Students manage not-for-profit investments

By almost any standard, Four Horsemen Investments (4HI) is not your average investment group. Technically a charity with the IRS denomination of 501(c)(3), 4HI is the only peer-to-peer student-managed microfinance fund in the world today. The group was founded in 2009 by Puget Sound finance professor Lynda Livingston and then-student Tom Glassman as a way to incorporate charitable goals with business and microfinance experience for students. Today 4HI’s six members are all seniors at Puget Sound, but the group is completely independent and is unaffiliated with the University.

“4HI represents a more sustainable way to go about finance,” 4HI President Spencer Kadas, ’12, said. “But we have also sponsored local families for the holidays; we’ve paid for part of our research costs and the costs of conferences. We’re also creating a 4HI book scholarship for students.”

4HI uses its approximately $3,000 in assets to purchase loans via Prosper, the world’s largest peer-to-peer lending marketplace. The group has weekly investment meetings on campus where they browse loan applications and decide who they want to lend to. 4HI usually makes around 50 loans per year and has seen a 13.1 percent yearly internal rate of return. These profits are then used to fund the group’s charitable causes and research efforts.

Research has translated into two published articles so far, the most recent of which was presented at the International Conference on Interdisciplinary Social Sciences in Cambridge, England between Aug. 2 and 5, 2010. 4HI also helped send two Puget Sound students to San Juan, Costa Rica in 2010 to present an award-winning paper. Members have also traveled locally to visit with Washington businesses, including participating in a VIP tour of Boeing’s new 787 production facility. Kadas and Livingston are currently co-authoring a paper on the use of pay-day lenders by college students.

“A lot of what we want to do is use what we have to design an alternative to pay-day lenders. I’m not trying to send out a bunch of Wall Street gnomes,” Livingston said. “We talked about starting an equity portfolio, but I would prefer not to. It is not unique, you need a lot of money, and I do not think it teaches good investment principles.”

4HI has strived to stay true to its founding goals and principles, working closely with a four-member advisory board that includes Livingston and Glassman. Personal development and career opportunities are also a part of that goal. Glassman, who is now working as a consultant at Boeing Employee’s Credit Union, said he has been asked about 4HI in every job interview post-graduation.

“It has been the best thing that has come out of my Puget Sound experience.” Glassman said. “It is not about making the most profit but doing the best good. The point will always be charity first and personal opportunities second. It is fun to put finance in a place that is viewed positively, because it has been so negative for years.”

The group’s impact on campus has also been significant. Aside from creating the book scholarships, in 2010 4HI brought three speakers to speak on campus during their “March Madness in Finance” event. They plan to bring a speaker to campus each month this year.

Although the application process for new members is technically over, 4HI is currently made up of all seniors and will therefore be looking for future members. Students interested in using finance for charity should contact Livingston for more information.

Livingston and Glassman stressed that 4HI is not only for finance students, but that membership will stay small in order to maximize the experience. Donations can be made on 4HI’s website.