Systemic problem: Find out what is bothering FDs

11th November 2015

Attendees at a breakfast event in London for the Property Finance Forum (PFF) a few weeks ago swapped notes on the latest developments under the AIFMD such as marketing and private placement regimes. But also debated was a different issue one hears much about - challenges CFOs and FDs face with their IT systems. By Robin Marriott, Langham Hall.

IT systems clearly remain a bugbear of FDs and CFOs.

It was mentioned several times during the course of the PFF breakfast in September how members were interested to share experiences on this topic, and the reason seems pretty obvious: There is still no one-size-fits-all solution in real estate fund management when it comes to harmonising platforms. In fact, blood, sweat and tears are being shed by a number of people that are trying to implement often complex and costly IT solutions in the hope of attaining maximum efficiency combined with versatility. 

Guests around the table represented firms of different scales, geographic footprints and evolutionary stages. On one end of the spectrum were firms that are content to stick with their bespoke Excel-based system even if they occasionally have to force it to bend when the need arises. On the other end of the spectrum, was a  firm in the midst of a project to overhaul a 20-year-old legacy systems that has assessed all the options for a full throttle IT project involving buying-in capability, bolting on systems or moulding existing platforms around new software packages. 

One of those present at the breakfast summed up his experience that plenty of other FDs can relate to. He said: “From my experience, we find systems that are good on property management but weak on accounting, and vice versa. The biggest challenge for us is to have an integrated system capable of handling property management, fund accounting and accounting at SPV level on the same platform and the ability to use that data captured in that platform for fund calculations, for compliance purposes and so on. That is the biggest challenge for us and that is what we are trying to achieve globally.” 

It was noticeable that quite a few firms seem to be going down the route of buying in off-the-shelf solutions. Yardi, Voyanta and MRI’s Cougar were among those mentioned. In the instance above, the member is implementing Yardi. 

One particular challenge highlighted, though, concerns firms making investments in multiple jurisdictions. Not only do some want a common IT system for each of the countries capable of rolling up data, but they want to be able to extract outputs from that harmonised data for fund modelling purposes e.g. projecting cash flows and IRRs. It is tough to find a system that can do all that.

Having scoped out software packages on offer in the marketplace, one guest whose firm is UK-focussed, said it continues to rely on Excel. She was adamant that IT software packages on the market that it had seen did not operate to its satisfaction. The guest said: “Excel does everything we want it to do because when it doesn’t, we make it!” That does imply certain limitations of Excel, of course.

While GPs are struggling, LPs are not really being well served either. As the representative of the smaller fund manager said, LPs might love the way the GP adapted Excel, but they did not appreciate the lack of standardisation present in Europe. “Our investors ask, ‘why is there no one standard reporting system for investment management?’ because they are getting different things from their managers.” 

This led to the question of where change might come from.

One guest ventured that LPs might be the key in that they ought to drive through the change necessary to achieve standardisation. Perhaps change should come from multi managers, suggested another.

Though interesting that there is no standardisation and that people are all independently looking for an optimal platform, there might very well be a slightly different point to draw out. As another guest asked after we ended the breakfast, is there any real competitive advantage to getting a system which works? Perhaps it is more about what you do with it and the decisions you take off the back of it that differentiates.

For more on the PFF, co-sponsored by Langham Hall, see http://www.propertyfinanceforum.com/

Also contact Rob Short at rob.short@langhamhall.com