The private equity real estate sector, as with all within the market, is facing economic and regulatory challenges which can, if managed ineffectively, affect operations and service expectations. These include the remote work trends, rising interest rates, regulatory changes, and increasing demands for transparency.
Elizabeth Fitzgibbons our Group Chief Commercial Officer, shares insights on these challenges and the evolving landscape.
The pressure is on in PE Real Estate: Commercial investors are demanding real-time reporting, regulators are imposing rules to increase transparency and the US Securities and Exchange Commission’s new rules for registered investment advisors to the International Sustainability Standards Board demand new standards for sustainability disclosures to name but a few challenges.
The industry swiftly embraced digital transformation, implementing enhanced cybersecurity and remote-access platforms to accommodate the remote work environment. Flexibility and secure remote access are now key considerations, and managers have taken this momentum forward and continued to embrace tech-enabled teams, allowing managers to widen their net when recruiting for talent. Remote working has brought about business growth for some at a rate that effectively means that managers are having to implement new performance management plans to deal with the inflow. While this is positive, it is adding pressure to the day-to-day operational landscape of the firm.
Global Compliance and Regulation:
Commercial investors are demanding real-time reporting, and regulators are imposing rules to increase transparency. In August 2023, the US Securities and Exchange Commission adopted new rules and amended others to enhance the regulation of private fund advisers. According to the SEC, the changes are “designed to protect private fund investors by increasing transparency, competition and efficiency in the private funds.”
The industry is adopting RegTech tools for simplified and automated compliance tasks, offering real-time regulatory updates from multiple jurisdictions. Firms are choosing more and more to outsource these roles and tasks, to ease pressure on internal teams. It is important when looking and working with outsourced partners that they have close connections with regulators, compliance officers, and advisors, along with robust technology and licenses, ensuring global compliance for clients.
Outsourcing fund administration:
Reducing compliance risks and costs, along with meeting investor-reporting demands, is pivotal for the growth of outsourcing. Market pressure to deliver accurate and transparent reporting has surged, and third-party administrators enhance credibility and offer reassurance to investors. Outsourcing grants access to cutting-edge technology and infrastructure, allowing fund managers to swiftly scale their operations and adapt to market opportunities.
The growing complexity of investment structures and increased regulatory burdens, necessitating specialised expertise. A shortage of skilled accountants and industry resources is prompting managers to seek external market and asset class specific support. As GPs seek investors across various jurisdictions, fund structures have become notably more intricate. Third-party administrators adeptly handle these demands, an arduous task for GPs alone. Today’s institutional investors no longer accept Excel spreadsheets; they require niche industry-specific accounting platforms, something third-party administrators can provide without the costs and time associated with in-house build, implementation and maintenance.
The Role Of Technology:
Data management reporting capabilities are crucial for Managers. Managers are seeking partners that are able to efficiently handle extensive data volumes. This includes automated data aggregation and integration tools, ensuring instant access to vital financial information while minimising manual errors and processing delays. Managers and Investors are increasingly requiring access real-time data through portals, to enable them to delve into information across various jurisdictions transparently, quickly and at any time.
Additionally, cybersecurity is of paramount concern. Your chosen fund administrator should showcase that they have robust cybersecurity measures in place to safeguard sensitive financial data and prevent breaches. Industry standard practices such as multi-factor authentication, encryption methods, and threat detection systems are vital to compliance and aligning with best practices.
When managers are considering outsourcing there are many factors that need to be considered. Finding the right fit and ensuring that your outsourced provider has the necessary specialised expertise, technology, regulatory demands, and efficiency considerations is paramount.
Centralis Group provides specialised real estate service, operating directly within the Private Equity and Real Estate investment funds markets. We acquired Ferris, a Group company of Centralis, in 2023. Ferris was one of the first service providers in Luxembourg to implement our own Yardi Voyager platform in 2011. The platform brings technology efficiencies, which, when implemented correctly, allow us to partner with clients to combine real asset knowledge with technological system experience.
Our distinct forte lies in constructing bespoke solutions for each client, rooted in an advanced understanding of the nuances and intricacies that define individual deals and their journey to success.
Our clients represent global real estate leaders, who enjoy the added advantage of Centralis Group’s reputable name and unwavering commitment to service excellence as part of their own client service proposition. This positions them favorably for future business opportunities and prospects.
Our client base encompasses entities of varying sizes and experience levels, and we seamlessly integrate our services to align with each of their unique growth strategies. Our role extends beyond support, offering market expertise across a spectrum of functions, including but not limited to consulting, transaction support, reporting and compliance services, management and accounting services, as well as unwavering business continuity support.