Evalueserve, a global research firm and the acquirer of my former company (Circle of Experts), provided supporting research and analytics in the initial phases of this study. We also thank Yujin Chung and Neha Kumar (Wharton 2010), research associates who provided invaluable support, and interns Corentin Roux dit Buisson, Dan Clark, Nitin Gupta, and Nikhil Iyer .

A highlight from the HBR article:

We've found that late-stage tech investors with geographically diverse portfolios are consistently among the best performers and have continued to attract large limited partner commitments, even during the challenging period since 2007. Almost all such players have been able to raise at least as much cash as they could previously. By contrast, the funds with traditional origination programs, focused on local networks, have had difficulty; most haven't raised new capital since late 2005.

Read the whole thing.

For more data from the study, see the slides below:

Download this presentation.

Download this presentation.

Four days ago, a team of Wall Street veterans launched Track.com, a new marketplace for independent research providers.  I met with the management team today. 

Track.com offers independent research providers a platform to distribute their intellectual property.  Buyers pay subscriptions for access to the pool of content. Similar to Value Investors Club, the general public can get access to the content at no charge after a delay.

It looks like an institutional version of SeekingAlpha.  It also has components of the market for research that AQ Research tried to launch some time ago.  

I think their greatest obstacle is noise.  There is a deluge of opinions available on the markets in every possible medium, and for every possible view on the market you will find someone passionately defending that view. 

The most clever parts of their model are:

- the appeal to elitism, which has a proven appeal on Wall Street

- the recruiting of Wall Street alumni in transition, who want to keep their brand visible in the market.  Given my background working with executives in transition, I particularly liked this aspect of the model.

- the tiered display of research over time, in order to price discriminate. 

I look forward to following their progress.

As usual, I'd welcome your feedback.

I enjoyed participating in a panel last night on "Market Research for Entrepreneurs", as part of the Founder Institute's first series of New York programming.  The other speakers were Nicholas Butterworth, President & CEO, Diversion Media; and Steven Haines, President, Sequent Learning Networks.  

My slide deck is below; I'd love to get your feedback.

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Courtesy of Craig Franklin, a Cornell MBA, following is a summary of an interview with Steve Schwarzman, CEO of private equity firm The Blackstone Group. 

LPs looking for more money back from illiquid assets, some nice exits.

Blackstone plans to IPO 8 companies and sell another 5 Strong growth in Asia - China @10% due to economic stimulus, India at 7-8% range, Indonesia and Australia growing, Japan also growing (growth @ 1-2%), and Latin America (commodities driven which are linked to exports to China).

U.S. at about 3.5% or more in Q4. Slowest growth is in Europe.

Banks are challenged b/c they are fending off defaults from consumer, mortgage, credit card, etc. Reasonable to expect growth at muted rates.

$3-$5B range. Leverage at 4-6x EBITDA down from as high as 11x, equity contributions of 30-40%. So sizeable equity checks required for a $4-$5B deals.

Opportunities in the US and Asia, less in Europe. Industries is function of pricing available. Too early to be playing the large scale cyclical businesses.

Resources are interesting but must be careful. Huge cyclical rebound in resources because people use them as a hedge against weakness in paper money. Gold, hard resources, oil are used as offsets.

Standard view of commercial real estate is that the refinancing necessary won't be available. Prices have decreased and there is bound to be difficulty in those areas. Rates have dropped to finance real estate. Many owners will not have enough equity to refinance.

Opportunities for investors.

Changes on Wall Street

Major players no longer exist and remaining banks are making more money.

Need a major relook at capital ratios.

Pretty clear that those boom years led to excess. Impact of rating agencies on subprime loans, that was way overdone. Affected American consumer who over borrowed, real estate was overleveraged. PE was paying too much money for businesses as were strategics. Global coordination so Fed policy also helped this and a regulatory regime could not cope with modern types of securities. System needs to be redesigned.

US Economy needs stimulus, most will be coming in this year. Beaten up US consumer and it will take a while for the consumer to rehabilitate their balance sheet. Stimulus is filling that void. Selective with who you invest in. Just bought Busch amusement parks. Great time to be buying assets that have been hit by lack of consumer spending and at a good price.

China has wealth to stimulate their economy, countries that touch China should have a very good economic future. Look at who China touches, very powerful long term growth engine that will shortly be converted to a more consumer focused economy. Generally, the developing world is now 34% of the global economy so keep a close tab on opportunities abroad.

(Milton Friedman)

I attended breakfast yesterday morning at the Levin Institute and heard a discussion between   Martin Wolf, Associate Editor and Chief Economics Commentator, Financial Times, and Robert Shiller, Arthur M. Okun Professor of Economics, Yale University.  My notes follow:

WOLF:

You used to be one of the few Keynesians in economics.  Suddenly in a crisis, we're all Keynesians.  Milton Friedman's ideas have proved to be of no relevance.  It looks to be a dismal situation for the dismal science.  Do we need to restructure the economics profession also?

SHILLER:

I've been distressed about the state of economics for a while.  Young people entering macroeconomics think that they have to approach a certain way.  Students think that they can't do what I'm doing, because it's too off-the-beaten-path. 

WOLF:

First thing when crisis is over is repeal a bunch of Nobel prizes.

What circuit breakers can we put in?

SHILLER:

New bill would create Financial Systems Oversight Council. 

WOLF:

What do you think of idea of splitting commercial and investment banks---the bread and butter, vs. the casino?

SHILLER:

The 1990 Depression scare, following the S&L crisis, was the same issue: we were insuring savings & loans but not watching them sufficiently.  Another part of the new bill is a resolution authority that will manage bankruptcies.  This crisis felt like a total surprise---we didnt have contingency plans. 

WOLF:

We see signs of genuine recovery, but it looks like force feeding.  Even the Germans are running a deficit.  All the major central banks are offering money for 0-1%, which has never before happened in peacetime.  Are we in a Japan like situation: in 90s whenever Japan tried to tighten, economy tanked. 

SHILLER:

My wife sees me on TV and tells me 'Don't smile when people are talking about depression."

Utley

What would have happened to US if WWII hadn't ended the Depression?

SHILLER:

Best chapter in Keynes' book is section on long - term expectations.  He says, those expectations are part of our basic mindset, and they're damaged in times like these. 

Japan had two huge bubbles (stock market and real estate) and hasn't gotten it together since.

After WWII, economics worried, will we go back to the Depression when war ended?  My story on this is that, the experience of the war changed our mindset in fundamental ways.  We were not in the Depression funk anymore.  We had national electroconvulsive therapy. 

WOLF:

We forget that 1945-75, Europe was a high-growth area: "les Trentes Glorieuses".  This period also saw a lot of catch up investment in technology developed in 1920s, 30s, 40s. 

Utley

How do we restructure financial sector?  Too big to fail problem? 

WOLF:

If you force banks to increase capital, they'll lend less.  Europe does not have a huge shadow system that needs replacing.  If as most people believe, securitization doesnt restart in the US, then we need banking system to replace it, to sustain existing level of intermediation in the economy.  This implies that you need huge amounts of capital in banks: enough to increase equity + enough to increase lending. 

One solution: make banks 'too good to fail', by reducing the chances of a bankruptcy.  Liquidity requirements relate to that.  Another side: make the system failure-proof against failure of institutions.  The financial system is a much denser network than it used to be.  We need a financial system like the internet, in which nodes can stand on its own. 

Major financial institutions are only nominally private institutions.

SHILLER:

Bank of England at least has had experience in dealing with financial crises.

The US regulatory authority has much less experience. 

We've developed a shadow banking system. 

Basel I and Basel II did not adequately see potential for bubbles.

We need a new currency called Regulatory Convertible Debt.  It's debt a bank can take, which only converts to equity if Regulatory Authority declares a systemic crisis.   This is a very creative idea.

Q

What do you think of Stiglitz's suggestion that certain derivatives should not be traded because they dont have underlying economic value?

SHILLER:

Derivatives have underlying economic importance.  They're really no different than insurance. 

Q

What is optimal savings rate for households under normal fiscal conditions?

To what extent is it linked to rising median wages?

WOLF:

In UK, a lot of household savings are pension savings (much of it corporate). 

The amount of savings corporates did on individuals' behalf was driven by their assumptions about L/T growth of their assets.  These assumptions were all insanely optimistic. 

Most households have no idea how much is needed to save for retirement.  They underestimate by 3 to 1 how much $ is needed.

Q

Comment on feasibility of minimum capital requirements, and phasing them in.

WOLF:

That's what 's proposed in the pending legislation.

In this crisis, we discovered institutions we thought were not systemically significant, were (e.g., AIG) . 

We have a well-developed (albeit not fully functioning) regulatory regime for banking.  We dont have that for insurance. 

Teten

How can we halt government's natural tendency to grow?

WOLF:

From a European point of view, the problem is not your government.  The problem is you're not willing to pay for the relatively small government you have.

I disagree with a premise of your question.  In W. Europe, the size of government has been relatively stable as a % of GDP for 25-30 years.  The reason is that we hit the tax limit.

WOLF:

Rate of growth of financial assets will be low over next 25 years.  Nearly all the growth in financial assets will be in emerging markets.  They will be investors. 

If you convert Chinese savings into dollars at current rates, in aggregate terms, the Chinese are now saving as much as the US.  That money is now going into bad banks.  That money will flow out of Asia. 

London was once a national financial center which became international because savings were outside of London.  NY will become an international entrepot.  This shift in wealth towards the East is irreversible. 

Utley

Future of capitalism?  Which model will be pursued?  What is role of state going forward?

SHILLER:

US has a longstanding commitment to free enterprise.  This is not as big a blip as people think.

Capitalism is a rough and tumble world.  We didn't abandon capitalism after Great Depression.

WOLF:

There will be no replacement for the market economy.  We're not going back to the libertarian world, the 19th Century. 

We're going to see a more caged financial system, because governments became frightened out of their wits.

An absolute law: solvent governments always rescue financial systems when they look like they'll collapse.  This was not true in the 19th Century, because financial system is so intertwined with the state. 

(Image via Wikipedia)

I enjoyed listening to Wednesday's panel discussion of the Harvard Business School Club of New York on Three International Investment Banks Expanding (and Hiring!) in New York.  It was off the record, so unfortunately I can't share my notes.

In organizing the panel, my colleagues and I developed the following (partial) list of international banks which are taking advantage of the current economic uncertainty to grow in the US.  If you're looking for a job, or seeking to start a business on the platform of an investment bank, these are some of the firms to contact.  Feel free to add names of additional banks that are growing in the comments.

Barclays

BNP Paribas

Deutsche Bank

Bank Itau

Macquarie

Mirae

Mitsubishi

Mizuho

Nomura

Royal Bank of Canada

Royal Bank of Scotland

Societe Generale

Standard Bank

Standard Chartered

Sumitomo

(Image by Getty Images via Daylife)

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The Financial Executives Networking Group New York Chapter's next meeting may interest you:

Agenda: "Using Expert Networks and Social Media”

The declining economy has caused considerable growth in niche outsourcing segments, one of which is for specialized expert consultants. This niche is for professionals with very specific and salable expertise, sought by companies active across a wide range of industries. Ironically, it is often the same firms which have laid-off executive talent which now seek the expertise they no longer have in-house.

Experts can sell their knowledge through intermediary firms, or by establishing their own advisory practices. Those who create their own businesses have turned increasingly to social media outlets to generate awareness for their brand. Further, companies and investor relations firms have found social media to be an effective tool for dissemination of information to institutional and individual clients.

The FENG New York has invited senior executives of two firms which focus on expert outsourcing and social media to discuss these sectors, and comment on how they interact with each other. Doors open at 5:30, and each speaker will have the floor for about 30 minutes from 6:00 to 7:00. The Q&A session goes until 7:30, followed by general networking until 8:30. The speakers will stay until conclusion of the networking session.

Sam Jacobs is the Managing Director for Americas Research at Gerson Lehrman Group (GLG). Previously, Sam was responsible for global client service and for running GLG’s Consumer Goods & Services research practice. GLG is a major player in the global marketplace for corporate expertise. Since 1998, its platform for collaboration and consultation has helped leading companies and institutions find, engage, and employ experts across a broad range of industries and disciplines. GLG maintains Group Councils consisting of financial consultants, physicians, scientists, engineers, attorneys, market researchers, and other professionals.

Council Members use GLG's proprietary systems to categorize their experience and expertise, which GLG makes available to clients needing a better understanding of the value and competitive landscape for their products and services. Prior to GLG, Sam worked at Capital One Corporation in their Global Finance Division, at Stern Stewart & Company in their Middle Market Finance Group, and as the founder of two technology-based entertainment startups.

Scott Lichtman is CEO of Vital Access, which advises firms on how to create online business communities and use social media for business development. Scott has worked with investment firms, attorneys, technology companies, green industry startups, and non-profits to launch business interactions among tens of thousands of professionals online in their respective sectors. In this connection, he is co-producing a business contest video program about small businesses leveraging the talents of industry experts and salespeople to facilitate expansion.

Previously, Scott was Managing Director at Evalueserve, a global research company providing investment and competitive research to over 1,100 clients, including 6 of the top 10 global banks, Fortune 500 companies, and numerous buy-side firms. Scott came to Evalueserve through its merger with The Circle of Experts, a network focused on emerging markets where he served as COO. Previously, Scott led product development for the securities industry firm Trade Ideas, was the Director of E-Commerce Marketing at Oracle, and a strategy consultant at Deloitte.

To attend this event please RSVP to The FENG New York at fengnyc@gmail.com, providing your name, preferred email address, and telephone number. A charitable contribution of $20 (payable at the door) is requested, which is dedicated to clerical and overhead expenses of the chapter and headquarters. If you register and your plans change, please provide notification. If it is necessary to leave before 7:30 we kindly request that you sit in the back of the room so as to not disrupt the speakers. Please turn off cell phones before the presentations begin.

Remember

• The dress code is business casual.

Directions

• From 45th Street entrance walk up one flight to 2nd floor to reception.
• From 42nd Street entrance walk through Grand Central Terminal, take escalators up two flights to 2nd Floor reception.
• Please also check into the meeting on the 26^th floor.

I'm visiting Southern California October 5-8, and I hope that some of you will be able to attend one of my presentations there.  I'll be discussing the results of my research project on "Private Equity and Venture Capital Funds' Best Practices in Deal Origination".  A preview of my slides is here.

I'll be speaking in three semi-public events (scheduled so far):

_______________________________________________________________________

Tuesday, Oct. 6: noon-1:30 pm (presenting at 12:30pm approximately), boxed lunch and refreshments provided

CFA Society of Los Angeles ( www.cfala.org )

2 California Plaza / ETC Room, 350 S. Grand Avenue, Los Angeles CA 90071

RSVP: CFA event.

_______________________________________________________________________

Wednesday, Oct. 7: 8:00am-11am (presenting at 8:30am, approximately), breakfast included

Keiretsu Forum ( http://www.keiretsuforum.com , large network of angel investors)

RSVP: Keiretsu event.

Beverly Hills Country Club, 3084 Motor Ave., Los Angeles, CA 90064-4746

_______________________________________________________________________

Wednesday, Oct. 7: 6:30-9pm (presenting at 7:30pm)

Harvard Business School Association of Southern California ( www.hbsasc.org )

RSVP: HBSASC event

Luxe Hotel, 11461 Sunset Blvd., Los Angeles, CA 90049

I hope to see you there!

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