Special situations investing with Laura Dalton

Great to chat with you today Laura! Tell us about yourself.

After undergrad, I started in mutual fund accounting at Waddell and Reed. I did that while I was getting my master's in the evenings, and it set up a natural transition for me when I started at EY in their financial services organization. EY splits out financial services from core audit a little more formally than the other Big 4. So I started there and did three busy seasons. I was able to see a lot of things and get a lot of exposure to financial services companies. I worked on funds, insurance and reinsurance, and some real estate investment deals. It allowed me to start dipping my toe in the water of those industries.

What made you move on from EY?

Public accounting just wasn’t a great fit for me. It’s a great learning experience, but there's so many other things out there. You can take that experience and go do something that is in some ways more fulfilling. When you go in and you're the auditor, you see a thing and then you walk away from it. When you're working internally somewhere, you get to find things or understand what's happening, but also work towards the end goal. So having that ownership and being involved in things was a great aspect of leaving public.

Where did you land when you left?

A company called Ovation Partners down in Austin. They have a handful of funds, but one main alternative income fund. It held a variety of investment structures, but a lot of subprime debt and some preferred equity. They identify as focusing on private credit and specialty finance assets. They invest in niche asset classes that are less accessed by large financial institutions and investors.

I routinely got to look at new industries and deal structures. I worked on everything from single family rentals to litigation finance to real estate bridge lending to various forms of consumer finance.

A lot of the assets were more nuanced or in younger assets classes. This provided an opportunity to dig in and really understand how to appropriately finance them.

How did Ovation Partners get started?

It was a kind of passion project started by our two founders. After the Great Recession, a sort of black hole in finance had developed. Some industries weren't able to get financing the way they needed, and the founders saw it as an opportunity to step in and pickup some of those investments. It started with Texas tax lien loans. They opened into other assets from there. The goal was always to select assets with a low correlation to the market.

You’ve mentioned a bunch of asset classes. Are they all held in the same fund?

There are some specific purpose funds, but most things were put in the main fund during my time there. Typically, different assets would be placed in different SPVs within the fund.

What was your role at the company?

I started in their back office on the accounting team. When I started, it was a still a young fund and that afforded me the opportunity to do a lot of tasks from other roles that didn’t exist yet. I got to do a lot of analyst work and a lot of portfolio manager work. Ultimately, they asked me to flip to the other side of the house and start their field exam team. I didn’t even know that job existed when they offered it to me, but they knew I had the right skill set and were willing to train me. That job really helped me make the transition from accounting jobs to finance jobs.

Talk more about the field examiner role. Were you doing exams as a part of diligence, as a monitoring function, when an asset was distressed?

Yeah, all of those. I would do an initial field exam as a part of due diligence on any investment that we were interested in. I was also going into all of our existing investments on a rotation.

In general, if something is a little more distressed or in trouble, you might do an exam two to four times a year. If something is working, has a clean exam, and the returns are there - you might go once a year or every other year.

Banks traditionally have these roles, so that’s a good place to look for a job like this. Field exams in banks are primarily done on asset-backed lines of credit. You’re going in and looking at the collateral supporting that revolver. There are also a handful of consulting groups that specialize in field exams. The role is a great way to see a lot of deal structures, not just the collateral. I had to read the deal docs to understand the structure before I could do the audit. It gave me a lot of exposure to debt and equity structuring.

Sounds like you had a great background for the role.

It’s a very natural transition for someone coming out of that public accounting audit role. It uses a lot of the same skills. You're sampling, going in, looking at things - but your goal is a little bit different. You’re not trying to make sure that everything is right. You’re very focused on making sure your deal structure and collateral is supported.

So it's less of taking random samples and more sampling the exact things you think might be wrong. You also do a lot of analytics and trends over time. It really starts to take that audit skillset and blend in some of the analyst, transactional skillset, and then just set you on a different progression.

What are some non-obvious ways that public accounting helped your career?

Good question. There are things that I take for granted that I didn’t realize until recently came from public accounting. These are a part of my daily work and can be very basic things. One is the way that I email or communicate, that foundation of good business communication. 

There are also things like verifying data. I would never open a file and not tie the data to another piece of data. It's just second nature to me. And then just general organization and prioritization. A lot of people struggle with that, but in public accounting you don’t have a choice but to learn it.

Any advice on how to find high-growth opportunities?

I would recommend going to a big market to get that foundational experience. Also, just being intentional about what you’re looking for. A smaller company gave me a lot of opportunities to do things that I wouldn't have otherwise. And not just small, but small and going through some sort of transitional phase presents a lot of opportunities. Ovation was still in the startup phase, but any place going through a growth stage has that same sort of mentality. Asking those questions upfront when you're going through an interview helps you find those growth opportunities.

What are some best practices for finding the right job?

As I've progressed in my career, I've learned to trust my gut about interviews or companies that I'm working with. Something can look really great on paper, but something in the interview or the conversation can not feel right or raise a red flag. Typically, if I notice something like that, once I'm in there and working, I discover the reason that I was feeling that. The right opportunity will come along, so be very intentional about what you're picking.

The way I think about it now, is I want to be aligned with the company ethically and morally. I tend to work in a fiduciary capacity and that's very important to me. I'm going to stay on the straight and narrow. I also believe in transparency. If you pay attention, you can pick up on those things during an interview.

What are some of the most important things you’ve learned about careers?

There are these very set trajectories or normal career paths you can follow. Looking back at my career, I've developed a lot of skills but I didn’t follow the normal path.I’ve learned that it's important to know how to speak about your skillset. You have to be able to explain that you know how to do the things needed for a job even if you haven’t followed a specific trajectory.

This is especially true if you’re interviewing with someone who doesn't understand the job. For instance, it’s common for the first interview at a company to be with HR. They probably don’t really know what the job entails. If you don’t check the exact requirements in the description, they don’t understand how to translate that experience. So it’s up to you to take your experience and fit it into their box.

Imagine you could have coffee with anyone. Who would you pick?

This might be controversial, but I think that I would pick one of the Kardashians/Jenners, You can't tell me that they're not business geniuses. With multiple billionaires, they're doing something right.

Do you have a motto or words to live by?

My core belief is more times than not the truth is in the middle somewhere. So if you have people telling you wildly different versions of things, try and find the middle ground, that's probably where the truth is.

If you no longer had to work, how would you spend your time?

I would start a competition barbecue team and take a lot of Irish dance lessons. And then, I don't know, I might become a dance or fitness teacher just for fun.