Wright Thurston has created quite a few home study courses outlining his techniques. His titles include: ” Diamonds In The Rough: How To Build A $9,000 A Month Positive Cash Flow” cost: $325, “Total Investment Package” $699, “Making It Happen: Getting Rich The “Wright” Way” $250, “60 Strategies for Successful Investing” $100 and the “Property Management Magic: Fair But Firm Landlording Techniques” $325.
Wright Thurston began his journey in business as an IBM employee. Thurston claims to have become a millionaire by the ripe old age of thirty years old. He says he made most of it from doing some real estate investing while living in Alaska. Wright quit his day job with IBM back in 1989 to pursue real estate investing on a full time basis.
As far as his courses, they consist of a book with mostly the same material on cassette or cd. The books contain some good nuggets with some useful nuts and bolts information, but it’s mostly the same stuff you can find in a dozen different real estate books in a used book store for pennies on the dollar. Here’s the bottom line: Wright Thurston is an excellent salesman so he knows how to package his materials to look very classy and appealing.
Wright Thurston also offer mentoring courses, which he calls “Millionaire’s Retreats”. They go for about $2000 and last about 2-3 days. You probably won’t get mentored by Wright Thurston in person. You’ll most likely be mentored by another so called “wealth building expert”.
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Institutional investor profile: Lou Gerken, Founder and Chairman, Gerken Capital Associates
12 Feb 2003. Source: AltAssets.
Gerken on the sophomoric attitude of some private equity fund managers, on why the industry missed an opportunity in the disclosure debate, on why he’s positive about private equity and on the difficulty of judgment calls.
Based in California and set up in 1989, Gerken Capital Associates describes itself as an alternative equity merchant banking boutique. A fund of funds, it takes equity positions in the general partnership of a variety of equity funds, including some private equity houses. It invests in funds based in the US, Europe, Asia and Latin America and acts as a ‘non-managing general partner’ and also as a limited partner. Its investors are internationally based institutions. Gerken was previously a Managing Director and Group Head of Prudential Securities Technology Investment Banking Division and GP to the Prudential Securities Venture Capital Funds.
How would you describe the position of a ‘non-managing general partner’?
‘It’s slightly different from being a straight limited partner. We take a stake in the management companies of private equity firms – and that can be anything from a three to 50 per cent stake. So we take on the liability that a general partner would take on, but we are not involved in the day-to-day decisions about which investments are made. We are very involved in helping managers build their funds and helping them formulate and align their strategy. Every one of the funds that we get involved with is in a different state of development. So, for example, the earlier the stage of development, the more hands-on we are in getting the firm established. If the firm is more developed, we tend to help them with a particular initiative.
‘Having said all that, we are also limited partners in several of the funds in which we have invested. The funds in our portfolio range from funds of funds, to primary funds and secondaries funds. We think of it as a diverse family of funds in the alternative equity universe, which by way of our very active involvement in those funds, we have a very broad base of intelligence globally. That helps us formulate some interesting, out of the box-type assessments in tricky periods such as the one we’re going through now. There are a lot of funds out there that were set up in around 1995 by some very bright people. The problem is that they are not seasoned private equity investors. And to be able to tap into the expertise of individuals that have been in the business for five cycles and have the corresponding Rolodex and who are still active is invaluable to them.’
How do limited partners view your involvement with the funds?
‘Firms want to have the best “directors” on the board of the fund – as should limited partners. On the one hand, you want to make sure that these people are independent and that there are no conflicts of interest. However, if you have someone who is active in the industry, they will be involved with other funds and some people may see this as a conflict of interest. My view is that we have to be 100 per cent transparent in everything that we do. If a conflict of interest arises, we can always abstain on a particular issue. That situation hasn’t yet arisen because we have been very open about what we do.
‘We do get asked about our involvement when investors are looking at one of our funds, but we think that we add a positive slant. We take the view that we help funds avoid the traps and pitfalls that can present themselves. This is not an experiment, after all, you are dealing with other people’s money. You are paid to get it right, not to make mistakes. You need to surround yourself with people who can help you avoid those mistakes. If you are new to the fund management game, then you need to get people on board who are motivated and incentivised economically to pay attention. If you haven’t experienced this type of economic dip, it’s hard to work out what the next move should be. Should you sit on your investments? Should you, on a risk-adjusted basis, align your portfolio accordingly? The more experienced people that you have around you to help you formulate an opinion, the better the eventual decision will be.’
How does your investment process work?
‘The process is fairly similar to one that a limited partner would use when assessing investment prospects. But it does differ in that we are looking for a specific type of fund. We look for situations in which our experience and network can have a material impact on the success of a given fund. We are not interested in being passive investors that just sit on the board – we need to feel that we can make a real difference to the business tomorrow. Clearly, we are looking for good managers, but we are also looking for funds that are facing an interesting inflexion point. Look at Latin America and PIPE financings, for example. We’re always trying to assess the right asset class given the prevailing investment climate with the view of being forward-thinking. We don’t just look at what has happened over the last few years, but try to work out what are going to be the more interesting opportunities going forward while keeping both feet on the ground when we think about it.’
How do you find out about investment opportunities?
‘The most important source for us is our network. Having been involved in the business for many years, it means that there is a ready pipeline. I know most of these funds. I have visited them. The trick for me is to keep in touch with the successor management teams. Many of the managers I originally knew were around in the late 1970s or early 1980s and many of them have now moved on. We are on the lists of all the placement agents and so we often get to hear about opportunities that way. I also hear about funds through the meetings that I attend on a regular basis. They tend to be a good source of industry information. It’s a collection of sources, but we formulate it into our own proprietary pipeline that we keep and monitor constantly.’
How does your due diligence process work?
We go through all the usual, regimented steps that you might expect, but what we really try and focus on is whether the GP group has what it takes to go the distance. The hardest thing for us or for anyone is that it is a new relationship. You can do all the investigation, the reference checks and the analysis of portfolio companies, etc. But at the end of the day, it is the GP and our firm. If we haven’t worked together before then you never know how it will pan out until you roll up your sleeves. Only then do you find out whether the chemistry is right and whether everything that we had identified that we wanted to happen will actually happen. That’s more of a subjective assessment. So we try to spend a lot of time with the general partners – this is more important for us than for straight limited partners because we are far more than passive investors.’
What puts you off a fund?
‘We’re trying to zero in on groups with experience that is directly related to the investment strategy that they have outlined. We want to see a 1.0 correlation there. We want to see that they have the experience and the deals behind them to make it work. We’re not interested in groups that are attempting to trade off other people’s achievements. We want to make sure that we are getting the information from stand-up people and that they are totally transparent with us. We don’t want to see any misrepresentations – that is our hot point. All we have and all they have is a reputation. If you compromise that through wrong decisions, then you’re in trouble.’
What irritates you about private equity?
‘The one thing that stands out with the advent of a lot of new funds is that there seemed to be a notion that the allocation process was a very simple exercise. There are many funds who felt that there was nothing to it. They thought that you just went out and found the best funds – that was all there was to it. This I believe is a sophomoric attitude about how little intelligence it takes. There is obviously a lot more to it than that. I roll my eyes when I see a fund of funds that comes into my office asking if I want to come onto their board, saying that I shouldn’t worry about this or that point. I think this is less of an issue in the US than in Europe, where there is still a lot of money flowing into the business. But I can be sure that there will be a lot fewer of these players out there in the future. There will be a tremendous amount of consolidation in this area. But this is what happens when there is a lot of money to be made in an area. It attracts a lot of people – not always seasoned, professional people.
‘There is a lot more to investing than picking, in anybody’s league table, the top quartile performers over the last five or ten years. Getting the asset class right, given the prevailing investment climate, getting the right managers who will be successful going forward, understanding the dynamics within those partnerships and then being able to ensure that changes get implemented – these are all tough calls. I’m not sure that all managers appreciate this.’
What is the biggest mistake that you have ever made?
‘I think that it comes back to spending time with the general partners and making sure that they have the right ingredients for success in the future. We haven’t always got that right. It’s not that those that haven’t done well for us haven’t been bright people. Our business model is predicated on helping funds, to be active and to assist them on specific initiatives and sometimes it just happens that we are not the best fit. When that is the case, we constructively cut the cord and allocate our resources elsewhere. That’s why it is so important to pick the right managers in the first place.’
What is the biggest issue in private equity at the moment?
‘I think that the biggest issue is consolidation. We have about 2,000 funds in operation globally right now. A large proportion of those players will fall by the wayside because they just won’t be able to raise a successor fund.
‘The other issue is what appears to be an excessive amount of capital overhang that needs to be deployed. That will eventually be worked off by way of funds handing money back to limited partners, which is already happening.
‘And another is that private equity leadership should take a more active role in the debate about transparency. Many of the public pension funds are now being forced to deal with this right now, but managers had the opportunity to do something about this a few years ago. They missed an opportunity there. They should be more proactive and get involved in setting guidelines. That way they will be able to keep the legislators out.
‘Finally, the whole area of securitisation of private equity portfolios, insured principal guarantees and the cross-over with the hedge fund industry present some very interesting opportunities and challenged for the industry.’
How do you think that that the market will change in the future?
‘We are going back to basics, with what will be a stronger industry populated by more experienced players. This is a process that any industry goes through when it reaches excess. You always see a shut-down and then by some kind of correction, you tend to come out with a stronger industry. Private equity is going through a self-corrective process. I am very positive about the industry and believe that it has excellent prospects for those that understand it. I’m hoping that we’ll start seeing a pick-up in M&A and IPO activity by the second half of this year. I’m more positive about the industry than most people. The macro-fundamentals for the economy and industry at large are better positioned for growth now than when compared to 1995, the inception point for the bull market run and internet craze.’
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