear is not a fully regulated institution, the investment bank was deemed too central to the complex web of America's financial system to be allowed to fail.

Private-sector solutions to banking crises, in which strong institutions buy the weak, demand well-heeled banks. Just now, these are in short supply. Few institutions have been left unscathed by bad mortgage debts; JPMorgan Chase is a rare exception. When banks are threatened with insolvency, it is often the government—with the deepest pockets of all—that has to make good their losses. But how much might the state have to stump up? And how should it go about it? As today's credit crisis widens, commentators are turning to history as a guide.....

For the full story click here