TVA Portfolio

The TVA Investment Challenge Program

Started in 1998, the TVA Investment Challenge Program (ICP) is a generous educational opportunity to fund student investment groups at 25 universities within TVA’s service region. It is an innovative and unique partnership designed to give students real-world experience in portfolio management. Funds for the program have been allocated from TVA’s Nuclear Decommissioning Trust Fund as part of the process of diversifying the financial management of the Fund. TVA has committed over $10.1 million to the program with each of the universities now managing an equity portfolio worth about $350,000. Besides giving student teams hands-on portfolio management experience, they also compete on behalf of their schools for monetary prizes awarded on the basis of portfolio performance. The Investment Challenge Program is an important part of TVA’s economic development mission. It nurtures the educational infrastructure that is vital to the Valley’s continued growth, and it provides invaluable training for the future business leaders of the region.

Goals and Objective

The investment goal of the TVA ICP portfolios is to provide TVA (i.e., the Nuclear Decommissioning Trust Fund) with a strategic allocation to the domestic equity market. Specifically, the portfolio’s objective is to achieve long-term capital appreciation through investments in U.S. common stocks with a risk profile similar to that of the market benchmark. The CMG is expected to achieve this objective by providing TVA with greater value than is offered by passive exposure to the market. Value will be added through active management in the domestic equity market.

Investment Guidelines

The CMG must adhere to an established set of guidelines when implementing and executing the portfolio strategy. Some of the guidelines and constraints are:

  • Investments must be made exclusively in U.S. listed equity securities.
  • Cash equivalents cannot exceed 5% of the portfolio at any time.
  • To ensure diversification:
    • The portfolio is expected to consist of at least 20 individual stocks.
    • At time of purchase, no single issue should exceed 5% of the portfolio.
  • The portfolio’s holdings must be in large market capitalization companies such that the average market capitalization of the portfolio is above $10 billion.
  • Companies with a market capitalization below $250 million at the time of purchase are prohibited.

Performance Standards

The relative benchmark consistent with the CMG's investment style is defined as the S&P 500 Index. The portfolio should meet the following performance objectives:

  • Outperform the S&P 500 Index over a one-year horizon.
  • Generate a total return at least 100 basis points above the S&P 500 Index over a three to five year horizon.

CMG Performance

CMG returns on the TVA portfolio: