“The first word that comes to mind when I think about Adam is wise. He brings a calm, thoughtful, strategic perspective to every discussion. As part of a small team, Adam works on every part of our endowment, carefully evaluating how each decision may impact the portfolio and the Institute, while keeping a keen eye on the macro environment. It is impossible to faze him, and he marches through every challenge without ever losing focus.”
—Jeff Gatto, CIO, Institute for Advanced Study
Since joining the Institute for Advanced Study roughly two years ago, Adam Solan has made himself invaluable to the investment team. In the first half of 2020, the allocator helped restructure the endowment’s overall portfolio strategy during the market downturn. Later that year, he helped the small investment team transition after CIO Mark Baumgartner’s departure for the Carnegie Corporation.
His ability to hit the ground running has earned him admiration from those who say that Solan is a sharp allocator, and a discerning judge of talent and character. For Solan, those instincts are the product of many varied experiences he’s had over the course of his near 13-year career, bookended as it is by two financial crises.
Solan started his investment career in June 2008, hired straight from undergrad at Tulane University into the school’s endowment office by then-CIO Jeremy Crigler. Crigler, also just starting his tenure at Tulane, was building an investment office from scratch and hiring recent graduates into the endowment’s three-year analyst rotation program.
Those early days at the endowment were formative for Solan. Not only were the investors cycling through the different asset classes, they were selecting managers and building out their investment processes, all while in the throes of the second-worst recession in US history. “We put a lot of action into place,” said Solan.
By the time he joined IAS—following other stints at software development firm Caissa, asset manager Ocean Road Advisors, and State Street Global Advisors—his multi-asset experience gave him a keen understanding of investments. At the endowment, Solan sources partners and also utilizes quantitative analytics, which he is an advocate of, in the portfolio.
“The varied experiences and mentors I’ve had, working on all these different portfolios, investing in funds, directs, and co-investments, has really allowed me to leverage all the insights that I’ve learned over the years,” Solan said.
CIO: What is the best way to bring more diversity to the financial industry?
Solan: Consider diversity an asset, which it is, when recruiting new employees. I believe it is extremely important to have diversity of thought and experience for decision-making and the only way to get true diversity of thought is to have a diverse team.
CIO: What are your favorite alts, and why?
Solan: I’ve always been drawn to private market investing. I think the market for private assets is less efficient than the public markets and thus present more compelling alpha opportunities. Moreover, it’s a lot easier to effectuate value creation through growth and/or rationalization when investing in a private business, early or late stage, than it is with a publicly listed corporation.
CIO: Is cryptocurrency a flash in the pan, or an asset of lasting value?
Solan: As a technophile, I’m drawn to crypto for all of the obvious reasons.The bull case has been well reported and amplified by many skilled investors and asset managers. That said, as an investor, I do see two huge risks to crypto: environmental impact and regulation. The environmental impact is an issue that I think the crypto market’s stakeholders are innovative enough to find solutions for. However, the regulation issue is much less clear to me. Just recently, we’ve seen some downward pressure in crypto prices due to China’s potential crackdown on mining. Whether the crypto market has the escape velocity to outrun these risks is very hard to predict.
CIO: How will the pandemic have changed the economic/financial world?
Solan: There are countless ways the pandemic will change every aspect of our lives. From an allocator’s perspective, I’m hoping that a hybrid model of in-person events with a virtual option will be the new norm. Having the ability to cut down on travel and spend more time with family would be a welcomed development. The environmental impact of reduced commuting and travel is yet another positive.
CIO: How will ESG change investing going forward?
Solan: I think the ball on ESG has started rolling and there’s nothing to stop it. Like most progressive issues, Europeans are way ahead of us. I think we’ll eventually catch up. The impact of ESG is perhaps overstated–I believe the invisible hand will organically divert market participants to allocate capital toward companies who are good stewards from an ESG perspective without the need for a rules-based overlay. I believe most companies recognize these trends and will do their best to comply with ESG standards simply from the standpoint of exercising their duty to shareholders. Regardless of the path, the outcome of more companies and businesses complying with ESG standards is a good thing.
CIO: Where do you see the most exciting areas to specialize further over the coming years?
Solan: I actually think having a broad scope in terms of asset class coverage is helpful as an allocator. So much of this business is relationship-based–many of the best funds, especially these days, are mostly closed to new investors and selectively let in new LPs when conditions warrant. Having relationships and prior contacts with these hard-to-access firms is an important skill set in allocating capital and thus the broader your mandate, the more of these relationships you’re likely to have.
CIO: What asset class or investment troubles you most right now—and why?
Solan: Value equities. Yes, I know the valuations of value stocks are at historical lows relative to growth stocks. However, I believe that the recent trends which have led to growth stocks outperforming will continue to accelerate and not mean-revert. A big part of this is demographics–young people entering the workplace surely prefer to work for companies like Google, Netflix, and Apple over companies like Exxon, JPMorgan, and Comcast. Likewise, this younger generation is much more likely to open up an online bank account on their phone (which, by the way, yields a much higher interest rate) than walk into a retail bank branch. Demographics aside, who doesn’t prefer the convenience of ordering goods online and having them shipped to your door versus going to a store? There are countless anecdotes in this vein and I just can’t envision a scenario in which any of these trends reverse.
CIO: What investing decision have you made that you’re most proud of?
Solan: Investing in private credit, specifically peer-to-peer lending, back in 2012. Some of these dynamics still exist today, but back then, individuals with savings were earning close to 0% on their cash, yet individuals who needed to borrow were paying double-digit interest rates on their credit card balances. It made a lot of sense to create a marketplace whereby the individuals with savings who wanted to take on some risk could earn a higher yield by lending some of their savings to people who needed an unsecured loan at a more reasonable cost. The risk-adjusted returns of the peer-to-peer lending asset class were very strong in the early and mid-2010s.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Solan: Steve Cohen. Obviously the investment-related conversation would be stimulating, but it would also be fascinating to hear about what it’s like to own a baseball team and an incredible art collection.
