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Houlihan Smith Asset Manager Brochure
- 1. Investment Banking Servicesfor Asset Managers
- 2. HOULIHAN SMITH FIRMOVERVIEW HOULIHAN SMITH & COMPANY, INC. (“HOULIHAN”) is a nationally recognized valuation and investment banking firm (Member FINRA, SIPC) with offices in Chicago, London, Los Angeles, New York and Toronto. Houlihan provides comprehensive services to several of the largest asset managers around the world. Backed by years of experience, Houlihan is frequently called upon to provide valuation and advisory services to hedge fund advisors, traditional fund managers, family offices, fund administrators, pension funds, endowments and other financial instit tions institutions. Houlihan works with 20 of Alpha Magazine’s Top 100 Hedge Funds. The firm’s tailored services to asset managers include Portfolio Valuation (FAS 157); Restructuring, M&A and g ( ) g Transaction Advisory. We are highly experienced with dealing with complicated transactions and complex asset classes that challenge the most sophisticated client. Houlihan covers all investment strategies, including those that are illiquid and underperforming. 1
- 3. HOULIHAN SMITH &COMPANY, INC. Houlihan has a focused group of professionals dedicated to serving our Investment Management clients. Below are some of our core competencies: Seasoned Professionals Independent Portfolio Valuation Services • Unparalleled Leadership • Fairness and Solvency Opinions • Decades of Experience p • Portfolio Valuation • National Footprint • Advisor Valuation • Highest level of Professional • Financial Reporting Compliance Standards • Litigation Support Investment Banking • Mergers & Acquisitions • Restructuring • Private Placements • Transaction Advisory CLIENT FOCUS 2
- 4. INVESTMENT BANKING SERVICESFOR ASSET MANAGERS M&A Advisory Portfolio Valuation • Sales and Divestitures • Monthly, Quarterly and Annual • Acquisitions of Targets Portfolio Valuations • Mergers and Strategic Ventures • Financial Reporting Compliance • Transactional Support/Due • Side Pocket Transactions Diligence • Specific Investment Valuation(s) Restructuring Transaction Advisory • Asset Level • Secondary Market Transactions • Portfolio Level • Financial Opinions • Advisor Level • Advisor Valuation 3
- 5. THE HOULIHAN FIRM Ourreputation is built upon years of unmatched quality and service. We consistently deliver high-end performance which is evidenced by the caliber of our client base. The Houlihan Firm is built on serving our clients and creating a plan that is focused on executing in a highly sophisticated and responsive manner. O motto iis “B t E hi ti t d d i Our tt “Best Execution. B t P ti ti Best Practices.”” Investment Bank with Deep Industry Knowledge Depth of Experience Houlihan Smith is a full-service investment bank with full service Houlihan boasts a deep understanding of the the capabilities to meet the evolving needs of asset challenges that asset managers, both traditional and managers. Dedicated teams of specialists with alternative, are facing in today’s market. We have expertise in the Asset Management industry are successfully transacted numerous acquisitions and represented in each service offering ensuring the offering, dispositions of asset managers advocating cultural managers, necessary industry experience to thoroughly execute fit, strategic optimization and mutually advantageous assignments. deal structures. Independent Senior Level Attention We understand the need for independence in these Our key principals are involved at every juncture of times of heightened scrutiny. Our practice is built on the transaction process, lending years of experience strong risk-managed principles where we seek to and expertise to every assignment. reduce conflicts of interest and ensure our analyses are objective and unbiased. 4
- 6. M&A ADVISORY As aresult of the consolidation occurring in the financial services industry, the need for an investment bank that understands the nuances of asset management operations has never been g greater. Further, current market conditions have hindered smaller RIA’s ability to raise additional y capital, making mergers and strategic alliances even more attractive strategic alternatives. Houlihan provides both buy-side and sell-side advisory to asset management clients, traditional and alternative. There are several considerations that must be made in every transaction. Houlihan understands the importance of a cultural fit for its clients. Matching leadership styles and strategies are necessary components to a successful combination. Each transaction requires a complex valuation with unique circumstances factored into the valuation model. We analyze the value of an advisor from multiple perspectives, incorporating a wide array of valuation metrics (See Transaction Advisory – Advisor Valuation). Our seasoned investment bankers negotiate and structure deals to maximize our clients’ short and long-term objectives regarding management earnouts and other f bj ti di t t d th forward llooking compensation t i d ki ti triggers, such h as cash versus stock consideration, and mechanisms to allow our client to participate in the future growth of the firm. In addition, our experience enables us to provide strategic tax advisory pertaining to the allocation of a transaction’s proceeds in order to minimize the associated tax liabilities. 5
- 7. M&A ADVISORY (cont.) Furthermore, Houlihan’s extensive Diversify Client Base network provides us with Acquisition Appetite Access Broader Distribution comprehensive understanding of Seed New Strategies the investment advisor universe. uisition Branded Participate in Upside We represent dozens of clients on ny Image both the buy-side, fi b th th b id firms t i ll typically Acquiring Compan Acqu Cross Sell Strategies/Products with Branded Firm Expandable Liquidity Event with greater than $5.0 billion AUM, as well as on the sell-side, firms Platform Strongg Maximize Earnout through typically with less than $1.0 billion yp y $ A Enhanced Performance Historical Performance AUM. Additionally, that network Broad allows us to introduce parties trategic Alliance Distribution Network Breadth of Service Offerings interested in forming strategic Access t B A to Broader Di t ib ti d Distribution alliances and partnerships to St cross-sell niche products across multiple distribution networks. 6
- 8. PORTFOLIO VALUATION Thecurrent market conditions dictate the need for independent and supportable pricing, given the material impact that certain investments can have on the Net Asset Value, on a mark-to- market basis. The introduction of FAS 157 has made independent valuation a necessity for any entity with financial reporting requirements. Investment management firms are heavily dependent on the validity and integrity of security pricing and portfolio valuation. Houlihan has decades of valuation experience providing companies with objective, independent and defensible opinions of value that meet acco nting and reg lator req irements We combine al e accounting regulatory requirements. technical expertise with best practice modeling techniques to perform complex financial instrument and portfolio valuation. We employ sophisticated methodology when it comes to pricing and use the most current mark-to-market pricing technology available. Our experiences from both the audit and financial valuation world have established us as a service provider renowned for dealing with the most complex and hard to value securities hard-to-value securities. Houlihan’s senior leadership team has a clear understanding of the level of independent evidence that is required for auditors to support their opinion, which overall leads to an efficient and more cost effective year-end process. 7
- 9. PORTFOLIO VALUATION (cont.) Houlihan provides comprehensive valuation services to hedge funds, fund advisors, fund administrators, and related financial services firms. Our reports are highly transparent, which ensures a deliverable that is well accepted by clients and their auditors, such as: • Monthly, Quarterly and Annual Portfolio Valuations • Financial Reporting Compliance • Side Pocket Transactions • Specific Investment Valuation including: • Mortgage-Backed Securities • Credit Linked Notes • Asset-Backed Securities • Structured Investment Vehicles • Pass-Throughs • Exotic OTC Options • Mezzanine Debt Securities • Complex Derivatives • Convertibles • Private Equity Placements • Distressed Securities • Other Illiquid and Hard-to- • Auction Rate Securities Value Securities (Level III) • Cash & Synthetic CDO & CDO² • Fund of Funds and Other LP Tranches Interests 8
- 10. RESTRUCTURING Houlihan provides acomprehensive suite of restructuring services for alternative investment firms seeking to restructure in the midst of the current unprecedented market conditions. Alternative Investment Managers will face continuing pressure in the coming months as the industry’s assets under management are expected to drop significantly due to investor redemptions and declines in asset values. Some industry forecasts are predicting declines in AUM of 30% or more across the industry. Continued consolidation within the alternative investment industry ill require in estment ind str will req ire a unique set of ser ices and skill sets to ser e the critical niq e services serve needs of funds looking to provide investors with a broad array of options. Our experience in advising alternative investment managers looking to provide investors with p g g g p choices, whether it be the lock-up of money up, having funds placed in a liquidating trust where investments will be sold and the cash paid out over time, or splitting a fund into a liquid and illiquid master fund represented by different share classes is unparallel. We have acted as an advisor on a number of fund restructuring engagements as we have an extensive network of alternative investment managers making markets across a wide variety of asset classes. The restructuring is designed to meet clients’ objectives to retain assets under management, while also creating synergies among the trading platforms. 9
- 11. RESTRUCTURING (cont.) Restructuring Service Levels Asset Level Advisor Level • Structuring and Arranging the Sale of • Loan Workouts and Refinancing Securities • Recapitalization and Reorganization • Maximizing the Value of Assets • Advisory Related to Lock-Up Periods • NAV Calculation, High Water Mark Resets Portfolio Level and External Valuation Opinions • S Pocket Structuring and Valuation Side S • Advising and Valuation of Dissolutions • Wind Downs for Both Onshore and Offshore Complex Hedge Funds • Evaluation of Alternative Restructuring and Remediation Proposals 10
- 12. TRANSACTION ADVISORY Advisor Valuation Secondary Market Transactions • Advisors in need of firm valuations count on Houlihan is uniquely situated to introduce Houlihan to provide comprehensive, detailed transaction opportunities to both buyers and analytical reports that maximize the firm’s sellers across the investment universe, intrinsic value, whether it is for strategic or including the following types of positions: financial purposes. • Auction R t S A ti Rate Securities (ARS) iti • Houlihan provides guidance to advisors • Non-Performing Whole Loan Pools regarding compensation and incentive • CDO Tranches structures that are strategic and can be • Limited Partnership Interests supported by the firm’s existing structure and pp y g • Mortgage-Backed Securities M t B k dS iti comply with federal and state laws and • 1st and 2nd Lien Loans regulations. • Distressed Real Estate Assets • Houlihan’s proprietary advisor valuation model uses a fundamental approach to forecast future growth rates across each product/strategy. Other items taken into consideration include management, performance and other fees, current and projected AUM, and operating expenses. 11
- 13. TRANSACTION ADVISORY (cont.) FinancialOpinions There are certain situations that require an independent opinion as to whether, from a financial point of view, view the terms of a transaction are fair to specific parties of interest typically investors in a fund interest, fund, creditors of an Advisor or shareholders of an Advisor. For instance, when a portfolio of assets are being bought from or sold to a related entity or when a majority block of shares of an Investment Advisor are sold without prior consent of a minority shareholder. Often times there are changes to the Advisor’s capital structure that merit a fairness opinion as well well. Houlihan Smith is a leading provider of fairness opinions, one whose reputation is highly regarded. Houlihan’s approach incorporates the leading best practices within the corporate governance, regulatory, legal, legal and valuation fields Our experience in the asset management industry and our strict adherence to fields. maintaining independence enables Houlihan to discern fairness for all parties in the transaction. Where areas of uncertainty do arise, we are forthcoming with sound advice to ensure significant and time sensitive transactions are completed without the foregoing of fiduciary duties. Houlihan has issued a number of Fairness Opinions in the following situations: • Transactions involving the purchase/sale of assets • Transactions involving the purchase/sale of investment advisors • Recapitalization/reorganizations 12
- 14. RECENT SPEAKING ENGAGEMENTS August2009: Karl D’Cunha. “Finding a Strategic Partner in Today’s Environment/What’s Your Hedge Fund Worth Today?” Infovest21 LLC - Seminar. (New York, NY) July 2009: Karl D’Cunha. “FASB157: Compliance Strategies and Lessons Learned.” NYSSA Event – Co-hosting with Harvey Poniachek, PhD, Director of Valuation Services, RSM McGladrey, Inc. (New York, NY) June 2009: Andrew Smith. “M&A in the Middle Market.” Duane Morris LLP – Partners Meeting. (Atlanta, GA) April 2009: Richard Houlihan and Karl D’Cunha. “Overview of the Current Market Conditions.” Proskauer Rose, LLP. (New York, NY) April 2009: Andrew Smith and William Butrym . “Hedge Fund Restructuring and Consolidation in 2009.” GAIM Ops Cayman – Co-hosting with Bingham McCutchen LLP and Aragon Group. (Grand Caymans) April 2009: Karl D’Cunha. “Hedge Fund Restructuring.” Round Table – Co-hosting with Lowenstein Sandler PC, PricewaterhouseCoopers, and Aragon Group. (New York, NY) April 2009: Karl D’Cunha "Hedge Funds in Distress " City Bar Center for Continuing Legal Education – Conference (New York NY) D Cunha. Hedge Distress. Conference. York, March 2009: Houlihan Smith & Company, Inc. “Capital Availability and M&A in the Middle Market.” Duane Morris LLP – Presentation to Corporate Practice Group via Webinar. March 2009: Karl D’Cunha. “The Changing Landscape of Fund Reporting.” Private Equity Seminar – Co-hosting with Mourant Fund Services, JC Flowers & Co. LLC, and Simpson Thacher & Bartlett LLP. (New York, NY) February 2009: Andrew Smith. “Making the Most of Financing Opportunities in Today’s Market.” Conference – Co-hosting with Winston & Strawn LLP and GE C d Commerciall Fi i Finance. (Chi (Chicago, IL) January 2009: Karl D’Cunha and Andrew Smith. “Latest Trends in Investor Operational Due Diligence and Hedge Fund Selection and Industry Best Practices.” GAIM Miami 2009 – Co-hosting with Sadis & Goldberg LLP, Sellers Capital LLC, Citadel Solutions LLC, and KPMG. (Miami, FL) January 2009: Karl D’Cunha. “Getting the Deal Done: Corporate Valuations in 2009.” Dealmaker Magazine – Panelist via Webinar. November 2008: Karl D’Cunha. "FAS 157 and Marking to Market: What Does Fair Value Mean to Your Company in Today's Economy?" Co-hosting with Ernst & Young LLP and Lowenstein Sandler PC. (New York, NY) November 2008: Karl D’Cunha and Jim Honan. 2nd Annual Structured Credit Investor Conference – Co-Sponsor and Speaker. October 2008: Karl D’Cunha. “Understanding Investment Opportunities and Systematic Risks within a Global Framework.” 2008 Annual AFP Conference – Panelist. (Los Angeles, CA) October 2008: Houlihan Smith & Company, Inc. “Finding Liquidity in an Illiquid Market.” Fulbright & Jaworski LLP – Presentation to Practice via Webinar. October 2008: Houlihan Smith & Company Inc. “How to Find Liquidity in an Illiquid Market ” Co hosting with Day Pitney LLP (CT MA NJ & NY) Company, Inc Market.” Co-hosting LLP. (CT, MA, NJ, March 2008: Karl D’Cunha. “Valuation in 2008: Fair Value Issues for Hedge Funds Private Equity Funds and Corporate Transactions Seminar.” Panel – Co-hosting with Katten Muchin Rosenman LLP. (New York, NY) 13
- 15. RECENT PRESS Investment Dealers Digest. “More Science Than Art?” (2009 July 9) – Cited: Smith, Andrew. Dealers' Digest More Art? (2009, Smith Andrew Mergers & Acquisitions Journal. “An Inexact Science.” (2009, July) – Cited: Smith, Andrew. Chicago Sun-Times. “Finding the Sales.” (2009, June) – Cited: Houlihan, Richard. Chicago Sun Times Online “Finding the Sales ” (2009 June) – Cited: Houlihan Richard. Sun-Times Online. Finding Sales. (2009, Houlihan, Richard Structured Credit Investor. “Little Awareness of Policymaker Impact on Risk Management.” (2009, June) – Cited: Weber, Brian. Hedge Fund Weekly. “Robeco-Sage Capital Eyes FoHF Purchase.” (2009, June) – Cited: D’Cunha, Karl. g y g p y ( ) Chicago Sun-Times. “Taking Groceries Online.” (2009, May) – Cited: Houlihan Smith & Company, Inc. CFO Magazine. “More Than Zero.” (2009, April) – Cited: D’Cunha, Karl. Alpha. “What are Funds Buying?” (2009, March) – Featured: D’Cunha, Karl. p y g ( , ) , Hedge Fund Law Report. (2009, March) – Cited: D’Cunha, Karl. Investment Dealers’ Digest. “Culture Clash as Hedgies Join Forces.” (2009, March) – Cited: D’Cunha, Karl. HFM Week. “Houlihan Smith Expects Consolidation Increase.” (2009, January) – Cited: D’Cunha, Karl. p ( , y) , Pensions & Investments. “Illiquid Securities to Get New Market.” (2008, November) – Cited: D’Cunha, Karl. Dow Jones. “Toxic Auction-Rate Securities Available at Firesale Price.” (2008, November) – Cited: D’Cunha, Karl. CFO Magazine. “Rethinking Capital.” (2008, November) – Cited: D’Cunha, Karl. g g p ( , ) , Barron’s. “Unlocking the Auction Rate Mess.” (2008, August) – Cited: D’Cunha, Karl. Seeking Alpha. “The Untold Story of The Auction Rate Securities.” (2008, August) – Cited: D’Cunha, Karl. 14
- 16. ASSET MANAGER SERVICESGROUP Karl D’Cunha is a Senior Managing Director at Houlihan Smith and oversees the firm’s financial advisory practice. He is head of the firm’s Hedge Fund Advisory services group and a team leader of the firm’s Technical Standards Committee. Mr. D’Cunha has over 13 years experience in the alternative investments industry, including working with some of the largest hedge funds globally on valuation, restructuring and M&A issues. Mr. D’Cunha has prepared, supervised, and consulted upon assignments to US and International hedge funds, fund of funds, investment advisors, mutual funds and other entities. Mr. D'Cunha was previously an audit manager at Ernst & Young, LLP and PricewaterhouseCoopers, LLP with 8 years experience in the Investment Management industry group. Mr. D'Cunha holds a B.A. in Finance and Economics from University of Western Ontario and a Graduate Diploma in Accounting from McGill University. Mr. D'Cunha is a Chartered Accountant and a level III candidate in the Chartered Financial Analyst program Mr D’Cunha is a member of the following organizations: Canadian program. Mr. D Cunha Institute of Chartered Accountants, CFA Society of Chicago, CFA Institute, Hedge Fund Association, New York Hedge Fund Roundtable, Association of Chartered Accountants in the United States, Association for Financial Professionals, Appraisal Issues Task Force and American MENSA Ltd Force, MENSA, Ltd. 15
- 17. ASSET MANAGER SERVICESGROUP Bill Butrym is a Senior Managing Director who has extensive experience in hedge fund restructuring, operations, financing, work-out and due diligence. Bill has directed the start-up and closure of numerous hedge funds. He has extensive experience in structuring and managing leverage facilities. In addition, he has participated on various investor committees and provided advice to numerous hedge funds on restructuring strategies, such as the formation of side pocket/liquidating trusts, redemptive share class offerings, exit financing for portfolios and sales of advisors. Prior to joining Houlihan Smith & Co., Bill managed a fund of hedge funds in the Asset Based Lending Sector. Bill co-managed the investment portfolio and was responsible for all operational aspects of the fund. Bill spent 24 years with Arthur Andersen where he held various Managing Partner roles in domestic and global operations, including directly overseeing the orderly dissolution of the company in 2002. Bill was dedicated to all aspects of strategy development, risk assessment, finance, operations and all related back‐office functions. Bill holds a BSBA (1979) from Creighton University and an MBA (1981) also from Creighton University. 16
- 18. ASSET MANAGER SERVICESGROUP Tom Kornmeier is a Managing Director with Houlihan Smith & Company in the New York office. Mr. Kornmeier serves in a business development capacity with a focus on assisting alternative investment advisors with their portfolio valuation, M&A advisory, restructuring and transaction advisory needs. Prior to joining Houlihan Smith, Mr. Kornmeier was a founding partner of Quantitative Alpha. Quantitative Alpha employed an investing approach that integrated a set of carefully researched alphas with a unique and effective investment process. Before founding Quantitative Alpha, Mr. Kornmeier was a financial advisor for UBS A.G. where he was responsible for the management of a large portfolio of fixed income and equity securities. Mr. Kornmeier began his career in finance as Executive Vice President of Riskspan L.L.C. While he was there he managed the sales and marketing of Riskpan's valuation and risk management application for fixed income securities for buy side and sell side enterprises. His additional responsibilities included security modeling and reverse engineering of fixed income instruments for accurate modeling by Riskspan’s analytic tools. Mr. Kornmeier is involved with the Real Men Read program in the Chicago Public School S S h l System and the Children Affected by A.I.D.S F d i M K d h Child Aff d b A I D S Foundation. Mr. Kornmeier i holds a Bachelor of Science degree from the University of Michigan in Ann Arbor. 17
- 19. ASSET MANAGER SERVICESGROUP Bruce Lohman is a Managing Director at Houlihan Smith & Company, Inc. and works with a wide range of domestic and international financial services institutions. In this role, Bruce focuses on providing fairness opinions, solvency opinions, valuation services, complex securities valuation, transaction services, structured finance advisory, and financial restructuring services. Bruce has over twenty years of experience in global derivatives, structured products, corporate credit and bankruptcy workout transactions working with a wide range of corporate, financial institution, and special purpose vehicle end users. Previously, Bruce worked at ABN Amro where he was a Managing Director in the Global Derivatives Team. In his career, Bruce has focused on special purpose counterparty risk, securitization, derivatives accounting, ISDA documentation and bundled financing solutions. Bruce executed a wide range of large scale, complex derivatives and structured transactions across a range of credit, market value and rates markets. Bruce originated, structured, executed and then terminated successfully a multi-billion notional portfolio of derivatives supporting single seller mortgage securitizations and bespoke repo agreements. Bruce has spoken at numerous industry conferences. 18
- 20. ASSET MANAGER SERVICESGROUP Peter Melloni is an Managing Director at Houlihan Smith & Company, Inc. where he is responsible for the firm’s M&A and private-placement efforts for the financial services industry, including asset management, hedge funds, banking, and insurance businesses. Prior to joining Houlihan, Mr. Melloni launched and managed a $400 million CLO of middle market leveraged loans on behalf of institutional investors. Mr. Melloni was previously with ABNAMRO Incorporated working four years in the private equity placement group and the credit structuring advisory group. Prior to those four years with ABN AMRO Incorporated, Mr. Melloni worked six years with ABN AMRO Bank, N.V. in various capacities including a two-year assignment as a board member of ABN AMRO (Polska), S.A. in Warsaw, Poland, with functional responsibility of building and managing both the structured finance unit and the international corporate banking group. Prior to ABN AMRO Bank, Mr. Melloni worked for Fuji Bank, Ltd. and Riggs National Bank of Washington D.C. Mr. Melloni completed The Executive Program at the Haas School of Business at the University of California at Berkeley and holds a B.S.B.A. with double major in finance and international business from Georgetown University. Mr. Melloni is a licensed S i 7 FINRA securities representative. li d Series ii i 19
- 21. ASSET MANAGER SERVICESGROUP Jeff Spurlock is a Vice President with Houlihan Smith & Company, Inc. Mr. Spurlock is a team leader of the firm’s Investment Management and financial advisory groups. Mr. Spurlock has worked on numerous client engagements with investment managers employing a wide array of strategies, working on issues related to M&A transactions, raising additional assets under management, valuation of Level III portfolio securities, rendering financial opinions, and the liquidation of illiquid portfolio investments during distressed situations. In addition, Mr. Spurlock leads the firm’s financial advisory practice providing financial opinions including valuations, fairness opinions, and structured finance advisory to public and private companies. Mr. Spurlock is a graduate of the Kelley School of Business at Indiana University in Bloomington, Indiana, where he earned a B.S. with concentrations in Finance and Business Process Management. In addition, he has earned the designation of Certified Management Accountant. Mr. Spurlock is also a CFA Level III candidate. 20