Private equity and real estate firms drive for timely and transparent reporting16 Nov 2015
The development of the Real Estate and Private Equity industry in recent years, coupled with an ever-evolving regulatory landscape and an investor base typically spanning multiple jurisdictions, has resulted in many firms adopting a more complex investment structure in order to limit the liability of the investor base, manage risk and mitigate tax leakage. As a result, this is putting a greater amount of pressure on new and evolving operating models.
However, there are other key considerations for managers to address. As the regulatory landscape continues to evolve and shifting investor preferences and requirements continue to shape investor/manager relationships; investors are asking their Real Estate and Private Equity firms for enhanced, transparent and timely reporting. Investors and the regulator want information that will enable them to assess the risk profile of their investments and their relative performance against expected returns.
Interestingly, a research report published by EY earlier this year supports these assumptions; investors were asked how firms can improve their reporting, and transparency and timeliness were the two most important factors identified.
Whilst the majority of investors surveyed were "generally satisfied with reporting methodologies" adopted, investors are seeking a greater understanding of the key assumptions and inputs that drive the valuation of underlying investments. Investors are now seeking more granular information and explanations relating to the valuation methodology adopted. This trend is only set to continue and managers, who continue to embrace investor and regulatory developments, may find themselves with a key competitive advantage.
Managers who improve their reporting standards, may also benefit from improved operational efficiencies simply due to the fact that it will typically result in improved internal controls and data management. Real Estate and Private Equity firms who develop the appropriate infrastructure, technology, and use of specialist third party providers will find themselves well placed to deal with the onslaught of reporting demands forced on them by the regulators and their underlying investors in the years to come.