Fund managers outsource more services to focus on investment

European real estate fund managers are looking to outsource more services to third parties in order to meet increased investor requirements and respond to burgeoning regulation, according to new research from financial services provider State Street Corporation.

The firm found that many managers have either already outsourced, or are considering outsourcing, a number of back-and middle-office processes as part of a review of their business models.

As institutional investor allocations to real estate assets continue to grow, fund managers are increasingly turning to an operating model that prioritises outsourcing and closer collaboration with third party service providers to concentrate on their core investment skills, State Street said.

Despite the resurgence in real estate investment, institutional investors are looking for more information and are seeking a greater understanding of the investment strategies of their fund managers. They want increased control over their investments, greater flexibility over entry and exit from funds, and more transparency and granularity in reporting, the research found.

'We are on the cusp of significant change in the way that real estate fund managers structure and operate their funds,' said Simon Burgess, vice president of real estate fund services for State Street's Global Services business in EMEA. 'The sector is opening up in a way never before contemplated by the industry and offering rich, diversified returns for investors. However, real estate fund manages face conflicting factors that are likely to have sustained, far-reaching and fundamental implications for their business models,' he added.

'Complexity is on the increase and our research has demonstrated that we can expect the trend towards outsourcing to continue alongside the growing globalisation of real estate investment and fund management,' Burgess said.