Over the past three or four years, there has been a shift from acquisitions to lending among real assets investors. Commercial real estate prices increased starting in 2008 when acquisitions of both residential and commercial real estate were quite high. The shift from acquisitions to lending to real asset owners/investors in need of capital is fast becoming a new trend. Lenders are able to earn on the interest of the loans rather than commit to an asset—particularly commercial which has seen a drop in value. That drop has been most dramatic during the pandemic, although the decline was beginning prior to March 2020. Investors who may have diminishing values in their real estate portfolio can turn to private capital to provide needed liquidity—particularly during the recent volatility in the market.
As loans increasingly span different regions across the world, standardization has become more important. Globally, the US is the most advanced in the standardization of loan terms, with Europe in second place and Asia lagging behind. The need for standardizing the same loan terms across different regions has become increasingly important as the use of private capital becomes a more attractive alternative vehicle for investor returns, and likewise, for access to liquidity. In a recent report, Private Capital AUM by geography indicated the US firms are holding $1405.9 in dry powder with $2400.7 in unrealized value; in Europe, $558.6 in dry powder with $985.0 in unrealized value; and in Asia, $429 in dry powder and $1079 BN in unrealized value. 1
As firms look for solutions to facilitate the shift from acquisitions to lending, fund administrators and service providers like SS&C are seeing an uptick in the move to outsourced services. Many firms are discovering that, when they license aspects of their fund administration, they are able to enter the loan space more readily by enhancing their existing offerings with the necessary solutions to support their customer base. Moreover, investment managers increasingly need to achieve consolidated views of their portfolios across all asset classes while ensuring timely, complete and accurate reporting. Finally, risk mitigation and reduced audit scrutiny are also top of mind for investment managers.
Flexible solutions like SS&C’s Precision LM and Singularity stand out among service providers for both licensing and outsourcing. Precision’s robust platform manages the entire loan lifecycle from origination to loan servicing. SS&C Singularity is a fully-integrated investment analytics, accounting, compliance, performance and risk platform that revolutionizes middle- and back-office investment operations with embedded Artificial Intelligence (AI), Machine Learning, Predictive Analytics and other innovative technologies. Solutions like these support business operations 24-7 while allowing investment managers to remain focused on what’s most important to them- investment decisions. To learn more about our lending solutions, read our Global Lending Technology & Services brochure.
- Source: Preqin Pro, Data as of 31 March 2020
Written by Jamie Villiers
Business Development Director