Fast and furious investment game demands smart solutions

Fast and furious investment game demands smart solutionsWith capital raised by the world’s top private equity real estate firms reaching $293 billion this year, off-the-shelf software solutions are no longer an option, says Yardi’s investment management specialist, Greg Fuhrman.Private equity real estate has experienced huge growth in recent years. According to the 2015 Private Equity Real Estate (PERE) report, capital raised has increased from AUD $231 billion in 2014 – a 27 per cent increase in just one year. The star performer this year, The Blackstone Group, raised more than $60 billion – more capital than the second, third and fourth placed firms combined.In the private equity real estate system, there are two separate but equally important groups. Limited partners (LPs) are usually institutional or high net worth investors expecting income and capital gains by investing in a private equity fund. LPs play no active role in the fund’s management, and they are protected from losses beyond their original investment.General partners (GPs) are responsible for managing the investments within the fund, and earn a management fee and a percentage of the fund’s profits as a result. GPs are also legally liable for the actions of the fund.According to Yardi’s investment management specialist, Greg Fuhrman, the global financial crisis changed the private equity game. Fuhrman has a keen understanding of the challenges facing today’s private equity firms – and insights into the solutions available to manage and reduce risk.”Prior to 2008, GPs could rely on a web of spreadsheets, people and off-the-shelf general ledger software to manage the financial, accounting, and reporting activities of the fund,” Furhman says.Today, it’s a different story.”Institutional LPs and their consultants have shifted their focus squarely to the accuracy of the information provided and the speed in which it’s provided. Performing this work in spreadsheets and with basic general ledger software is cumbersome, thankless, and fraught with inherent risk of errors,” Fuhrman explains.”Each LP desires the same things – protect my capital, make money for me and report to me on the status of my investments. Most LPs have made investments in funds, so they typically know what information they want you to report. But since 2008, the limelight has expanded to include how you accumulate the information.”GPs are now seeking enterprise financial solutions that provide visibility, efficiency, transparency, accuracy and real-time access to source information and transactions at all levels in an investment’s ownership structure: from a tenant in a property at the bottom to an investor at the top. Managing the accounting, finance, and reporting functions at a GP with complex ownership structures frequently spanning multiple levels is very time consuming to complete manually. “Instead, simultaneous, multi-company general ledger and financial systems allows you to meet your accounting and reporting requirements, tracks KPIs over time and, most importantly, allows you to calculate everything your LPs want. All in a standardised format to make it easier for you to service them and help reduce their risk”and yours,” Furhman concludes.Established in 1984, Yardi has become the leading provider of high-performance software solutions for the real estate industry. Learn more.