Investor Management Platforms: An Overview for the Private Equity Real Estate Industry

Key Takeaways

  • It has become a best practice in the commercial real estate industry to implement an investor management platform.
  • Platforms tend to include features designed to increase transparency and streamline common investor management activities, including investor portals, document management, reporting, CRM functionality, and capital call and distribution assistance.
  • A fund administrator should be well-versed in investor management platforms but should also manage the platform with a strong risk mitigation strategy in place.

An investor looking at an investor management platform on a laptop.

Every fund or syndication sponsor is acutely aware of the importance of sound portfolio and asset management, but effectively managing the investor base can also yield substantial benefits over time. Fortunately, over the last several years, numerous software providers have rolled out affordable and feature-rich products to help sponsors and fund administrators track and share information with investors. The industry has evolved to the point where it is considered a best practice to use these investor management platforms (IMPs), and many investors have come to expect sponsors to provide access to a portal along with the other features discussed below.

While some sponsors view these tools as additional overhead without a measurable ROI, an IMP can increase perceived sponsor quality and satisfy the requirements of many middle market institutional investment partners. Additionally, offering an IMP instills confidence among limited partners by providing easily accessible information about the deals they have invested in, important documents, and a quick, secure way to communicate with the sponsor.

Key Features of an Investment Management Software Product

Modern IMPs bundles several key features to help fund managers and syndication sponsors streamline operations and reduce the burden of manually tracking investor information.

Investor Portal

An investor portal is a prepackaged, but usually customizable, web-based tool that allows every investing entity to register a unique set of credentials and perform a variety of self-serve tasks. This is where equity investors can access information about their positions, including performance reports, financial statements, and contribution and distribution history. Every investment management product that we recommend to our clients includes an investor portal feature.

Document Management

It’s no secret that managing a private equity real estate strategy involves a lot of paperwork, and much of it revolves around the investor base. Fortunately, document management tools are built into all the IMPs we work with, and this helps to ensure that documents are sent timely and to the correct investing entity. These tools enable sponsors to securely store, organize, and share important documents such as operating agreements, offering memorandums, and tax documents.

Reporting and Analytics

Reporting is one area where we’ve witnessed a divergence among software providers in the commercial real estate industry. Most IMPs offer built-in reporting features that generate transaction history reports, performance metrics, and portfolio analytics. Some also offer customizable reporting options to meet the specific needs of different investors and stakeholders.

CRM Capabilities

Most IMPs include a customer relationship management (CRM) system to track and manage interactions with investors. This can help sponsors improve investor relations and run personalized fundraising campaigns, which we believe is becoming increasingly important in a world where many capital raisers are seeking to use automation to raise at scale.

Capital Call and Distribution Support

Most of the IMPs on the market include tools to facilitate capital calls and distributions such as automated calculations of call and distribution amounts based on each investor’s ownership percentage. Capital call notices and distribution summaries can be sent through the IMP to the relevant investors in advance of the capital event, funding statuses can be easily tracked, and follow up communications can be sent to individuals or targeted groups.

Additionally, many IMPs are equipped to allow for ACH transfers between the sponsor and the investor base. This has quickly become a sought-after feature because it streamlines the flow of capital by minimizing the number of steps required to transfer funds. It also helps to reduce reliance on paper checks and bank wires where fraud is an ever-present risk.

The Role of the Fund Administrator

We have a bit of a different take on the role of a fund administrator as it relates to investor management tools. Traditionally, fund administrators have specialized in supporting operational tasks, which the sponsor often chooses to outsource due to time and personnel constraints. This has come to include the onboarding and ongoing maintenance of investor management software. We’re confident in our ability to support these tasks, but we feel strongly that the most vital role we fill for our clients is as a mitigator of key operational risks.

Lexcraft Advisors Focuses on Risk Mitigation for Our Clients

One of the unfortunate realities in the private equity commercial real estate industry is that many sponsors attempt to set up and maintain IMPs without putting in place risk mitigation systems. Documents, facts, and figures are posted to investor portals as an afterthought when time permits and without establishing accuracy and completeness controls. We have addressed this for our clients by designing processes to ensure that maintenance on our clients’ platforms is performed on a regular schedule and that newly incorporated information is cross referenced against other client systems to verify accuracy. High-quality fund administration is about a lot more than saving the sponsor time.

Combining Software with Experience and Relationships to Bring Value

In addition to risk mitigation, many clients ask us to oversee their IMP because they know we’ll bring value beyond timely and accurate ongoing maintenance. One of the advantages of partnering with a diverse client base is that our team fields questions from an equally diverse group of investors. Through this experience, we can anticipate many of the questions that investors will ask, the information they will request, and the common issues they might encounter while attempting to interact with the technology. We enjoy imparting this experience on our clients, and we take pride in helping them get in front of the issues commonly associated with an IMP.

Final Thoughts

Implementing an IMP has become a best practice in the private equity commercial real estate industry. These systems offer features that enhance transparency and streamline investor relations, such as investor portals, document management, and CRM functionalities. Sponsors can build credibility and strengthen relationships by providing investors with easy access to crucial information and a secure communication channel. However, it is vital that these systems are managed with an eye toward risk mitigation to avoid presenting investors with inaccurate information. If implemented properly, IMPs bring long-term benefits and represent worthwhile investments for sponsors of all shapes and sizes.

Lexcraft Advisors is a fund administration provider that serves middle market real estate investment funds and syndications, typically with equity under management between $15 million and $100 million. Our team takes pride in providing general partners with reliable fund administration solutions often reserved for large, global investment firms. To learn more about our services, schedule a complimentary meeting with one of our Managing Partners.

Connect with Lexcraft

Contact us to learn more about our service offerings and to discuss how our team can assist your firm with meeting objectives.