Tamas Mark (IQ-EQ): The real estate funds’ gatekeeper
“Our prominent position in the global fund administration ecosystem is putting data at the centre of IQ-EQ’s servicing model,” says Tamas Mark, Head of Real Estate for IQ-EQ Luxembourg. In the interview, he shared with us new challenges that real estate funds are facing after the pandemic, how IQ-EQ is adapting, and how he sees the future of the industry.
What are the main trends in real estate at the moment?
The amount of dry powder on the market remains very high. So, when an attractive asset presents itself, investors are very keen to allocate their capital to it. Predictably, this results in fierce competition and brings down yields. As a result, and despite the pandemic, real estate remains, on the whole, expensive. When we talk about real estate these days, we cannot avoid mentioning the current buzz word: ESG. ESG considerations are now having an impact across all levels in a real estate structure. This is perhaps no surprise when you consider that, based on available data, ESG-compliant funds are already generating higher returns than non-ESG-compliant ones, and investors expect even higher ROI over the five or six years to come. Covid-19 has definitely accelerated this, too. Nevertheless, the high carbon footprints of buildings – in terms of construction and energy consumption – is clearly an issue for the industry. A question remains to be answered: how can the decarbonising of existing buildings be reflected in valuations? Lowering the carbon footprint of real estate as an asset class will be key for the coming years. It is a positive and welcome move from the regulators that new rules and reporting requirements are being implemented to boost environmentally compliant investments.
"ESG-compliant funds are already generating higher returns than non-ESG-compliant ones"
How is IQ-EQ adapting to this evolution?
The rise of ESG investing, and the regulatory changes this brings, require new skillsets. The variety of structures, investor requirements and regulations are becoming more and more complex. Besides our core services, we act as gatekeepers for our clients. Our duty is to remain up-to-date and proactively help clients to tackle the challenges they face and meet all regulatory obligations.
Our prominent position in the global fund administration ecosystem, in touch with all of the key players in the market, is putting data at the centre of IQ-EQ’s servicing model. We are constantly expanding our service lines, developing new products, training our people and implementing new technology-enabled solutions. For instance, we have IQ-EQ Cosmos, which provides analysis and visualisation of live investment data across multiple asset classes, so that our clients receive relevant, consolidated data on their assets’ performance 24/7 and are well-equipped to make informed investment decisions. More recently we’ve also launched IQ-EQ Compass, an integrated service offering that simplifies ESG compliance with ESG health checks, reputational assessments, policy drafting and reporting. It is essential for fund administrators to continuously invest in their technology. Our world is evolving fast and we can only keep up with the trends, work efficiently and meet LP and GP demands if we invest in state-of-the-art solutions. To give you an example, the onboarding of 40 investors in a fund should not take twice as much time as the onboarding of 20. To achieve this, we needed to develop our own solution.
How do you see the real estate asset classes evolving in the future?
I am very positive about real estate and its future. We see for example that large family offices and pension funds are allocating a higher portion of their portfolio to real estate. If the pandemic has shown us anything, it’s that buildings play a vital role in our social life. Offices, for example, are now seen as a place where people can interact in real life, exchange opinions and have creative discussions. Beside the social aspects, the environmental impact of buildings will be at the centre of investors’ attention. Decarbonisation of buildings will create some challenges for owners. Buildings that were built decades ago will become unattractive for investors if their refurbishment to comply with ESG criteria is seen as too complex and expensive. The elephant in the room is the retail sector. The growth of online retail and the evolution of consumers’ habits has resulted in a challenging environment for ‘bricks and mortar’ retailers. However, the development of new, safe and attractive architecture combined with dynamic product/service offerings are maintaining the appeal of the sector. Let’s not forget the core role that bustling central markets played in ancient economies and societies: a place for people to meet. That’s what real estate will continue to represent.