The protagonist is considering acquiring a timber property located in rural China, a region where almost no timberland investment has taken place. The question is how to value the property, including understanding the appropriate risk-adjusted return.
The protagonist is trying to decide whether to purchase and develop an aquifer lying beneath rural land near Fresno, California. The project could fill a void for local farmers as well as surrounding municipalities and a variety of other customers throughout California.
In February 2010, Jane Mendillo, CEO of Harvard Management Company, was reflecting on the list of issues facing Harvard University's endowment in preparation for the upcoming board meeting. The recent financial crisis had vividly highlighted several key issues including the adequacy of short-term liquidity, the effectiveness of portfolio risk management, and the balance of internal and external managers.
Gone Rural employs 750 women in rural communities across Swaziland to produce handwoven baskets and other hand-crafted items. The women are mostly grandmothers caring for children orphaned as a result of the country's high AIDS-related death rate. The company has a strong social mission to improve the economic situation of these women and wants to grow rapidly. It has been very successful designing, making, and selling its products in the high-end global marketplace. It now needs to raise significant external capital to build new facilities. This may be the first time in its 18-year history that the company brings in external profit-minded stakeholders.
Dollarama is the leading operator of dollar stores in Canada. The firm performed extraordinarily well after a leveraged buyout in 2004, and recently executed a highly successful IPO. The company sources its goods primarily from Asia. It has strong brand recognition and competitive advantages in operations, purchasing, and merchandising. In the face of margin pressures, Dollarama recently took the risky decision to move from the single one dollar price point to multiple price points. The additional price points offer some flexibility, but customers' appetite for purchasing products priced above $1 has yet to be fully determined. Dollarama is on a fast growth track but remains chiefly concerned about its vulnerability to supply disruptions and to increases in merchandise costs from higher input prices. The firm appears quite overvalued based on a multiples analysis, but considerably undervalued based on a discounted cash flow analysis.
The Endowment Model of Investing, which was based on creating high risk-adjusted performance through diversification, a long time-horizon, top-notch outside managers, and illiquid investments, had served Notre Dame and other large universities well over the past several decades. Scott Malpass, Notre Dame's Chief Investment Officer, was confident that this was a successful way to invest if implemented effectively, but he also saw the top university endowments experience 25% to 35% declines in portfolio value during the second half of 2008 that eviscerated the investment gains from the past several years. Notre Dame had weathered the crisis relatively well, but there were several key questions Malpass had to address. Should Notre Dame continue to make illiquid investments in the context of rising unfunded commitments relative to liquid funds? Was compensation adequate for the illiquidity of these types of investments? In relation to manager selection, how could the Notre Dame investment team continue to find the best managers to create alpha? To what extent would the performance of managers during the crisis be predictive of future performance in other portions of the economic cycle? How would the long-established industry terms of contract between clients and managers change going forward? Was there an opportunity for clients to negotiate better terms? These issues all needed to be addressed in the context of protecting the University's operating budget and supporting the mission of the institution.
In December 2008, in the midst of the worst financial crisis since the Great Depression, Rosetree Capital Management was evaluating the purchase of a pool of U.S. residential mortgages. The firm had formed an investment vehicle to acquire troubled residential mortgages from banks and other motivated sellers. The idea was to purchase mortgage loans at a discount and to work with individual borrowers to restructure their debts. Performing mortgages could then potentially be resold in the secondary market. The case provides cash flow projections in various economic scenarios that are revealing of the economics of troubled mortgages and home foreclosure. Rosetree needed to decide whether and how much to bid for the loans.
The carbon market has emerged in response to concerns about global climate change. This note characterizes the market in 2008, describing each segment and how it operates.
In late 2007, EcoSecurities had to decide whether to undertake a new Clean Development Mechanism (CDM) project in China. EcoSecurities was an aggregator of carbon credits and also invested directly in projects that produced carbon credits. Governments and firms required to cut their greenhouse gas emissions under the Kyoto Protocol could use carbon credits to fulfill part of their compliance obligations. As demand for UN-issued carbon credits rose, the UN approval process had become increasingly burdensome. The Ventilation Air Methane Project was an opportunity to break into a new sector with large potential, and the economics and risks of the project needed to be assessed.