Real estate fund managers are having to adapt to a fundamentally changed operating environment Investor consolidation, sustained fee pressure, rising data demands, and rapid technological change are reshaping what it takes to win and retain capital.
In the face of these new challenges, fund resilience is key: that is, how well a fund manager is able maintain investor confidence, manage liquidity, meet reporting expectations, and operate effectively during periods of market stress.
AREF recently hosted an exclusive member webinar, sponsored by Apex Group, bringing together senior voices from across the real estate and private markets space to address exactly that challenge.
At a glance
- Pension pooling and Local Government Pension Scheme (“LGPS”) consolidation are concentrating buying power and raising the bar on manager due diligence
- Data demands in Requests for Proposals (“RFPs”) have increased materially over the past two to three years and continue to grow
- Institutional-grade operations are now considered to be the minimum standard, not a differentiator
- AI and technology adoption are seen as the primary lever for margin recovery after sustained fee compression
- Fund vehicle selection is increasingly investor-driven, with private Real Estate Investment Trusts (“REITs”), Authorised Contractual Schemes (“ACSs”), and limited partners (“LPs”) all retaining a role
How investor consolidation is changing what it takes to win capital
Fewer, larger, and more sophisticated investors have raised the threshold for capital raising across the board. According to Neil Meikle, Head of Private Markets Distribution at Legal and General, the level of interrogation applied to products and propositions is higher than it has ever been and continues to increase. Tenant-level analysis, underlying asset resilience, and granular performance attribution are now standard RFP requirements.
A strong investment track record remains essential, but it is no longer sufficient on its own. The idea that a specialist manager will be given a pass on operating model quality because of their size is simply not the case. Investors now assess governance structures, cyber security controls, risk management processes, and data frameworks alongside track record. For managers spinning out of larger firms, the standards they held at that level will be expected in their new environment as well, regardless of size, strategy, or stage of growth.
The shift in the balance of power is structural. Larger pools of capital have the expertise and buying power to demand more from managers, including bespoke operating models and greater transparency.
Operating model expectations: then and now
| Previous focus | Current focus |
| Historical performance | Performance and operational resilience |
| Fund strategy | Strategy, governance, and controls |
| Manager reputation | Demonstrable processes and reporting |
| Periodic reporting | Continuous access to information |
What the liquidity debate actually revealed
Liquidity remains one of the most contested issues in real estate investing. Years of fund gating, changing regulatory expectations, and growing scrutiny of open-ended structures have prompted managers and investors to re-examine how liquidity is delivered, priced, and communicated. Yet the discussion has increasingly shifted away from whether open-ended funds can work and towards whether investor expectations are aligned with the underlying assets.
In the eyes of Paolo Alonzi, Real Estate COO at Aberdeen Investments, the industry response to open-ended fund gating cycles has been disproportionate. The structures were not as broken as widely portrayed, and the overreaction made a manageable problem significantly worse. In our webinar discussion, Hugo Llewelyn, CEO of Newcore Capital, added a structural note that managers who continue providing liquidity while peers gate effectively become the only cash machine in the room, attracting all remaining redemptions.
The emergence of tokenised share classes is one potential response to the industry's ongoing search for more flexible liquidity solutions, creating a quasi-secondary market for investors (even if tokenisation has not yet been tested under genuine stress conditions). Another, sharper, point is that there is almost always liquidity available, but the question is at what price. Confusing real liquidity with pricing mechanisms is where managers and investors repeatedly come unstuck.
What ‘institutional grade’ actually means today
The outsourcing conversation has largely concluded. The focus now is on data, process, and technology, and on how service providers deploy those things on behalf of clients. The current period of technological change, as argued by Neil during our discussion, represents a genuine opportunity for managers to recover margin, not by cutting headcount, but by doing significantly more with existing resources.
Better data and stronger processes should not be viewed solely as a cost reduction exercise. Firms that combine strong investment outcomes with institutional-grade governance, reporting, data, and oversight are better positioned as competition for capital intensifies. Fragmented portfolios sitting across multiple providers cannot be consolidated overnight, which places greater emphasis on operational discipline and data quality.
Watch the full discussion
The recorded webinar covers the complete panel debate, including audience Q&A on fund vehicle selection, the case for further UK core fund consolidation, and whether funds should remove the ability for investors to revoke redemption requests.
To explore these themes in more detail, watch our on-demand webinar here.
