June 11, 2007
Center for Finance & Investments and the UCLA Ziman Center Host Alternative Assets Conference
Event addressed private equity, commodities, real estate and hedge funds
A Nobel Laureate, a BusinessWeek top-ranked finance professor in teaching, private equity and hedge fund titans -- the list goes on. These are but a few of the speakers and attendees at a unique gathering of intellectuals, both academics and practitioners from leading institutions and firms across the country at a recent conference about alternative assets. The conference was held at UCLA Anderson on May 4th, 2007, jointly sponsored by the Center for Finance & Investments and the Ziman Center for Real Estate.
Topics spanned private equity, commodities, real estate, and hedge funds. Dean Judy Olian kicked off the conference. Morning sessions featured academic papers, while industry viewpoints were presented in the afternoon. On the topic of private equity, Steven Kaplan (University of Chicago) presented results from his recent study on the evolution of firms from early business plans to IPOs. In his talk titled "Should you Bet on the Jockey or the Horse?" Kaplan polled the audience on whether they’d wager on the management team of a firm (the jockey) or the product/core business (the horse) to ensure success. The audience was split down the middle, but according to his study, it pays to bet on 'the horse,' as an initial strong business appears to be necessary for a firm to succeed, while it is common for firms to replace founders and initial managers and still go public.
At lunch, conference participants enjoyed an illuminating discussion on liquidity from Myron Scholes (Professor Emeritus, Stanford University and Nobel Laureate). Scholes also explained why corporate-sponsored pension funds should hold mostly fixed-income assets and eschew equity; there is a corporate tax advantage. Firms can tailor their overall debt/equity mix (pension plus the firm's own account) to any desired level but, for tax reasons, should hold the debt in the pension account and the equity in the corporate account.
On the subject of real estate, the academic perspective was provided by Sheridan Titman (University of Texas, Austin). Titman presented results from a recent paper that provides indirect evidence of incentive and information problems that can arise when mortgages are originated with the intention of selling them to investors as part of Commercial Mortgage Backed Security (CMBS) market. The real estate industry perspective was provided by D. Michael Van Konynenburg (Eastdil Secured), with a focus on recent trends and statistics from the real estate market.
The audience heard from the private equity and hedge fund industry later that day in a lively panel discussion between Richard Crowell (Aurora Capital), Kit Jennings (ROTH Capital), and David Windreich (Och-Ziff Capital), moderated by Mark Garmaise (UCLA). Panelists were asked to share their thoughts on a variety of topics, ranging from the recent trend of private equity firms going public, emerging global opportunities, to future challenges. Jennings discussed the growing importance of PIPEs, Crowell spoke about the consideration given to increasing competition from India and China in making strategic investments within the U.S., and Windreich explored the role of hedge funds in corporate control and interesting ethical issues that followed.
David Hsieh (Duke University) gave a comprehensive summary of academic research on hedge funds. Hsieh discussed the major styles of hedge fund trading strategies (i.e. merger arbitrage, fixed income, long/short equity), existing theory on modeling hedge fund strategies as well as accompanying empirical results. Karlheinz Muhr (Credit Suisse) wrapped up the afternoon sessions with a talk on volatility management. Muhr discussed the role of volatility as an entirely separate alternative asset class, several volatility strategies, as well as the future growth potential of professionally managed volatility as an asset.
Richard Roll (UCLA), Eduardo Schwartz (UCLA), and Karlheinz Muhr chaired the sessions, breaking up the intensely stimulating discussions with amusing anecdotes and observations. The conference concluded with an intimate and relaxing dinner on the UCLA Fowler Museum Terrace and a peaceful sunset. -- Pansy Yang
Watch the Keynote Presentation by Nobel Laureate Myron Scholes (Windows Media)
About UCLA Anderson School of Management
UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.
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