Career Focus

This course is intended for any student interested in a career in private market investing. Specifically, we will cover topics pertaining to investing, managing, and developing investments in real estate and private asset backed companies. The course will be divided into three modules. The first module will focus on portfolio construction and understanding investment risks associated with private investments. The second module consists of the analysis of specific transactions with an emphasis on whether to pursue a specific transaction or not based on its investment merits. This section of the course will be run as an investment committee. We will focus on the attributes of both successful and many unsuccessful transactions. The final module consists of a focus on private investment firms, their compensation structures and how they impact behavior. For the final project students will be asked to develop an investment concept and present it via a paper and investment proposal. Industry leaders will judge the final presentations.

The course guests have historically included some of the leading private investors in the world, including Howard Marks, Barry Sternlicht, John Grayken, Ken Caplan, Mike Fascitelli, and Karsten Kellwig, among many others.

Educational Objectives

1. How to construct a private investment portfolio

2. How to assess the risks and returns in private investments and real estate portfolios

3. How to perform relative value analyses of differing investments

4. How to manage troubled investments (when to hold 'em and when to fold 'em)

5. How to understand how compensation issues affect performance

Course Content and Organization

Conceptual Framework: the course is divided into three parts with special emphasis on private equity financial analysis for transactions and portfolios. The course will analyze issues associated with both successful and troubled investments. We will address the issue of when to "double down" on an underperforming investment. We will incorporate a relative value approach in differentiating more attractive investments based upon their risk adjusted returns. The first module focuses on portfolio level issues, the second will review individual transactions and the third will look at the management and investment issues from the perspectives of both general partners and limited partners. The analysis will also include a study of firm economics and the resulting incentives from the 2/20 standard compensation model. Finally, students will prepare an investment proposal and present the investment concept.

Pedagogical Mix

Private equity real estate investments lend themselves to the case study method as virtually every subject requires both quantitative and qualitative analysis, judgment calls and development of a practical action plan. "Cold calling" is a frequent and important component of the class. Polling will be done frequently.

Textbook readings and technical notes supplement the cases, while additional optional books and articles are suggested for more exposure to theoretical concepts. A very significant component of the course will be presentations by case protagonists including leading industry figures. Senior executives from the industry will be in class to discuss the case and offer practical perspectives on lessons learned from the case. Out-of-class review sessions are offered by the professor to supplement concepts included in the case, particularly with regards to modeling certain concepts included in the given case. The workload and preparation are above average for the HBS EC courses.

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