Bloggin’ la vida loca

I have been back in Barcelona for more than a week now, IESE’s case and work load has hit me with all its wrath, but I decided to leave for London anyway to attend the 2-day Alternative Investments Conference of the London School of Economics Student Union. The first day was all about hedge funds, tomorrow will be about private equity. I am not sure if this was the right move, since I have to miss lots of classes at IESE (where absences are somewhat severely punished) as well as our local VCIC competition - a fantastic competition where student teams evaluate real start-ups from a venture capitalist’s perspective, and are subsequently judged by some of Europe’s top VCs on their performance.

However, as all MBAs learn schmoozing and networking is important and since I am interested in alternative investments, I decided to go - plus I had to pick up my CAIA charter (finally!) in London anyway. I have to say that LSE’s Private Equity Club really managed to draw a more knowledgeable crowd this year. I remember that last year top speakers were asked questions such as “What is the life of a consultant like?”, whereas participants this year seemed to have done their homework. I also met a lot of former fellow students from my exchange school LBS at the conference which was a pleasant surprise.

Moreover, I really liked the speakers and even got close to one of Germany’s economic heavyweights Josef Ackermann, the CEO of Deutsche Bank, who gave the second keynote speech. The first keynote was given by (in)famous Victor Haghani, one of the key figures of Long Term Capital Management (LTCM) - the hedge fund that almost brought down the financial system in 1998 when it collapsed. If you want to learn more about Victor and the extremely interesting story of LTCM, I recommend to you to read the book When Genius Failed: The Rise and Fall of Long-Term Capital Management.

I then attend some workshops focused on the topic of distressed strategies. I thought this might be the hot topic right now and the workshop was indeed oversubscribed. The first workshop was held by an executive VP of Sankaty Advisors, a debt focused hedge fund/affiliate of Bain Capital. I saw and liked the guy already last year, but he has gotten better. He pulled out some really insightful and entertaining slides, one of which showed that the value Citi alone has lost in the last year would be enough to purchase the equity - at current market prices - of all the remaining major investment banks. For those of you who are interested in getting into a fixed income fund, he mentioned a couple of points candidates should look out for when deciding to join a FI fund: a good fund should…

• focus on credit selection,…
• have solid experience in restructuring (apparently this means an unproportional number of lawyers),…
• possess strong trading capabilities,…
• have no redemptions,…
• and be structured so that the LP’s money is safely locked in.

While this sounds perfect in theory, I doubt that most applicants will have the luxury of being this picky. And I wonder which funds have not had redemption requests yet…

The next workshop was run by an MD (in the alternative investments group) from a well-know investment bank that had just been purchased by an American banking giant. Once again, very entertaining and informative workshop, although I found some of his remarks controversial. For instance, he used the allegory “You can’t blame drug pushers for pushing drugs, if there are drug buyers” referring to banks as the drug pushers and to hedge funds, endowments, etc. as drug buyers. But some of his points were less controversial and still quite interesting: when asked about the Ponzi scheme set up by Bernard Madoff, he mentioned that the biggest Ponzi scheme ever designed could actually be most of the world’s governments with their respective pension schemes and welfare systems based on fiat money.

Unfortunately, I had to leave after this workshop and head out to do some actual work for IESE classes. I am curious to attend the second day of the conference focusing on private equity. I registered for the workshop stream “Optimising Portfolio Companies”, a decision that was partially triggered by the research done by one of my professors, Heinrich Liechtenstein, who has written a couple of great papers on this topic in cooperation with other IESE professors and BCG’s private equity practice.

The only thing I regret is not having enough space in my suit case when I moved again from Germany to Spain. It is EXTREMELY embarrassing attending a conference where 300 people are dressed in black two- or three-piece suits when you are the only one dressed in jeans and a jacket. I stood out, but it made the networking part a lot harder.

More to follow soon…gotta go prepare some more cases for an IESE team project.

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Alternative Investments, Career, Hedge Funds