DECEMBER 2018 | perenews.com FOR THE WORLD’S PRIVATE REAL ESTATE MARKETS FUND SERVICES & TECHNOLOGY A special supplement to PERE magazine EDITOR’S LETTER Time to board the technology train Not so long ago, a report on fund services would likely have been received with much head scratching among senior industry figures more interested in the sexier activities of fundraising and dealmaking. Viewed as the part of the business that ticked over quietly behind the scenes, it simply did not warrant much attention. How quickly things change. It is now front and center of the business. The old moniker – the ‘back office’ – is even considered a pejorative term. The full suite of factors that have facilitated this perception shift are too numerous to list here, but playing a big part certainly are: the increased level of investor due diligence of operations; the requirement for greater transparency and speedier; more detailed reporting; the volume of regulation and new risks impacting the sector; and a need to seek new ways to demonstrate performance and deliver value-add. Efficient, streamlined and cost effective operations are integral to that equation. And that brings us neatly to technology. It is clear how critical it has become to deliver top- grade fund services and meet stakeholder – namely investor – expectations. A contributor to this report describes it is as part of his firm’s DNA. Yet it is widely acknowledged that many private real estate managers have been slow on the uptake of technology. There could be many reasons: cost and complexity of searching the market for the perfect product; the time and effort involved in implementing and updating software; finding the right skillset to expertly manage it all. On top of that is the mindboggling pace with which technology changes. How do you know that the systems you integrate today will not become obsolete in five years’ time? Of course, the technology journey does not end at the door of investment management firms. There is also the performance-enhancing technology in the properties in their portfolios. Some investors have spotted an opportunity to back a new breed of funds dedicated to capitalizing startups that are developing innovations specifically for use in the built environment – it is aptly named proptech investing. These fund managers and investors see a future where real estate and technology become one. Technology is too often equated with business disruption. Throughout this report, it is clear it is time to think of it as “business-enhancing” at both the management company and asset level. The core message throughout is that if you are one of the managers yet to fully embrace technology, it really is time to step up. I’ll leave you with the wise words of one of our contributors: “Adapt or get left behind.” Enjoy the report, Helen Lewer Special Projects Editor FUND SERVICES & TECHNOLOGY | PERE 1 IN THIS ISSUE ISSN 1558-7177 New York 4 Fund services and www.perenews.com 130 West 42nd Street technology: Six trends Senior Editor Suite 450 Jonathan Brasse New York, NY 10036 Helen Lewer highlights key +44 20 7566 4278 +1 212 645 1919 [email protected] Fax: +1 212 633 2904 talking points Special Projects Editor Helen Lewer London 5 Sticking with tradition +44 20 7566 5478 100 Wood St, [email protected] Managers favor familiar domiciles London EC2V 7AN Contributing Reporters: +44 20 7566 5444 as they face disruptive times, say Lisa Fu Fax: +44 20 7566 5455 Evelyn Lee RBC’s Priya Nair and Dirk Holz Meghan Morris 19 Meet the venture capitalists Mark Cooper Hong Kong 8 The talent hunt Stuart Watson 19F On Hing Building funding the future of Staffing to meet the skills required Managing Editor – Production 1 On Hing Terrace real estate Mike Simlett Central in this tech and data-driven age is +44 20 7566 5457 Hong Kong Major investment managers are [email protected] one of many new challenges facing Tel: +852 2153 3240 opening their checkbooks, and Design & Production Manager real estate managers, write Simon Glen Reynolds Havers and Hugo Healing of portfolios, to a two-year-old firm set +44 20 7167 2039 PERE is published 10 times a year by PEI [email protected] Odgers Berndtson on finding startups that will reshape To find out more about PEI please visit: the asset class. By Meghan Morris Head of Marketing Solutions www.thisisPEI.com 10 Managing the unstoppable Real Assets Group 24 Protection v transparency: Nick Hayes tech revolution +44 20 7566 5448 Printed by How much data is the [email protected] Stephens & George Print Group In an era of more granular inves- www.stephensandgeorge.co.uk sector willing to reveal? Marketing Solutions Manager tor due diligence, technology has PERE rapidly become indispensable to Digitization is driving greater Annie Liu + 852 2153 3843 © PEI 2018 investment managers. RSM’s Tom transparency, but for some market [email protected] Green and Brad Berkley of Artemis participants there may be more Subscriptions and reprints value in data opacity, observes John Kral ‘PERE’ and ‘Private Equity Real Estate’ Real Estate Partners discuss the +1 646 545 6297 are registered trademarks and must not Audrey Klein, managing director, [email protected] benefits and challenges it brings be used without permission from PEI international institutional clients at Andrew Adamson +8 522 153 3141 No statement in this magazine is to be Corestate Group [email protected] construed as a recommendation to buy or sell securities. Neither this publication Chris Grant 25 All systems go +44 20 7167 2035 nor any part of it may be reproduced or [email protected] transmitted in any form or by any means, Driving efficiency in the fund electronic or mechanical, including management world is not just Customer Service Fran Hobson photocopying, recording, or by any about improved IT, but also getting +44 20 7566 5444 information storage or retrieval system, [email protected] without the prior permission of the the underlying processes right, An Nguyen publisher. Whilst every effort has been argues EY’s Kai Braun +1 212 645 1919 made to ensure its accuracy, the publisher [email protected] and contributors accept no responsibility 27 Finding the keys For subscription information for the accuracy of the content in this visit www.perenews.com magazine. Readers should also be 12 Five technologies set to to proptech aware that external contributors may As property technology moves represent firms that may have an interest reshape office space Editorial Director into the mainstream, investors are Philip Borel in companies and/or their securities By harnessing the latest technology, [email protected] mentioned in their contributions herein. managers and owners can stream- discovering how to best access the space. Meghan Morris reports Head of Research & Analytics Cancellation policy: you can cancel your line operations, make cost savings Dan Gunner subscription at any time during the first [email protected] and find value-add. Lisa Fu reports three months of subscribing and you 30 More data, more problems Publishing Director will receive a refund of 70 per cent of the 15 Omnichannelling is key to Buildings are filling up with Paul McLean total annual subscription fee. Thereafter, [email protected] digital devices that see, hear and no refund is available. Any cancellation future-proofing shopping Chief Executive remember everything. Dror Poleg request needs to be sent in writing [fax, mail centers Tim McLoughlin or email] to the subscriptions departments [email protected] of Rethinking Real Estate asks in either our London or New York offices. Henrie Kötter, CIO of ECE whether the sector is ready for a Managing Director – Americas Projektmanagement, explains Colm Gilmore privacy scandal [email protected] how technology helps provide Managing Director – Asia what customers want and is key 31 Relieve the pressure Chris Petersen [email protected] to making good retail investment Outsourcing has changed decisions considerably over the last 10 years and continues to evolve as managers 16 How technology is helping face more external demands. managers bridge the Alter Domus’ Anita Lyse and reporting gap ® Alan Dundon discuss current trends The industry has lagged behind in deploying technology, but 33 Phishing for facts investment managers must adapt Managing and preventing fraud to the new generation of tools and cyber-risk is simply all about MIX available, writes Scott Tavolacci, preparation, say Forensic Risk Paper from responsible sources Yardi’s regional director of Alliance consultants Kylie Tanner FSC® C020438 investment management sales and William Odom 2 PERE | FUND SERVICES & TECHNOLOGY STATE OF THE MARKET Fund services and technology: Six trends Helen Lewer highlights the key talking points 1 2 3 Ever watchful investors Regulation merry-go-round Keeping up with tech and data They expect information on pretty much Regulatory and rule changes globally There is a consensus that real estate is 010627-18Gbl. ED None. no. EYG All Rights Reserved. Limited. © 2018 EYGM every aspect of the investment manage- continue to keep compliance and risk playing catch up in utilizing technology ment business – front, middle and back teams on their toes. And it is not just and data. That mindset is changing office. Managers’ processes, systems and financial regulation. As one Europe- as firms start to see its potential in data management strategies are under based CFO notes, it is also regulation in delivering a competitive edge. But there the microscope more than ever. Yes, a plethora of other areas like data protec- is a downside. Fraud and phishing investors still want to know how man- tion – the EU’s General Data Protection scams are a big concern.