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Emerging fund managers: Assemble a top team and dive into fundraising

INSIGHT ARTICLE  | 

As the real estate market is poised to welcome new investors, RSM has put together a guide for emerging fund managers. Learn more about the steps, strategies, structures and compliance to consider when launching a new fund in our emerging real estate fund series.

KEY TAKEAWAYS

  • Find trusted business associates and focus on credibility.
  • Find a way to stand out.
  • Focus on current trends and new technologies that increase transparency.
  • Emerging funds have a leg up today, as large investors seek diversification.

Assemble a top team

The way to source a strong management team is through thorough interviews and recommendations from trusted business advisors, says Veronica Bulman, RSM US real estate audit policy leader, noting that group chemistry and alignment around strategy are important considerations.

An internal management team structure needs to be developed, says Tom Green, national real estate assurance leader for RSM US, and that structure is often built around one person who is already respected in the industry. A high-caliber representative helps the fund establish credibility, he says.

“Investors are more comfortable either working with the largest fund managers or redeploying with someone they've already invested with before,” says Green, who in recent years has seen reticence on the part of investors to work with new fund managers.

Once the right team members are in place, it will be their job to identify the best service providers for the legal, accounting and fund administration functions.

Dive into fundraising

Finding the fund’s market differentiation is essential for successful fundraising, particularly in a crowded field.

Green recommends the following considerations:

  • Does anyone involved with the fund have an outstanding track record?
  • Are the fund’s policies and procedures in line with what the targeted investors would require?
  • Does the fund have the technology in place to deliver on its strategy?

With the coming transfer of wealth to the next generation, more investors are demanding transparency—they want dashboard access to their investments in the palm of their hand, says RSM Real Estate Senior Analyst Lauren Gerdes. This is why technology has become such an important tool for attracting investors, she says.

“Raising capital is, of course, challenging, especially for emerging managers,” Gerdes says. “But right now, in the current environment, deploying capital can be even harder—having the right technology to source deals, underwrite and get to the table faster can be flashy to potential investors.”

An advisor on the team who can guide fund managers through important issues such as the fund’s stand on social impact and cybersecurity, among others, can be a game changer when helping a fund stand out from the competition, she adds.

Emerging managers have a fundraising advantage right now, Green says. There is a mandate among larger institutional investors to be stewards within the real estate sector, so they are often looking for opportunities to work with emerging and diverse fund managers as part of their own corporate social responsibility initiatives. Many larger U.S. pension funds, for instance, have so-called emerging manager programs so they can partner with funds that fulfill their strategies for corporate social responsibility.

This article was originally published in partnership with Bisnow.

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