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This case features San Francisco-based financial technology startup, LOYAL3. Founded in 2008, the company seeks to disrupt the capital markets and democratize access to those markets for retail investors. By the fall of 2014, LOYAL3 had three products. In the first, the Social IPO Platformâ„¢, LOYAL3 acted as co-manager of an issuing company's initial public offering (IPO), enabling individual investors to purchase IPO shares at the same price-and the same time-as institutional investors. The second product, the Social Stock Planâ„¢, allowed investors to purchase stock in publicly traded companies they liked. The third product, Stock Rewardsâ„¢, enabled companies to grant free stock to customers in lieu of promotional discounts or in recognition of brand loyalty. LOYAL3 CEO Barry Schneider viewed 2014 as a watershed year. The company had participated in 10 initial public offerings to date. In the case he contemplates the product roadmap going forward.

Spreadsheet supplement for case 214048.

Spreadsheet supplement for case 215025.

In the Spring of 2014, Rudy Adolf, CEO and founder of Focus Financial, and the two other co-founders of the firm are considering alternative growth strategies to solidify Focus Financial position as a leading aggregator of independent wealth management firms in the U.S. Focus has grown from $3.5B in client assets at its inception in 2006 to over $70B in and it has acquired more than 30 RIA (Registered Investment Advisor) firms, capitalizing on a secular shift in investors' preferences from a traditional product and commission-driven brokerage model to a fiduciary, fee-based client advice model.<br/><br/> Since the 1970's, independent SEC registered investment advisors (RIAs) have been a growing segment of U.S. wealth managers, steadily winning market share from the dominant, traditional wirehouse broker-dealers. But, with more than $1.4 trillion in assets under management in 2013, the RIA industry is also at a crossroads, with aging advisors with limited succession plans and limited access to capital to fund intergenerational transfers, rising compliance and regulatory complexity, competition from new advice delivery models, and fragmentation. The case examines the RIA business model, the opportunities for growth through consolidation in this industry, and the competitive landscape in the wealth management aggregator sector through the lenses Focus Financial business model, its acquisition and M&A model for RIAs, and its wirehouse breakaway programs. The case examines Focus Financial strategy in the face of rising competition, potential growth paths, and IPO scenarios.<br/><br/> The case presents opportunities for students to explore similarities and differences between the broker-dealer and the RIA retail wealth management business models, strategies for growth and consolidation in the retail wealth management business, and issues related to incentives, organization and valuation of retail wealth management businesses.

In 2011 Britt Harris, the Chief Investment Officer for the $107.4 billion Teachers Retirement System of Texas (TRS), was considering whether to pursue strategic partnerships with a group of large private equity firms. After spending four years aggressively moving the fifth largest pension fund in the United States into alternative asset classes, Harris felt that TRS shouldn't just participate in private equity funds as a typical limited partner. Rather, under his proposal TRS would offer carefully vetted firms multi-billion dollar investments through a customized fund structure that had fewer allocation mandates than traditional fund structures, and guarantees to reinvest 50% of any investment gains back into the investment vehicle. In exchange, Harris hoped to receive a highly customized compensation structure and gain greater access to investment professionals within the participating firms.

In late July 2013, Danielle Engle, Managing Director of Clairemont Capital, was contemplating what to do about a large investment her fund had in the stock of Yahoo! Inc. In mid-2012, Clairemont had invested nearly $75M in Yahoo! after the tech company settled a highly visible proxy fight with prolific activist investor Daniel Loeb of hedge fund Third Point. Since that time, Loeb and his colleagues had joined the board, the company had hired a new CEO and the stock price was up nearly 80%-increasing the value of Clairemont's investment by $60M in less than a year. But Yahoo! had just announced an agreement to buy back two-thirds of Third Point's stake in the company. It had also announced that Loeb and two other company directors appointed at his request would step down from the board. At the same time, Alibaba, the giant Chinese e-commerce company of which Yahoo! owned a sizable stake, was widely expected to go public in the near future. What should Clairemont Capital do with its investment in Yahoo! in response to this news? This case provides students with opportunities to discuss shareholder activism, the interaction between a company growth strategy and business model and its valuation, discounted cash-flow valuation analysis, multiples valuation, transaction-based valuation, and company valuation by parts.

In November 2012, Prudential Financial and General Motors closed on a $25.1B pension risk transfer (PRT) transaction, the largest of its kind to date by an order of magnitude both in the U.S. market and globally. In exchange for an in-kind transfer of $25.1B in assets, Prudential Financial agreed to irrevocably guarantee the full payment of pension benefits to approximately 110,000 participants of General Motors Retirement Program for Salaried Employees and assume all risks related to investment, interest rate, and longevity as well as all operational and administrative requirements to make those payments for as long as necessary. As they gear to close another significant PRT transaction with Verizon, Dylan Tyson and Phil Waldeck, senior managers of the Pension & Structured Solutions group at Prudential, consider the strategic importance of these deals for Prudential business strategy and the potential growth of the PRT business in light of trends in interest rates and longevity, the regulatory and reporting landscape for defined-benefit pension plans, and the appetite for pension funding risk of plan sponsors. The case examines the pension fund industry, drivers of pension funding risk including investment risk, interest rate risk, and rising participant longevity, the regulatory and reporting landscape for pension funds, and the strategies available to pension funds to de-risk their plans. It then examines insurance companies and specifically Prudential Financial's competitive advantage in managing pension risk and implementing de-risking strategies for pension funds in the context of Prudential Financial's decision to commit resources to expand its PRT group that resulted in the pension liability buy-out deal with General Motors. Finally, the case examines the development and implementation of a PRT deal of this size and complexity, and explores the implications of such deals for the future of the asset management industry.

In June 2012, Standard & Poor's Indices is finalizing a deal with the CME Group, the largest global exchange for futures and options and majority owner of Dow Jones Indexes, to combine their respective indices business into a new joint venture called S&P Dow Jones Indices. This case discusses the index provider business model through the lenses of this transaction: sources of revenue and profitability, business valuation, uses of indexes in the money management industry, types of indexes, intellectual property protection issues, and competition, marketing, and growth opportunities. The case makes special emphasis on the strategic drivers for business consolidation and combination in an environment of increased competition, trends toward self-indexation, and growth of indexing at a global scale.

This case explores reasons for Blackstone Alternative Asset Management's (BAAM's) growth from 2007-2013, a time when the overall fund of hedge funds industry contracted substantially. Additionally, the case analyzes evolving business models and value propositions within the fund of hedge funds industry. J. Tomilson Hill, CEO of BAAM and Vice-Chairman of The Blackstone Group, is the protagonist. At the time of the case, BAAM was considering two potential directions for future growth: 1) providing hedge fund products for the defined contribution pension space, and 2) beginning direct internal "manufacturing" of investments. In the context of the current fund of hedge funds industry, the case considers challenges and opportunities for these potential new areas for growth.

Financial Accounting Foundation chairman Jack Brennan is under pressure from private-company interests to set up a new body-the Private Company Council-to determine separate GAAP for private companies. PCC advocates-including the US Chamber of Commerce-argue that traditional US GAAP has too many disclosure and fair-value requirements that impose very high compliance costs on private companies. But there are influential players-including the Big Four auditors-who oppose creating the PCC. They argue that the compliance costs of traditional GAAP are the price of high-quality accounting standards. Balancing these powerful interests, Brennan must make a decision on the PCC; at stake is US GAAP's ability to facilitate capital allocation decisions in the economy.

Spreadsheet Supplement for case 212-045.

Spreadsheet supplement for case 212-035

A hedge fund is deciding whether to liquidate its position in Apollo Group, a for-profit education firm, in light of significant political and macro-economic uncertainty facing the industry. As part of the investment analysis a complete discounted cash flow analysis must be performed.

An advisory company has to decide how to sell their client's hedge fund holdings in the secondary market, and thinks about their future. Shelley Capital was a a European advisory company operating in the hedge fund secondary market, a market that boosted in 2008 with the world financial crisis. Shelley had identified four final bidders for the $84.5 million portfolio of illiquid hedge fund holdings that one of their clients had commissioned them to sell and had now to decide to whom they should sell the holdings, if they should split up the portfolio, or if they should postpone the sale. At the same time, they needed to decide about their future business. The financial crisis was behind the exceptional growth of the hedge funds' secondary market, yet another crisis could follow and boost the secondary market again. What direction should Shelley take once the hedge fund industry fully recovered? But what if a second global crisis threw the hedge fund industry into disarray once again?

Windward Investment Management has experienced rapid growth in assets under management in just ten years, from under $30 million at year end 1999 to $3.6 billion in 2010. Windward is one of the leading firms in the Registered Investment Advisor (RIA) industry that seeks to value for its investors through asset diversification and active macro-level investing. The firm implements its proprietary investment model by trading exclusively exchange traded funds (ETF). Windward is considering a range of future growth opportunities and how to finance those opportunities, including raising external capital. The case focuses on the decision of what opportunities Windward should consider and on the valuation of the firm if it decides to raise external capital.

Spreadsheet supplement for case number 205126.