Investment managers have been grappling with a challenging investment landscape this year. The current commercial real estate market, marked by rising interest rates, inflated capital costs, and an ever-expanding complex global economy, has complicated portfolio management, investor communications, and operational efficiency. We understand that these are not just your challenges, but common hurdles that the industry is facing.
To understand how investment firms are addressing these difficulties and identify emerging trends, we conducted a comprehensive survey targeting General partners (GPs) and managers. We asked them straightforward but provocative questions designed to uncover their deepest concerns and predictions for the coming year.
Our report is a comprehensive interpretation of the survey results, highlighting key findings and the outlooks of commercial real estate management firms. This all-inclusive report is not just a collection of data, but a valuable resource that provides actionable advice to assist investment managers in making the crucial decisions involved in optimizing their operational processes.
Key takeaways and insights
Although our survey covered several topics related to the concerns and pain points affecting real estate investment firm General partners and managers, a few stood out to us as forefront:
Underutilization of advanced technology
We discovered the adage, Old habits die hard, is true even when applied to savvy general partners and investment managers. Despite modern technology’s many advantages, an overwhelming majority of investment managers (94%) fail to employ advanced technology to communicate with and service investors.
Choosing the most efficient means of communication between General partners and investors is not just a matter of preference but a crucial step in building bridges and strengthening bonds. Our survey results reveal that there is much room for improvement in this area.
The different communication methods the majority of investment managers are currently using might surprise you, but they also present an opportunity for change and improvement. We hope this insight, available in our full report, inspires you to take action and explore more effective communication methods.
This stark reality underscores the pressing need for investment managers to adapt to the newest real estate investment management technologies. Implementing digital tools streamlines communication, enhances efficiency, and provides investors with real-time updates and insights, addressing these challenges head-on.
Limited staff and time for investor management
Human resources and their available working hours are two of the most valuable and scarce commodities in any business. Therefore, many commercial investment firms are under-resourced in terms of staff and hours dedicated to investor management and relations.
We found that some firms had no staff assigned to this function, and one-third of those who responded to our survey indicated that only 1-2 staff members were assigned to investor relations. Another one-third of respondents reported that a dedicated staff of 3-4 was allocated to investor management.
Additionally, time devoted to investor management varied significantly, with about 20% of those who responded reporting 5/10 hours per week and slightly over 40% dedicating 16-20 per week.
Such a limited-time and staff investment in investor management can hinder effective investor engagement and satisfaction and lead to increased investor attrition rates.
Misconceptions about technology benefits
Many investment firms hold misconceptions or are simply unaware of the benefits of advanced technology solutions. Over thirty percent of GPs believe they manage well without comprehensive investor management tools, and over twenty percent are uncertain of the potential advantages.
This knowledge gap could negatively impact their long-term performance. Educating firms on the cost savings and efficiency gains from technology adoption is crucial for overcoming these misconceptions and driving industry-wide improvements.
Over twenty percent of respondents were uncertain about the benefits of a comprehensive investor management solution, which is a cause for concern. This lack of knowledge could potentially lead to significant financial losses for an investment firm.
Commitment to operational efficiency and technology integration
We found that two of the top concerns for investment management GPs in 2024 are improving operational efficiency and boosting technology integration. It’s encouraging to see that investment management firms are not just aware of these challenges but are actively addressing them. They are increasingly leveraging data analytics, artificial intelligence, and machine learning to enhance decision-making, optimize asset performance, and improve operational efficiency.
Significant spending on bookkeeping and accounting
The accounting function is not just another cog in the business wheel but the very foundation of successful commercial real estate investment firms. Accounting and bookkeeping services are essential in accurate record-keeping and remaining in regulatory compliance.
The substantial financial outlay associated with accounting and bookkeeping services in commercial real estate investment firms reminds us of the importance of adopting efficient financial practices.
Over fifty percent of General partners spend upwards of $6000 annually on maintaining accurate financial records. Therefore, the need to implement prudent in-house solutions and advanced accounting software to help reduce these costs is front and center in the thinking of GPs and investment firm managers.
Complying with taxes and regulations
Staying on top of the latest tax regulations is a necessary financial burden on every real estate investment firm. It’s reassuring to know that this is a shared experience regardless of the firm’s size.
Our survey revealed that all respondents, from small to large firms, have spent from $1,000 to over $6,000 annually on the services of a Certified Public Accountant to ensure company compliance and optimize tax strategies.
We found that some firms have chosen to streamline their operation by implementing an automated and cost-effective tax solution. These software systems significantly enhance accuracy and compliance in tax reporting and ensure precise calculations by incorporating the latest tax laws and regulations.
Conclusion
Our 2024 Investment Management survey examines key areas and highlights where investment management firms like yours can optimize their operations and investor relations. By adopting advanced technology, investment firms can stay current with the latest industry trends and maintain their competitive edge.
Dedicating sufficient resources to optimize investor relations and management leads to operational efficiency, cost control, and retaining investors who return for additional opportunities.
Discover the full range of insights and recommendations from our 2024 Investment Management Survey. Download the complete report now to equip your firm with the knowledge and tools needed to excel in today’s dynamic investment environment, potentially leading to significant improvements in your operations and investor relations.
