Course Syllabus

University of Maryland, College Park

BUFN758M: Special Topics in Finance; Hedge Fund Management
Spring 2018

Time: TuTh 12:00pm – 1:50pm

Classroom: VMH 3505
BUFN758M - Syllabus.docx

Instructor: Ken Brodkowitz, Partner and Co-founder of Newland Capital Management

M.M. The Kellogg School, Northwestern University 1996
B.A. The Johns Hopkins University 1991
Email: kbrodkow@umd.edu ; kbrodkow@rhsmith.umd.edu
Office phone: 917-535-3417
212-329-0761
Office Hours: Email to schedule an appointment

Teaching Assistant: Louis Dubick

Email: ldubick@terpmail.umd.edu

Course Description:
The objective of this course is to give students a greater understanding of how public market
alternative asset management firms operate. The course will give an overview of the operational
structure of a hedge fund. Students will gain an understanding of the different types of hedge
funds (macro, long-short, market neutral, etc.) and will be given an overview of the mechanics of
the industry. A great deal of time will be spent on understanding and implementing the tools that
hedge funds use, such as volatility, shorting, pairs trades, long equity, commodity and fixed
income investing. By the end of the class students should be able to construct hedged
portfolios. It is anticipated that students will come away with a far greater understanding of how
to invest in a hedged manner, and what the pros and cons of the industry are. Students will be
divided into groups and run simulated hedge fund portfolios thru Stocktrak. This simulation will
enable students to understand the complexities involved in running proper risk-adjusted hedged
portfolios.
Course Objectives:

1. Synthesize knowledge gained in previous courses into practical skill in portfolio management
2. Understand the relationship between individual assets and the interaction of those assets as part of
a portfolio
3. Realize the unpredictability (at times) of security prices
4. Measure the performance of portfolios on risk-adjusted basis
5. Gain new skills and experience

Course Materials
Class notes and supplemental materials will be handed out in class or made available on Canvas,
which can be accessed at umd.instructure.com
There is no required textbook for this course
Subscription to the Wall Street Journal is recommended: Link

Software:
All students will be required to register on Stocktrak in order to carry out the investment
mandates and construct your group portfolio. The link to register on Stocktrak is at
http://www.stocktrak.com:80/members/registerstudent?className=BUFN758MBrodko0501
If you need any assistance on using Stocktrak, please contact the teaching assistant.

Students will also be required to create an individual Bloomberg account and familiarize
themselves with the Bloomberg terminals as part of their group project. The terminals are located
in VMH 1318, where there will be someone there to assist you in creating an account.

Grades
Student grades will be calculated as follows:

 25% Class participation

 40% Group project and assignments
 10% Midterm
 25% Second Half exam

Homework and Class Participation

At the beginning of each class a discussion and analysis of the stock market and stock selection
will take place. Students will be expected to be up-to-date with current events in the financial
industry. To that end, the Wall Street Journal must be read each day and it is suggested that the
first 15 minutes of both Mad Money and the Kudlow Report be watched on CNBC each night.
Assignments will be given in class when appropriate.
This class is a combination of learning mechanics of the industry and following the markets.
Students are responsible for fully keeping up in real time with the movements in the markets.
Once a topic is discussed all students should have actionable ideas readily available on that topic.
Since class participation forms a large part of your grade, attending every class and following
current financial news is crucial. The learning and understanding of managing a fund requires
extensive dialogue and communication. All questions and comments are encouraged and
welcome. To ensure credit for class participation, all students should bring their name placards to
class.
Group Project
You will be assigned into a group of 4 people by the end of the second week. As a group you
will co-manage a hypothetical $10 million hedge fund using Stocktrak, and will need to
incorporate longs, shorts, option hedges and fixed income and commodity positions as the class
progresses. Your group will present your portfolio to the class at the end of the term, and you
will be graded on both your portfolio construction and performance return.
Project Timeline:
Week 1: Tutorial on using Stocktrak is provided. Groups will be assigned by the end of the week.
Week 2: All groups should have registered on Stocktrak using the class account number and
begun trading. One group member should pay for the account with their credit card and receive
reimbursement from the other group members for an equal share of the cost.
Week 3: At the end the week, the value of all accounts in Stocktrak will be reset to the initial
zero starting point. The risk-adjusted performance of the fund will be judged from this point
on. In addition, all portfolio positions entered into in Stocktrak must be added to the PRTU
function in Bloomberg.
Week 4: Long and short positions should be implemented in the portfolio
Week 5: Options-based positions (both longs and hedges) should be implemented. At the end of
the week, students must submit their hedging assignment.
Hedging assignment: Groups must perform a hedge based upon various scenarios (market
up/down 5%, volatility doubling/halving) in Bloomberg. Students should use the Option
Scenario Analysis (keyword: OSA) and Portfolio (keyword: PORT) functions screens and
implement near-term put spread collar options to see how their portfolio reacts to shifting market
conditions. Students will submit print-outs of their Bloomberg portfolio analysis screens and will
be graded on how well they hedge.
Week 6: Stocktrak trading closes at end of the week.
Weeks 7: Groups present their fund’s results and trading strategy to class. Groups must also
submit written reports and hardcopies of their PowerPoint presentations. The oral and written
reports must include:

 analysis of the portfolio’s risk-adjusted performance

 revised fund strategies based on what you have learned during the course (in other words, remark
on what you would have done differently if you had known better)

Project Grading:
The grade for the group project will be based equally on:

 discussion of fund strategy and its evolution during the exercise

 analysis of portfolio performance (qualitative and quantitative)
 risk-adjusted performance of the portfolio

Quizzes & Exams

The quizzes and exams are closed-note and no cheat sheets are allowed.
In case of an emergency causing the university to close, a scheduled exam will be held on the
next scheduled class period. If you should miss an examination due to: (1) serious illness
(requiring medical care), (2) family emergency, or (3) religious holiday, AND you provide
appropriate documentation (e.g. doctor’s note), you must make arrangements with the professor
to take a make-up exam at an alternate time. Without an excuse as outlined above, you will
receive a grade of zero for the missed exam.
Please bring a laptop to class on exam day. If you forget or do not have a laptop, a paper exam
will be distributed.
Special Needs
Any student with special needs should bring this to my attention as soon as possible, but no later
than the second week of class. If you are a student with a disability that requires accommodation,
you must provide me with documentation from Disability Support Services (DSS) by the second
week of class, so we can make appropriate arrangements. If you have a disability, but have not
yet registered with the University, please do so by contacting DSS as soon as possible
(301.314.7682 or 301.405.7683 TDD). Accommodations cannot be made without appropriate
documentation.
Code of Academic Dishonesty
The University's Code of Academic Integrity is designed to ensure that the principles of
academic honesty and integrity are upheld. All students are expected to adhere to this Code. The
Smith School does not tolerate academic dishonesty. All acts of academic dishonesty will be
dealt with in accordance with the provisions of this code. Please visit the following website for
more information on the University's Code of Academic
Integrity: http://www.president.umd.edu/policies/docs/III-100A.pdf
Academic Dishonesty: any of the following acts, when committed by a student, shall constitute
academic dishonesty:

 Cheating: intentionally using or attempting to use unauthorized materials, information, or study aids
in any academic exercise.
 Fabrication: intentionally and unauthorized falsification or invention of any information or citation
in any academic exercise.
 Facilitating academic dishonesty: intentionally or knowingly helping or attempting to help another
to violate any provision or the Code of Academic Integrity.
 Plagiarism: intentionally or knowingly representing the words or ideas of another as one’s own in
any academic exercise. To avoid plagiarism, always cite your sources. You can view more about
citing sources at: http://www.lib.umd.edu/tl/guides/citation-tools. Feel free to use any of the styles
listed here.

To help you avoid unintentional cheating, the following table lists levels of collaboration that are
acceptable for each type of graded exercise. If you are ever unclear about acceptable levels of
collaboration, please ask!
Attendance
University policies excuse the absences of students for illness, religious observances,
participation in University activities at the request of university authorities and compelling
circumstances beyond the student's control.
Copyright
Course materials that exist in a tangible medium, such as written or recorded lectures, Power
Point presentations, handouts and tests, are copyright protected. Students may not copy and
distribute such materials except for personal use and with the instructor's permission.
Course Evaluation
As a member of our academic community, students have a number of important responsibilities.
One of these responsibilities is to submit course evaluations each term though CourseEvalUM in
order to help faculty and administrators improve teaching and learning at Maryland. All
information submitted to CourseEvalUM is confidential. Campus will notify you when
CourseEvalUM is open for you to complete your evaluations for fall semester courses. Please go
directly to the website (www.courseevalum.umd.edu) to complete your evaluations. By
completing all of your evaluations each semester, you will have the privilege of accessing online,
at Testudo, the evaluation reports for the thousands of courses for which 70% or more students
submitted their evaluations.
Grade Dispute
If you have a question or concern regarding an assignment or quiz grade, you need to document
your concern in writing. Within one week, you must bring to me in class a photocopy of the
original assignment and a written rationale to explain why you believe your grade should be
changed. In your rationale, be sure to explain how my decision to change your grade will be fair
to everyone else in the class. My decision will be based upon your written argument.
Inclement Weather
In case of inclement weather, check the University of Maryland homepage or call 301 405-
SNOW to check on cancellation status. If classes are cancelled, schedules will be adjusted
accordingly. It is very unlikely that exam dates will be changed from the dates stated in the
syllabus. It is possible that the material covered on the exam might be adjusted.
Religious Holidays
It is University policy that students will not be penalized for religious observation. You shall be
allowed, whenever possible, to make up academic assignments that are missed due to such
absences. However, you must contact me before the absence with a written notification of the
projected absence, and arrangements will be made for make-up work or examinations. If you
participate in a religious observance that conflicts with attendance or assignment completion in
this class, please let me know by the second week of class, so that we can make the appropriate
arrangements.
Technology
You can use laptop or tablet to access slides and cases during the class. No electronic device is
allowed to surf the Internet during class sessions.
Class Schedule
The beginning of each class will involve discussing current market environments and
events. Since class participation forms a large part of your grade, attending every class and
following current financial news is crucial.
Please note, all assigned readings are subject to change.

Date Discussion Topics

― Overview of the course

― Introduction to Hedge Funds
― Overview of Housing Collapse
― Different Types of Hedge Funds: what they do and how
Class 1:
○ Long/Short
Tues Jan 23
○ Macro
○ Fixed Income
○ Market Neutral
○ Arbitrage
 ― Different Types of Hedge Funds (part 2)
― Portfolio function in Bloomberg
Class 2:
― Stock discussion: SEE
Thurs Jan 25
― Stock Track Tutorial
― Stock Track Groups

― How to set up and operate a Hedge Fund

― Overview of chemicals industry
Class 3: ― Stock discussion: OI
Tues Jan 30 ― Risk Management
○ How to measure risk
○ Risk reports

― Risk Management (part 2)

○ Ratios
Class 4: ○ Net/Gross Delta/Beta
Thurs Feb 1 ○ Newland returns
○ ETFs
― Equity Investing and Housing overview

Class 5: ― Technical Analysis

Tues Feb 6 ○ How to spot entry and exit points in stocks

― Technical Analysis (part 2)

Class 6: ― Alert functions in Bloomberg
Thurs Feb 8 ― Macro and micro view of the markets
― Alert functions in Bloomberg

Class 7:
Tues Feb 13 ― Hedging
 ○ Shorting
○ Pairs trades (Bloomberg correlation)

― Stock discussion: IFF and BHI (short squeeze)

― Equity Investing/Theme Investing
Class 8:
― Derivatives intro
Thurs Feb 15
― Volatility
― Derivatives cont.

MIDTERM
― Hedging Cont.
○ How to use options in a hedged portfolio
Class 9: ○ ETFs
Tues Feb 20 ― Regulatory
― Stock discussion: SLCA
― Trading
― Sentiment

― Live Trading
Class 10: ― Catalyst Investing
Thurs Feb 22 ○ Investing around earnings
― Company conference call

― Fixed Income
Class 11:
― Portfolio Management
Tues Feb 27
― How to find ideas

― Putting it all together

Class 12:
― Hedge Fund Opportunities: Finding a job, Raising money, e
Thurs Mar 1
Class 13:
Group presentations
Tues Mar 6

Class 14:
Group presentations
Tues Mar 8

Second Half Exam:

TBA