NAREIM Data & Information Management meeting

Key takeaways

October 8-9, 2024

Leveraging AI and other technology solutions opens the road to notable productivity gains, although translating the success of these tools into ROI is difficult to prove, members heard at NAREIM’s Data & Information Management meeting in Atlanta this week. 

In whole-room and peer-to-peer table-top discussions, members also reiterated the importance of the human element in technology, of having a “business champion” pitching new tools, and of being sensitive to the loss of institutional knowledge when outsourcing functions previously done in-house.

Click here to see the presentations and poll results from the Data & Information Management meeting.

Artificial Intelligence – Hype and FOMO

While an overwhelming share of members expect AI to be “revolutionary” or “transformational” for their businesses, most were in the “pilot project” or “exploring and learning” phases of AI adoption, according to a live poll conducted at the meeting.

Respondents are focusing their AI investment primarily on investment analysis and portfolio optimization (63%), and to a lesser degree on property management automation, risk assessment and mitigation, predictive maintenance, customer experience and tenant engagement, and other uses.

Moreover, the majority of respondents said their firms spend less than 5% of their annual budgets on AI and technology innovation, according to poll results.

One member shared how they leverage AI during moments of natural attrition, which allows them to avoid ruffling feathers.

“When a staff member leaves, we try to automate whatever that person was doing manually,” members heard.

To encourage adoption of generative AI, tech leaders at one firm first showed colleagues how to “make a travel itinerary in ChatGPT,” members heard. Once colleagues saw the time-saving potential for a mundane task, they started playing around with it.

However, LLMs are “still not great at dealing with unstructured data,” members heard.

Finally, to position their firms to leverage AI in the future, members were advised to “hire people who have a growth mindset and/or engineering background, not just a finance background.”

Uses and potential uses for generative AI and LLMs members discussed included:

• Analyzing information in deal rooms

• Analyzing videos of site visits

• Drafting narratives and location descriptions in investment memorandums and IMAs

• Matching investor preferences, goals and histories with investment opportunities 

• Assisting transaction teams analyze opportunities

• Analyzing the deals the member firm chose NOT to look at, to determine “what can we do with those.”

• Manual work of scouring news sources 

• Helping the investor relations department source leads.

Considerations for Fund Admin Outsourcing and ‘Liftouts’

According to live poll results, 71% of member firms represented at the meeting are currently outsourcing fund administration. Most are using either a single fund admin for multiple funds or more than one fund admin across several funds. 

Despite the benefits and opportunities of the solution, which include reduced overhead (27% respondents), new product that required additional expertise (9%), enhanced investor experience (27%), and ability to or scale quickly without additional headcount (36%), external fund administration and “liftouts,” specifically, come with challenges.

“It’s not how it used to be,” one member shared. “We can’t just walk down the hall. Now [the team] is across the highway. There are continuing connectivity issues that we have to be extra intentional about addressing.”

Having your technology group involved early and “at the table,” when doing a liftout can proactively address the solution’s risks and challenges, and the challenges of external fund admin in general. They include:

• Loss of institutional knowledge

• Poor transition plans

• Technology gaps with investor-facing content

• Formatting / branding issues

• Data integrity issues

• Compounding complexity

• Keyman risk

Additional highlights from the meeting included:

• When cleaning up dirty data, remember that different vendors use different unique asset IDs. Account for that.

• For those who love risk, leverage scare tactics when cleaning up your data stack with governance, risk, and compliance in mind: “name and shame.”

• TIP: Beware of the space after letters, a common source of data errors.

• One investment manager runs a daily script using 2,000 business rules to keep their data clean.

• When shopping around for proptech vendors and tools, watch out for conflict of interest, durability, switching costs, and how the company will store your data and deliver it back to you.

• Employees still save critical files “on their desktops,” and store all their data in an Excel file created “in 2007,” major no-nos that can be chalked up to human nature: “Be mindful that whatever data they’ve improperly saved is very personal to them.”

Click here to see the presentations and poll results from the Data & Information Management meeting.