This article is sponsored by Sanne, an Apex Group company.
Making sure that firms are equipped with the right tech solutions has never been more important for CFOs. Investor requirements for access to data become more sophisticated with every passing year, extending beyond traditional financial metrics and into data on ESG performance. Providing a seamless user journey for investors accessing data is fast becoming a prerequisite for managers’ ability to compete.
Simon Vardon, global head of real assets at fund administrator Sanne, an Apex Group company, says technology will play an increasingly key role in helping managers respond to investor requirements, while also achieving efficiencies by integrating systems. He adds that real estate managers are increasingly turning to tech to help them manage their assets more efficiently.
What are investors looking for when it comes to accessing data held by fund managers?
We have seen a shift where investors demand increased access to online data and analytics – they want to move away from PDF statements and similar static data. For investors, it’s not always necessarily about increased quantity, but more about the quality and consistency of the data they are receiving.
That trend has raised the bar for what portals need to be able to offer investors. We need to remember that investors will hold positions in funds operated by different managers, all of which have different investor reporting tools. So, getting greater consistency in reporting, as well as ease of access, is crucial for investors.
Alongside online access to the traditional fund metrics, the other demand is now for ESG data reporting. Investors all have their own ESG targets and they want access to performance data on ESG from the underlying funds and underlying investments. A fund may not actually be under a regulatory obligation to report ESG data, but the manager will still need to get the ESG metrics to investors if they demand that.
How are fund managers integrating advancements in tech into their back-, middle- and front-office functions?
We are seeing managers take a big, holistic view on technology. The back-, middle- and front-office teams may have traditionally worked in silos, and initiatives might have sometimes progressed in isolation. We have seen much more of a holistic vision taking shape from managers in recent years.
Fund managers can have significant volumes of data to crunch, often from multiple sources and processes. They need to aggregate and analyze that data, both on financial and non-financial metrics, to meet the needs of their investors and other stakeholders, including regulators. They also have an incentive to make their processes more efficient, particularly as the amount of data grows and systems proliferate – and we have seen significant investment into technologies that allow them to do that.
One of the key themes managers are looking at is process automation and improved systematic controls. They are looking to increase the use of big data to enhance decision-making, alongside integrated datasets, so they get better insights from real-time data.
There is also a drive for cloud-based software and user-friendly apps for end users. For real estate managers, some of the efficiency improvements are coupled with innovation at the asset level. For example, we are seeing smart buildings, where utilities can be centrally managed or operated by sensors. That not only improves efficiency, but it captures data that can feed into financial reporting, as well as into metrics around utility usage for ESG reporting.
There’s a stereotype that fund managers are quick to promote digital transformation in their portfolio companies, but slow to adopt technology in their own operations. Will that change?
Yes, there’s quite a widespread desire among managers now to use technology to improve, to streamline and ultimately to make better decisions that might enhance performance.
New technologies are popping up everywhere, so the key is to be able to find out what is right for each manager because some technologies might be useful and others might be solutions waiting for problems.
When you look at the efficiencies that technology can bring, then whatever cyclical thing is happening in the market can almost be put to one side. Even with the current macroeconomic environment, I don’t see any dampening of appetite for technology that can improve processes, reduce errors and potentially reduce costs. The industry is full steam ahead on that.
For example, CFOs often complain about needing to provide data in a bespoke format for each investor. Portals are increasingly helping to solve that problem, because they can allow investors to drill down themselves into the data. That potentially takes away a lot of the question-and-answer interaction between managers and investors. The best portals are allowing an investor to view their investment in a fund, and compare it to their investments in other funds, and to pick out positions and movements with ease.
Can automated data be a differentiator for GPs?
The holy grail for the alternatives industry is a slick, accurate and secure data journey. Users would be able to look at the flow of data that needs to come from asset or investment levels, up through a fund, out to either investors, or any number of different stakeholders – which might include regulators, tax advisers, auditors and so on.
Managers can differentiate themselves, to some extent, through the progress they’ve made towards that vision. But I do take the view that automated data ultimately becomes the baseline. It will be the norm in the future and every manager will need to get it if they want to compete.
The pandemic drove the move to electronically executed contracts, which has helped to make leasing, asset and financing deals all far less painful at the execution step. Smart contracts are a good example of automated data. These cut out the need for paper documentation, they can cut out third-party involvement, which can reduce costs, and they should be highly secure and transparent. We see a lot of appetite for that.
There are also indirect influences driving automation of data and innovation, particularly in real estate. One example is the rise of the build-to-rent sector, where residential assets are professionally managed. Operators really focus on the tenant experience. They want to deliver app-led technologies and simplify how people use their assets, how they access the facilities that are available in new residential assets. That is something that is happening at the coalface in real estate.
How can managers overcome pressure points when collecting, analysing and sharing data?
The volume of data that real estate managers deal with can be huge. They potentially have a lot of data on residents. Some of that data might be sensitive or personal data that is governed by regulations like the EU’s General Data Protection Regulation. That has raised awareness around how to manage personal data. It plays a huge part in some of the day-to-day compliance needs that sit with real estate and property managers, so they need to make sure their cybersecurity capabilities are enhanced and updated.
Also, data typically comes in from a lot of different sources in real estate. The aggregation of that data is often where transformative changes are most desired – where people are looking for solutions to reduce timelines and make processes easier.
There has always been a focus on financial data, but these days non-financial data is also part of the equation. There are new ESG requirements, but the relevant information is not always accessible. For example, often the data needed for an asset manager to report upon ESG metrics is held with property managers or tenants. Where this arises, managers’ only option is to make best estimates in their reporting, which is not ideal. Now, we often see contracts being renegotiated that allow for the exchange of ESG data more readily. Typically, that is acceptable to everyone, because people understand this is probably helpful in driving improvements for everyone.
When it comes to outsourcing, what are the key elements necessary for creating an effective tech platform?
Some of the largest managers have the resources to implement technology solutions themselves, so they are looking to a fund administrator for a sense-check, or to provide support in making their solutions work more effectively. Other managers favor a fully outsourced model and so they are coming to administrators for everything.
There has been a lot of consolidation in the fund administration industry in recent years.
That scale has enabled the industry leaders to become global businesses and therefore global partners to large fund managers. The largest players can support technology solutions across financial and non-financial data.
We know that an effective technology platform must be able to ingest data from multiple sources, be able to aggregate it and support the traditional financial reporting needs, while also making that reporting simple for the end user. The online platform must be user-friendly for the investor and the manager.
On top of that, as you would expect, a fund administrator needs to put a huge amount of diligence into cybersecurity, data security and personal information.
The leading administrators have been investing directly into technology firms or entering into strategic partnerships with them to enhance the solutions that they can offer to their clients.
It’s been our mantra for a long time to provide clients with a single source solution for their back-to-front office requirements. That’s bearing fruit now with the types of solutions we can offer to clients.