Cornell Alternative Investments Symposium Speakers Discuss Trends, Strategies, ESG

By Kevin Lewis Collins, MBA ’22

In 2016, students at the Samuel Curtis Johnson Graduate School of Management launched the first Alternative Investments Conference. Held on campus in Ithaca, New York, it brought a few industry professionals to speak to club members about current market topics. By 2019, this student-run event had grown into a leading professional conference held in New York City.

Fast forward to 2022: The Johnson Private Equity & Credit Club continued the tradition in a post-pandemic era by hosting this year’s Cornell Alternative Investments Symposium at the Verizon Executive Education Center on the Cornell Tech campus in New York City on Feb. 18. The 2022 symposium, the first event held in-person since 2019, featured JPEC’s inaugural case competition. The symposium was made possible in part by the event’s platinum sponsor, White & Case LLP, as well as corporate sponsors Civitas Capital Group, Smooth Commerce, and the CAIA Association. Cornell sponsors include the Cornell Energy Club and the Parker Center for Investment Research.

Background and Features of the 2022 Cornell Alternative Investments Symposium

The Johnson Private Equity & Credit Club (JPEC) is education-focused and aims to provide comprehensive learning and networking opportunities to its members who are interested in alternative asset investing. The club seeks to achieve this goal through five main initiatives: Weekly educational meetings and lecture series during the fall semester; a guest speaker series for students to hear from industry practitioners; an undergraduate mentorship program to match undergraduate and graduate students with similar career interests; case competition participation, including sponsoring member teams to compete at competitions around the country; and hosting the Cornell Alternative Investments Symposium.

In addition to a fireside chat focused on topics in environmental, social, and governance (ESG) investing, the 2022 symposium featured the inaugural Cornell Strategic Alternatives Case Competition and five speaker panels that covered topics in private equity, private credit, venture capital, real estate, and cryptocurrencies. The event attracted more than 250 graduate students from Cornell and other leading universities, Cornell alumni and faculty, and industry professionals, who attended both in-person and virtually. In addition to providing their insights into their respective asset classes, each panel addressed ESG’s impact on their industry.

Mark Nelson, Anne and Elmer Lindseth Dean and professor of accounting, along with Lakshmi Bhojraj, Breazzano Family Executive Director of the Parker Center for Investment Research, and Kevin Collins, MBA ’22, JPEC co-president, provided opening remarks.

Inaugural Cornell Strategic Alternatives Case Competition

The first-ever Cornell Strategic Alternatives Case Competition brought graduate student teams from various MBA programs together to pitch a recommendation regarding a hypothetical acquisition of Chewy (NYSE: CHWY) to a mock investment committee of senior private equity professionals. The selection of Chewy provided teams with an opportunity to evaluate the merits and risks of investing in a dynamic company that has faced challenges and opportunities related to the current economic climate, the COVID-19 pandemic, and the rapidly evolving e-commerce space.

Teams competing included students from Johnson’s Two-Year MBA, Executive MBA Metro NY, and Johnson Cornell Tech MBA programs, as well as NYU Stern, Duke Fuqua, and UVA Darden. Judges for the preliminary round, conducted the week of February 7 via video submissions, included Jefferson Betancourt, MBA ’21, financial sponsors group, Credit Suisse; John Goedert, president and cofounder, Temple Hall Group; and Tiffany Ge, associate, Elm Park Capital. The teams they selected for the final round, held in-person at the symposium, hailed from NYU Stern, UVA Darden, and Johnson’s Executive MBA Metro NY.

The finalists presented to Craig Klosk ’81, JD ’84, cofounder of the Wicks Group, and Frank Schiff, JD ’84, managing director at MidOcean Partners, who hold more than 50 years of combined private equity industry experience. Klosk and Schiff fostered an investment committee-style dialogue, asking challenging questions throughout each presentation. Ideas presented ranged from a take-private leveraged buyout and partial public equity purchase to a recommendation to not invest. The NYU Stern team placed first, UVA Darden’s team placed second, and Johnson’s Executive MBA Metro NY team placed third.

Jason Li, MBA ’22, JPEC’s VP of competitions, and George Groen ’13, MBA ’22, JPEC’s VP of education, created and organized the inaugural case competition.

Creating Value in the Current Private Equity Market

The symposium’s first panel of speakers discussed “Creating Value in the Current Private Equity Market.” Introduced and welcomed by Hannah Dempsey, MBA ’23, JPEC’s VP of education, the panel speakers included James Hu, JD ’12, Partner, White & Case LLP, Eli Nagler, partner, Blackstone, Rob Redmond, MBA ’80, managing director, A&M Capital, and Philip Hunter O’Brien, senior director, CDPQ. Daniel Rathauser, executive director, Moelis & Co., served as moderator.

The panelists discussed how macroeconomic factors impact their investment decisions and portfolio companies—with the understanding, however, that their investments are inherently idiosyncratic micro-decisions. They discussed the record volume of private equity deals executed in 2021, the importance of due diligence depth, and speed of the process. In debate is the record amounts of dry powder (the capital a company has committed to invest) waiting to be deployed. One panelist noted that when you combine competition for deals with the recent trend in forming partnership between megafunds, which are essential to funding larger transactions, there is relatively little dry powder waiting to be deployed.

Lastly, the panel covered how clients are increasingly requesting ESG considerations and how sponsors can influence the business decisions of portfolio companies to drive the push towards higher ESG scores and sustainability.

Innovative Opportunities in Venture Capital Investing

Rose Haber, MBA ’22, JPEC’s VP of conferences, introduced the speakers for the second panel, “Innovative Opportunities in Venture Capital Investing,” which included Gayatri Sarkar, founder of Advaita Capital, Jenny Friedman, cofounder of Four Acres Capital, and Hyuk-Jeen Suh, general partner, SkyRiver Ventures. Brian Deck, CEO of Smooth Commerce, served as moderator.

The panel discussed investing in pre-revenue startups and the focus on founders’ persistence and capabilities. They discussed larger companies’ competitive motivation to have venture arms intent on being early in developing technologies.

On the ESG front, panelists analyzed the rise in female-founded VCs and the growing trend that venture capital firms are playing in investing and growing female-led ventures. The panelists discussed challenges female founders historically faced to raise capital and how attitudes are shifting among VC investors to embrace female founders. The panelists analyzed whether and how ESG factors into returns within venture capital, with a variety of approaches being taken. Some VCs target deep tech rather than ESG, specifically because it targets real, fundamental change and huge societal problems.

VC investors recognize that taking ESG considerations into account in investment decision-making as well as investing in ventures directly addressing ESG issues are best practices; however, speakers noted that it is difficult to accurately evaluate ESG impact on early-stage ventures.

The panelists advised future founders in the audience to build relationships with venture capitalists before a company needs funding; even if you are rejected from funding early, stay in touch and continue to build the relationship. The panel ended the discussion on how to break into the venture capital industry. One speaker’s advice on how to differentiate yourself: Focus on four main questions: Why this industry? Why now? Why us (the company)? Why you?

Emerging Trends in Real Estate

Following a brief lunch break, Ines Andrade, MPS-RE ’22, co-president of AREC, introduced speakers for a panel on the “Emerging Trends in Real Estate,” which included Tillie Borchers, managing director, Civitas Capital Group, Daniel Hayes, director, New York Life Real Estate Investors, Justin Levitt, executive director, PGIM Real Estate, and Mark Rudovic, principal, Hodes Weill & Associates. Colin Bahor, vice president, Northpath Investments, served as moderator.

Panelists discussed which asset classes have been outperformers during the pandemic—most notably, the industrial space, where valuation growth has outpaced other areas of the market.

The speakers discussed the effects of expected rising interest rates. While cap rates continue to remain low, developers and borrowers are requesting fixed-rate financing, while institutional investors, notably in the industrial and multi-family space, increasingly demand floating-rate lending.

Panelists also evaluated the resiliency of infrastructure throughout the pandemic and the tangential effect infrastructure has on multi-family and industrial assets. Lastly, the panel discussed how ESG factors are influencing their industry. At an increasing rate, investors are inquiring about ESG factors when deciding which managers to allocate capital to; they also look at how managers are increasingly deploying capital to sustainability-focused investments.

Private Credit Outlook for Rising Rates and Elevated Inflation

Kevin Collins introduced the next panel’s speakers, who discussed the state of the private credit market and how the “Outlook for Rising Rates and Elevated Inflation” will affect the asset class. Speakers included Louis Bélanger, director of private debt at TD Asset Management, Hank D’Alessandro, MBA ’92, managing director and vice-chairman at Morgan Stanley Private Credit, and Kate Rubenstein, MBA ’05, managing director at Blackstone. Stacy Wang, principal at Blackstone, served as moderator.

The panel started the discussion by defining what private debt means: Of the approximately $4 trillion market for sub-investment grade companies, about $1 trillion is private credit—that is, privately negotiated and sourced loans to private companies, usually with a sponsor involved. The speakers analyzed factors affecting both issuers and investors in the debt markets. For issuers, private credit can be beneficial to bypass credit ratings or traditional bank underwriting models, to achieve greater flexibility than offered in the broadly syndicated market, and to issue to a smaller number of lenders. For investors, investing in private credit offers the opportunity to perform their own due diligence on EBITDA adjustments and earn higher net returns with lower correlation to the broader equity market.

The panel addressed the growth of the private lending market, noting that the lower end of the high-yield public market is shrinking and shifting to a preference for private markets. Also noted was the floating-rate nature of private loans mitigating the risk of rising rates for investors. The speakers addressed how leverage levels are at or near all-time-highs, coupled with aggressive EBITDA addbacks and loose documentation leading to untested credit conditions; however, they also noted that credit quality is significantly higher than levels leading up to the Great Recession.

Lastly, the speakers addressed ESG trends in lending; sustainability-linked loans have gained popularity in Europe, with the U.S. following suit at a lagged pace. While equity sponsors will be a larger driver of the ESG shift at the portfolio company level, there is significant collaboration across the private credit industry in regard to promoting ESG and DEI initiatives.

Investment Opportunities in Cryptocurrency, Blockchain Technology, and Digital Assets

JPEC treasurer Kamran Safarli ’14, MBA ’22, introduced speakers for the day’s final panel, who discussed “Investment Opportunities in Cryptocurrency, Blockchain Technology, and Digital Assets.” This was the first year that the symposium featured crypto as an alternative asset class. Speakers included Ramnik Aurora, head of project, FTX, Lydia Chiu, VP of business development, Ava Labs, Aya Kantorovich, head of institutional coverage, FalconX, and Darren Langer, managing director, Arca). Joe Doll, corporate attorney, Fenwick & West), served as moderator.

Each speaker gave their background on how they first got involved in the crypto space, as it is still a relatively new asset. Backgrounds ranged from traditional finance and corporate law to technology. While there is still debate over what aspects of crypto are here to stay, the panel noted that certain things will persist and evolve. Crypto allows for economic experimentation, as many things in the world will continue to be tokenized to unlock value in assets, and it allows for more decentralization. Cryptocurrency has unlocked value through fiat currencies and has also fractionalized assets to make these assets accessible to more retail investors. Transparency is a key factor in the shift towards decentralization, panelists noted; however, there are methods of self-policing in blockchain systems (for example, blacklisting addresses linked to theft).

The speakers addressed how institutional investors view crypto—notably, that the low-rate environment has created demand for higher yields such as those found in DeFi, which they think will lead to increased adoption by institutions in a low-interest-rate environment. The speakers also discussed possible reasons for the recent cryptocurrency market crash, including a pull-out of macro funds that viewed crypto as a hedge to inflation in view of the possible rate hikes. They spoke about how various assets held up during the bear market and how, to everyone’s surprise, non-fungible tokens, or NFTs, were among the best-performing assets during the market crash due to their illiquid nature.

The speakers emphasized how they are seeing an unprecedented interest in crypto from corporations and traditional asset managers. They also touched on the environmental impact of public blockchains and how Avalanche, a smart-contract platform founded by former Cornell computer science professor Emin Gun Sirer, has embraced being green and environmentally friendly. The speakers also discussed upcoming emerging trends including play-to-earn and play-to-learn models. The speakers shared their incredible optimism for the space and its potential to positively disrupt the future of finance.

Fireside Chat: Topics in ESG Investing

Marty Lee, MBA ’22, JPEC’s VP of education, introduced speakers for the symposium’s final event, a keynote fireside chat about ESG investing featuring Doug Beal, partner and director at BCG, and Tony DeSpirito, managing director and chief investment officer at BlackRock. Beal and DeSpirito noted that ESG is still a relatively new term, its predecessor being corporate social responsibility (CSR). ESG as an investment strategy initially gained mainstream popularity in Europe, followed by the U.S. in recent years.

For investors seeking alpha, companies that fulfill ESG metrics are an attractive choice because they tend to perform better, and investors have historically been underweight in creating arbitrage opportunity. The pair discussed how ESG value is not always reflected in market value; stated differently, ESG is not figured into the stock price, so investors can gain some alpha rather than additional risk, as previously thought. They emphasized that traditional “sin” industries and businesses like tobacco or oil and gas should not be abandoned by investors; rather, investors should aim to push change internally and at the board level, and large institutional investors should take on an “activist” approach.

When asked if mainstream ESG-focused stocks will become overvalued, leading investors to shift to non-ESG businesses, the speakers pointed to studies that have proven that an ESG focus by investors can generate superior returns over time. They noted that ESG is not a fad and that COVID has accelerated these issues and made them more visible. Coupled with a growing investor push for an ESG focus, corporations are expected to take on a societal role like never before.

The symposium ended with a networking reception cocktail hour at the Panorama Room on the Cornell Tech campus. Bennett Cook, MBA ’22, JPEC’s VP of alumni relations, delivered closing remarks to wrap up the event.

What’s next for JPEC and the Cornell Alternative Investment Symposium

JPEC will continue to host individual guest speakers, educational content, and events for its club members throughout the spring 2022 semester. When classes resume in the fall, JPEC will open applications to prospective members across the Cornell University community to join as lifelong club members. During the fall semester, JPEC will focus on weekly educational meetings and lectures plus industry practitioner guest speakers and networking events.

JPEC aims to host the next Cornell Alternative Investment in the spring of 2023. Their goal is to expand participation from other top universities, from within the Cornell community, and throughout the professional alternative investing universe.

For more information on the JPEC and the Cornell Alternative Investment Symposium, please visit their website and follow them on social media:

• Instagram: @cornellJPEC
• LinkedIn: Johnson Private Equity & Credit Club

Special Thanks

JPEC’s student-run event would not be possible without the countless hours of work provided by the many student volunteers who organized the event. We would like to extend a special thank you to the following student volunteers:

Class of 2022: Ines Andrade (Baker), Kevin Collins, Bennett Cook, Benjamin DiPietro, Rebecca Greenway, George Groen, Rose Haber, Marty Lee, Jason Li, Luis N. Jaramillo, Kamran Safarli, Julio Alex Albarracin (Baker)

 Class of 2023: Marcelo E. Aranibar, Lauren Celano, Hannah Dempsey, Blerta Lleku, Alvita Miranda, Alex Perez, Ben Zarrour

About Kevin Collins, MBA ’22, CFA

Kevin Collins is a second-year MBA candidate in the Two-Year MBA program and a portfolio manager for the Cayuga Fund at the Samuel Curtis Johnson Graduate School of Management. He is also a co-president of the Johnson Private Equity & Credit Club. Prior to attending Johnson, Collins worked in the financial institutions group at PIMCO in New York City, where he was responsible for client servicing, portfolio strategy, and investment solutions for insurance companies globally. In summer 2021, he worked as a summer associate in leveraged finance investment banking at Bank of America. Collins has six years of investment experience, holds a bachelor’s degree from Ithaca College, and is a CFA charterholder.