Dr Ulf Axelson, MSc Finance and Private Equity Programme Director, and winner of the 2009 Brattle Group Prize for the best paper in corporate finance published in the Journal of Finance, talks to the Department of Finance Admissions Manager, Thomas Watson, about his work on the development and teaching of the MSc Finance and Private Equity at LSE.
Thomas Watson: Ulf, the MSc Finance and Private Equity has been running for a few years now. Can you tell me a little about the background to Programme?
Ulf Axelson: Well, it’s actually the first Masters in Private Equity in the world. The general growth that we’ve seen in Private Equity and Venture Capital over the past few decades has led to it becoming one of the most exciting areas to study in finance and economics, which makes it the perfect match with LSE. I think that it is very important that we teach our students about Private Equity as it’s now such an important part of the economy; we see these types of investor helping firms at every level of their existence, be it start-ups, medium-sized or large firms. And of course it is also a very exciting area of research in finance, which is another reason why I think that we at LSE should be heavily involved in this area.
TW: Leading on from that, what makes the research and teaching of Private Equity at LSE distinctive?
UA: I think that LSE is really an ideal research environment for Private Equity for several reasons. Firstly it’s obviously a great institution, whose research culture and environment allows us to tie together both finance and economics with the broader social sciences like no other place in the world. It is really crucial that when we study an important economic phenomenon like Private Equity we can ask questions like: ‘Is this a type of investment activity that actually helps the economy and helps the world become better place or is it just some destructive shifting of assets?’ It is important to have an objective institution like LSE, with its reputation for rigorous academic research, make a contribution to this type of question.
The other main advantage LSE holds is its location in the heart of London, which is really the home of the Private Equity community. LSE has a tradition of being the place where academics and practitioners meet and this is especially true within the Private Equity sphere.
TW: Which in turn must add a great deal to the teaching experience?
UA: Yes, exactly. And that’s the great thing about this programme at LSE, it combines the research-led, academic rigour that we are famous for with some much more practical elements. In fact I honestly think that I think the Private Equity part of this programme is probably the most interactive course in any Masters programme, definitely at LSE but also I think in Europe! The way I try to teach Private Equity is through a case-based method, where we take real company situations, which we then discuss and talk about how we can apply what we’ve learnt in other classes, in terms of theories of finance, to the real life situations.
TW: And the programme is structured to build onto the Department’s generalist MSc Finance…
UA: Yes, students who take the MSc Finance and Private Equity get the same foundation in terms of strong financing foundations that they do on the MSc Finance (Full-time) – so all the standard valuation, asset pricing and corporate finance tools. They then get to take three of the optional courses, allowing them to specialize not just in Private Equity. It’s really a great foundation to build on, definitely one of the best generalist MSc Finance programmes in the world. Then on top of that we try to really do something special in terms of a very applied Private Equity course, which is really the flagship of the programme.
TW: From what I understand the Private Equity course is more than just the standard lecture teaching format?
The Private Equity course consists of two parts; one is a classroom experience based on a number of business cases that touch on the different aspects of Private Equity, and the second is the weekly practitioner seminars, where we invite leading professionals from different areas of the Private Equity industry into the class. It’s great to have the interaction between practitioners and the academic side of things. Also a major part of the course is the dissertation, which has been very useful way for the students to get exposed to the particular area of Private Equity that interests them. Actually, several have got job opportunities through meeting people related to their dissertation research.
During the course we aim to give to the students a number of different things. One is a general institutional knowledge of Private Equity – there are a lot of mysterious institutional terms and it might seem like a very difficult universe if you’re not initiated, so we supply the students with all the
knowledge they need and then they also get to meet practitioners from the major Private Equity firms to get initiated into this ‘club’, so to speak. So that builds contacts for them and gives them job opportunities going forward.
I also think it’s about teaching a very applied type of course in what I would call ‘active investing’ which is really ‘how do we invest the money of wealthy individuals or companies into firms with a view to making these firms better and then becoming actively involved in their running?’
It is really a very important skill for students to have in basically any type of managerial capacity, whether it be in a normal firm, a Private Equity or a Venture Capital firm or if it is as just an asset manager that invests into Private Equity.
TW: So finally, what type of student do you look for when recruiting for the programme?
UA: Well, as with all of our degrees they obviously have to be academically excellent. They do also have to be interested in Private Equity as well, but when I say Private Equity I mean it in a very broad sense. So we’re talking about what I was referring to as ‘active investing’, which could be Venture Capital, where you think about investing in very small start-up firms, to the very large-scale end of things, the leveraged buyouts, where we think of investing in the biggest firms in the world and then thinking of ways of improving them.
I also think that the students who thrive on this programme have to be very smart and articulate because that’s a prerequisite within this industry and also the way that we teach the subject. It’s very important that students are proactive and outgoing in the way that they talk to each other and talk to practitioners and we actually train them to do this, so you need to be an outgoing, proactive person.
It’s also a benefit, although not an absolute requirement, to have some type of work experience or internship experience so that there’s been some exposure to firms before you enter the programme. But we’re looking for students from very diverse backgrounds. Private Equity is a field that’s actually starting to become very international and going in to all different parts of the world and our class definitely reflects that.