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Alice Handy, an investment professional with 30 years' experience as head of the University of Virginia Investment Management Company, has opened a new asset management firm targeted at midsize endowments and nonprofit institutions in January 2004. Her business, Investure, LLC, offered outsourced investment services to institutions with $150 million to $1 billion in assets and access to top-performing managers at lower cost than a fund of funds (FoF). Smith College, a prestigious liberal arts college with a nearly $1 billion endowment, is interested in increasing its current allocation to private equity. Handy and her partner are preparing to meet with Smith's trustees in an attempt to win Smith College as Investure's first client. The case presents three different approaches to private equity investing: direct investment through a traditional limited partnership, investment through a FoF, or investment through Investure's outsourced model. The class discussion presents an opportunity to evaluate advantages and shortcomings of each approach, introduce key terminology, and discuss the current trends in the private equity market. Students are given the cash inflows and outflows for a representative investment in a venture capital fund of the type Handy hopes to invest in on behalf of Smith College. The main analytical task requires students to evaluate the expected gross and net returns generated by the representative investment under each of the different approaches and fee structures.

This case was written for an early class in courses on entrepreneurial finance, venture capital, or private equity. It can also be used in specialized courses for fund trustees interested in alternative assets.

In the summer of 2013, Whitney DeSoto had just been hired as managing director for real assets at the Overton Pension Fund (OPF). Her task was to provide recommendations to the board of trustees to introduce real estate into the fund's portfolio, which to date had been invested solely in stocks and bonds. Combining her knowledge of modern portfolio theory with her institutional expertise in real estate, DeSoto needed to decide what fraction of the fund should optimally be invested in real assets. She then faced the task of deciding whether to invest in public or private real estate. If she thought private real estate belonged in the portfolio, she would need to identify the best investment strategy, the best vehicle, and ultimately the specific investments to recommend.

• Apply modern portfolio theory to the investment decision of an institutional investor allocating its assets between stocks, bonds, and real estate

• Understand the limits of portfolio theory in a real estate context

• Analyze the benefits/costs of investments in both public and private real estate

• Understand the various vehicles in which one can invest in private real estate

• Argue for a set of investments that offer individual benefits/costs relative to a theoretically ideal investment

Apply modern portfolio theory to the investment decision of an institutional investor allocating its assets between stocks, bonds, and real estate

Understand the limits of portfolio theory in a real estate context

Analyze the benefits/costs of investments in both public and private real estate

Understand the various vehicles in which one can invest in private real estate

Argue for a set of investments that offer individual benefits/costs relative to a theoretically ideal investment

Ever since he had heard her speak at a private equity conference, Babatunde Omotoba had wanted to work for Venita Fields, co-founder and senior managing director of private equity firm Smith Whiley & Company. He wrote and asked her for an informational interview, and was excited to receive her invitation to meet with her at the firm's regional office in Evanston, Illinois. After the interview, however, Omotoba came to the grim realization that despite all his preparations—researching private equity firms, studying the types of deals they make, and evaluating the analytical tools used to perform due diligence on companies and make investment decisions—he did not have a full grasp on the actual day-to-day work private equity professionals perform. He spent time reviewing materials from the career management office about private equity, and he meets two Kellogg alumni for informational interviews. He also reviews the investment process. The case ends with Omotoba having a broader perspective on the human aspect of private equity, beyond the analytical and financial aspects, as he anticipates meeting Fields again, hopefully to get the job offer.

Students learn the “tools of the trade” in private equity: managing portfolio company executives, meeting with limited partners to raise funds, managing the fund, selecting investments, and managing their time. Students learn the interpersonal nature of the business, including persuasion and negotiation, and how that is as important as financial skills. Students learn the process of preparing to interview with a private equity professional.

Strategic management/business policy.

This case study is intended for undergraduate (business administration) level students.

PeakWater is a state-owned water supplier in Peakland. Owing to government restrictions, the water supply maintenance business of the company has to be outsourced to a separate entity, resulting in the establishment of FixIt, a wholly owned subsidiary of PeakWater. FixIt is mainly responsible for maintaining the water pumps, as well as investing in new projects for PeakWater. The lower efficiency and incompetence in investment of FixIt hinders the growth of PeakWater in the long run, and also causes discontent by the citizens. PeakWater's Board is evaluating two proposals submitted by the Group Planning Division.

These are: the nature of private enterprises and its creation of value for public enterprises; the conflicts of interest between private and public enterprises; and the criteria and considerations in the evaluation of corporate strategies.

Teaching notes are available – consult your librarian for access. The teaching notes include a list of supporting materials.

In April 2015, Shannon Enberg, Managing Director of Real Assets at the United Kingdom Telecom and Technology Pension Scheme (UKTTPS), received a startling memo from the fund's board of directors. In a nutshell, the board sought to reduce the fund's multimillion-pound annual expenditure on management fees by asking all managing directors to drastically cut the number of private managers being used to manage UKTTPS assets. Enberg was told to cut the number of her external managers in half, but given the illiquidity of her private equity investments in commercial property, she would be allowed to make the decision to rehire each manager (or not) as each of her investments matured. UKTTPS had two investments in closed-end property funds that had just liquidated their final holdings at the end of 2014. Both managers had new funds being raised that could recycle the investment proceeds, but now that she was being forced to cut back, Enberg wondered whether either was really worth rehiring.

In mid-June 2000, MicroStrategy CEO Michael Saylor is considering an investment of $125 million of convertible preferred stock in his firm by a group of private investors including Citadel Investment Group LLC. The offer comes at a difficult time for the company, because only three months earlier, its stock had reached a record price of $300 per share. At that point, the company had registered a $1 billion seasoned equity offering. Shortly thereafter, the company was forced to restate its earnings after running afoul of the SEC for its revenue-recognition practices. Although the restatement did not change the company's cash-flow position, it did result in an SEC investigation and the cancellation of the stock offering. In order to meet Saylor's ambitious plans for MicroStrategy, additional funding must be obtained. With public-market funding sources shut off, students must evaluate what the best course of action is for the firm at this moment. Students are asked to evaluate a new form of venture financing called private investments in public enterprises (PIPE). PIPEs differ from conventional floating-rate convertibles in that the conversion price in most cases can only be adjusted downward. The case considers both the pros and cons of these investments.

Management Strategy.

Management Graduates and Post-Graduates.

Today, tourism is one of the fastest growing industries throughout the world. The tourism industry plays a very crucial role in the country’s economy, as it not only contributes towards the national income but also brings beneficial spillover directly or indirectly on the other industries. Tourism is the most important source of income for many emerging countries. India, a newly emerging economy, also depends, to a great extent, on tourist income. However, this sector continues to not make optimal contribution in India. In today’s competitive arena, the state tourism corporations must use all possible means to maximise growth and profitability through pegging up the rate of tourist arrivals. There is a general agreement in the tourism industry at the theoretical level about the imperative of a public – private partnership (PPP) in serving this objective. PPP aims to synergise the efforts of the two components in the general development of society and increase in competitiveness. The public–private partnership in tourism industry is at an emerging stage and could be developed in various ways. This case study highlights the key learning from Delhi Tourism’s experience on how PPP can be implemented in the tourism sector. This case study discusses an opportunity for Delhi Tourism which can alter the landscape of the tourism industry of India and also the rejuvenation of Delhi Tourism, a public sector corporation, through PPP.

The case will give a clear understanding of the dynamics and environmental factors governing a mixed economy like India. The reasons for the PPP can be analysed through the case. Students can understand the strategic choice of taking a private partner by a public sector in a very dynamic industry, i.e. the tourism sector.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

General Management/Strategy.

Post-graduate/MBA.

Case A: Mr Grandhi Mallikarjuna Rao, founding chairman of GMR, was considering a proposal to bid for an upcoming international airport in Hyderabad, India. The strategic move would have marked GMR’s foray into the Indian airport infrastructure sector. GMR had been involved in the development and operation of power plants and had thrived on public–private partnerships for all its projects. Mr Rao is thinking: Should GMR make another major investment in infrastructure development by bidding to build the airport in Hyderabad, India? Further, how should the organization prepare itself for this strategic move? Case B: On April 4, 2013, the meeting of GMR’s Group Executive Council (GEC) was scheduled to take place. Srinivivas Bommidala, G.M. Rao’s son-in-law and Chairman of GMR’s airports business, was gearing up for the meeting. The meeting was called to discuss a proposal for bidding for an upcoming airport project in the Philippines. It had been more than a decade since GMR entered the airport infrastructure sector. The organization had built substantial airport operating expertise during that period. It adopted a joint venture (JV) model for expanding in the airport infrastructure business. Until now, the organization had always formed JVs for all its airport projects. JVs with existing airport operators were necessitated by the bid conditions that required a certain minimum airport operating experience for qualifying as a bidder for various projects. In some cases, a JV with a local player helped GMR with market knowledge for functioning in a foreign market. GMR also used JVs to access the capabilities it lacked for operating in this sector and gradually learnt from its partners for building capabilities in-house. The group now had the required operating expertise in the sector to qualify as a bidder. One of the key issues the GEC was contemplating was: Whether GMR should continue to form JV for bidding for the upcoming project or should it go solo? Further, if it had to form a JV then, in which areas should it seek a partner?

Case A: To understand the relationship between key concepts in strategic management, including diversification, capabilities and core competence. To help students understand the various factors managers consider when deciding on the diversification strategy of an organization. To create an understanding of the organizational processes required to facilitate diversification into a new segment. To teach students how to evaluate a potential market opportunity that may require a firm to take on a diversification strategy. Case B: To help students understand how companies use alliances as growth strategies. To understand the rationale for formation of various alliances. To explore various factors managers consider when deciding on alliance strategy of an organization. To understand the challenges associated with using alliances as a strategic option. To understand the pros and cons of internal development (i.e. going solo) vis-à-vis strategic alliances.

CSS 11: Strategy.

Upon completion of the case study discussions, successful students will be able to: discuss the challenges of green financing and provide solutions on how to address such challenges. Explore the different dimensions for structuring a green financing fund. Analyse the risks and suggest a mechanism for de-risking an investment fund.

Kenya Climate Venture was established in 2016 as an independent subsidiary of Kenya Climate Innovation Centre, with a seed capital of $5m from European development financing institutions Danida and UKAid and the fund raised another $5m in new capital in early 2020. Its remit was to invest in commercially viable enterprises in agribusiness, water, commercial forestry, renewable energy and waste management, largely targeting small and medium-sized enterprises. The case is exploring three themes; Theme1: Challenges of climate financing, Theme 2: Structuring a climate financing fund Theme 3: De-risking an investment fund.

Teaching Notes are available for educators only.

CSS 1: Accounting and Finance.

This case is designed to illustrate the methods private-equity investors use in assessing the value of market opportunities--in this instance, a plus-size clothing retailer targeted to African-American and Hispanic women. The case addresses several issues, including niche marketing, urban development, and the challenge of evaluating market potential. The protagonist, a private-equity partner, must determine the market viability of an investment opportunity offered to his firm.