• December 2024
• Article

Chapter 7 is the most popular bankruptcy system for U.S. firms and individuals. Chapter 7 professional fees are substantial. Theoretically, high fees might be an unavoidable cost of incentivizing professionals. I test this empirically. I study trustees, the most important professionals in Chapter 7, who liquidate assets in exchange for legally-mandated commissions. Exploiting kinks in the commission function, I estimate a structural model of moral hazard by trustees. I show that a policy change lowering trustee fees would harm trustee incentives, reducing liquidation values. Nonetheless, such a policy would dramatically improve creditor recovery, increasing small-business-lender recovery by 15.7%.

• 2024
• Working Paper

This article surveys the literature on the historical growth and transformation of the U.S. financial sector. The sector expanded rapidly between 1980 until 2006, when its contribution to GDP rose from 4.8% to 7.6%. After the Global Financial Crisis, the size of the sector stabilized at approximately 7% of GDP. After reviewing this literature, we extend this research to cover recent developments, including the continued growth of high fee alternative asset management and a shift away from banks to lending by nonbank financial intermediaries. We interpret both the growth of the sector and the recent evolution as reflecting a continued transition to a more market-based financial system, with risk migrating away from banks and into markets.

• November 2024
• Case

Founded in 2016, Moonfare headquartered in Europe, was a pioneer in the “democratization” of private equity investments. Historically, private equity was accessible only to institutional investors like pension funds, endowments, sovereign wealth funds, and large family offices. However, as personal wealth has grown among broader segments of the population, along with advancements in technology and a slowdown in traditional fundraising, figuring out how to facilitate individual investors access to private equity has become increasingly attractive. Moonfare was among the first to enable individual investors to access a range of private equity funds by developing proprietary technology with fully digitalized onboarding and investment processes. Initially, Moonfare’s model facilitated direct access to funds for high-net-worth individuals and family offices. However, with the broader alternative industry facing pressure to find solutions for fundraising from "retail" investors, competitive pressures evolved rapidly. In this context, Moonfare considered creating an investment vehicle with an unprecedented minimum investment of 10,000. Given that retail investors' participation in private equity was still a relatively new trend, there was no established playbook for effectively managing this investor base. The Moonfare team had to address several considerations: the unit economics of onboarding retail investors, the increased risk of default, and the challenge of both attracting and retaining these investors. On the flip side, tapping into smaller check sizes could strengthen Moonfare’s position as a leader in the industry and unlock the potential of a large, untapped investor base. The key question remained: what would be the ideal investor segment to target, and which product would be best to launch?