One of the challenges for private equity real estate folk setting up on their own is the name of the firm. They either go for something with a colour in it such as ‘black’ or ‘red’, something that reflects nature and vision at the same time such as ‘cliff’ or ‘peak’, or they opt for the default option: a Greek name.
You might think that when it comes to Greek names, there are no options left as they are all taken, but think again. This week, Nori Gerardo Lietz, one of the most powerful women in private real estate investing with a client list that includes some of the globe’s largest pension funds and sovereign wealth funds, told contacts that she was leaving Partners Group to set up Areté Capital, meaning roughly “excellence” in the ancient language.
Wikipedia would have us believe that in its earliest appearance, Areté was ultimately bound up with the notion of the fulfillment of purpose or function: the act of living up to one's full potential. Areté in ancient Greek culture meant courage and strength in the face of adversity, the information site adds.
That is appropriate enough for Lietz, who once likened herself to the “cursed Cassandra” of Greek mythology (the girl whose curse by Apollo meant nobody believed her predictions). Indeed, she has been no stranger to adversity.
According to a magazine article in 2001, for example, Lietz was the subject of an apparent smear campaign with bogus and damaging claims about her relationship with the Oregon Public Employees' Retirement Fund being circulated to the largest clients of Pension Consulting Alliance, the firm she co-founded in 1988.
More enduring adversity, though, has come in the form of flak Lietz has received for some robust analysis of certain quarters of private real estate investing. Put it this way: she is probably not on the Christmas card list of some of the investment banks that sponsored the largest funds.
However, as Lietz prepares to be her own boss again with her own advisory and consultancy firm (she's also taking on publishing and teaching projects), she was only too happy to share her outlooks once more.
As she explained to PERE immediately after news of her departure surfaced, Lietz currently fears that capital at the moment is too “binary”. Too much is going to core property, she said, while the mantra that “opportunity funds are evil” is clearly too simplistic an approach to take if you are an investor.
While acknowledging there are indeed managers out there who deserve to disappear since they won't be able to raise another fund, Lietz said there also are those that deserve another shot. Those are the managers that proved to be good fiduciaries in recent horrible years and that didn't have compensation arrangements that have so badly sullied parts of the industry.
The market has not yet naturally sorted out one from the other, Lietz pointed out, not least because capital is not truly flowing. But when it does, she said it will become clear if you have done a really bad job at managing a fund because nobody will give you more money.
That's the consequence of poor performance, as Lietz said at a presentation in New York last year when she spoke of “Dead Man Walking” firms and the demise of the multi-billion dollar opportunity fund.
It is comforting to hear that Lietz does not feel that opportunity funds are bad per se. There is a role for those types of vehicles to play, and if anything, what needs to be questioned right now is the tonne of capital going to core funds.
Plenty of people – important investors among them – listen to Lietz. If one of her messages to them is that sponsors of opportunity funds can perform well, then it is a good thing she is setting up Areté to spread that message.
Indeed, it is an “excellent” thing.