Credit investing with Adam Peltzer

Adam, thanks for being here. Tell us about your background.

I went to Wichita State where I got a bachelor's and master's degree in accounting. I started my career with the KPMG office in Wichita - eventually moving to Kansas City - and spent about five years in the corporate tax department.

While taking the CFA exam, I switched over to Sprint with the main goal to move to the investment business. A couple years later, I got hired by a local firm, Fountain Capital, which was a high-yield bond manager here in Kansas City. I eventually made partner there and it proved to be a successful career transition for me since I always wanted to be in the investment business.

Fountain Capital was dissolved in 2015 and I then moved over to Tortoise Capital where the founders were a combination of individuals from Fountain and KC Equity Partners. Tortoise was focused primarily on energy investments, of which I had experience during my time at Fountain, so it proved to be a smooth transition. I was with Tortoise for five years before starting Hiram Capital Management with Jeremy Goff and Emmanuel Emah-Emeni in May 2021 where we’re currently in the middle of ramping up and closing our first fund.

A lot to unpack there. Start with your decision to leave public accounting.

In my mind, after 3-5 years, you decide whether you want to make it a long-term career or try something else. I enjoyed everything I did there, but my passion was always on the investing side of things - I would read anything I could get my hands on about investing. I had no desire to get on the partner track in public accounting.

However, it was a great experience and I wouldn’t trade it for anything. It’s a great start for anyone starting out since learning your way around financial statements translates to all aspects of the business world.

How did you make the transition to the investing side with Fountain Capital?

While I was at Sprint and studying for my CFA, I found the job posting for Fountain Capital on the CFA website. I was lucky enough to have some people here in town that were trying to help me break into the business, and through that network was able to get someone to put in a good word for me with Larry Powell, who was the head of Fountain Capital.

What can you share about winding down Fountain Capital?

Fountain was a very successful high-yield bond manager that was started in the early 1990’s and in fact launched one of the first Collateralized Debt Obligations (CDOs) and had a great reputation on Wall Street. Our client base was predominately large pension funds and endowments and over time more of them began to look for larger asset managers that offered multiple products versus a single focused boutique type firm like ourselves. So we made the decision in late 2014 wind up the business. It was at that point that I made the natural transition over to Tortoise where a number of the original Fountain Partners had moved to and was a great fit because I had been in charge of the Energy sector at Fountain.   

Tell us more about your time at Tortoise Capital Advisors.

I was a Senior Analyst and Portfolio Manager, primarily looking at equity investments. Tortoise was one of the largest MLP investment managers in the space. I also led the fixed income allocation on a couple of the closed-end funds as well as served on the Investment Committee of the private credit platform. 

That brings us to where you are now - talk more about Hiram Capital and the investment strategy behind it.

My business partners and I launched Hiram as an alternative credit investment platform with a focus on commercial real estate debt. We are in the later stages of raising our first fund which we are targeting at $150-$200 million. For the first fund we are focused on Mezzanine debt within industrial and multi-family commercial real estate.

We see a niche area in the market to bridge the gap between loan-to-value ratios that banks are willing to lend at and that which developers would rather finance their projects at, opening an opportunity for Mezzanine debt. We’ve received really good feedback thus far and are developing a healthy pipeline of potential investments as we move forward. 

How would you advise someone interested in transitioning from public accounting to an investment focused career?

If you’re interested in the investing world, a lot of people either get an MBA or take the CFA exam. I opted to make the transition with the CFA route since I already had a master’s degree in accounting and felt an MBA would be a bit repetitive.

The more general advice I would give is find whatever you're passionate about - whether it's investments or something else - and gain all the knowledge you can get on the topic and the different paths to get there. It’s also important to be proactive about your decision to transition. Networking is a huge component of this just to get your name out there and let people know you’re interested in a certain line of work. There is also an element of luck.

Also, convey your knowledge of the different businesses you worked on. Be able to not just explain the specific audit or tax work, but instead why the numbers say a certain thing or what they mean in the financial statements in the overall understanding of the business.

I was fortunate that there was a local investment manager here in KC that happened to be looking for someone that didn’t necessarily have investment experience, but just overall business experience. Public accounting provides a great foundation of understanding business concepts that most people don’t have early in their career, so leverage that to your advantage.

What are personality traits that you think best align with the investment industry?

You have to have an intellectual curiosity about investing and everything that comes with it. I’ve been on the buy-side of the industry, so you have to love to dig in and learn everything you can about the companies before you make a decision to invest.

For example, I spent close to 14 years covering the energy industry and I had to teach myself a lot about oil and gas engineering and geology. I’m not a geologist or an engineer, but you have to constantly be learning and investigating. Frankly a large part of your day as an investment manager is reading and studying. Understanding every aspect of a potential investment and where it could go wrong and how much potential there is for gains. If you’re going to be great at something, you have to be all in. It can’t just be a job and then you forget about it when you leave the office every night.

You’ve shared a personal love for investing - any trends that you’re particularly interested in the macro environment?

From an equity perspective clearly tech has been a winner for a lot of years now. It’s been hard to go wrong with the Apples, Facebooks, and Amazons of the world.

As we get more into an inflationary environment, which seems to be more than just transitory, you are probably going to want to rotate your equity portfolio to more value and cyclical names, as well as commodities and other hard assets that benefit in inflationary environments. Uncorrelated yield products should remain attractive which is what we’re focused on at Hiram.   

What are your long-term career goals?

I’ve told Jeremy, our Managing Partner, this is the last stop for me. We want to build this so that it can run successfully for a long time. Several years down the road, I would hope we would have 3-5 funds up and running. We’re going to look where we see the most opportunity within the credit market.

We don’t want to grow just to grow - we want to be smart about it. A lot of firms in the investment world go down a path where they become just asset gatherers. First and foremost, we’re investors. We want to be diligent and smart about our investing because ultimately it’s about the clients that entrust their money to us.