Asset Management After Brexit: Why No News is Not Good News

If you’re in the fund management business, it doesn’t get much tougher than the sort of task that has faced firms including M&G, Aviva, Standard Life and Aberdeen since the Brexit vote. Each of them has had to give investors in their commercial real estate funds an unpalatable message: not only have the funds’ assets fallen sharply in value since the referendum, but also, so many people have been trying to get their money out that temporary bars on withdrawals have been required.
Investors don’t like being advised their investments aren’t worth as much as they used to be. But they positively hate being told they can’t have access to their own money for an as yet unspecified period. It’s not a message where fund managers have an obvious way to sweeten the pill.
Interestingly, however, the backlash from investors and financial advisers to this spate of real estate fund suspensions has not been as vociferous or vehement as you might have expected. In large part, that’s because fund managers have learned a great deal about how to communicate effectively with their investors since the last time such drastic action was required, during the financial crisis of eight years ago.
Research published by the consultancy group PwC reveals that almost two-thirds of real estate managers have increased both the frequency with which they communicate with investors since the last big crisis and the quantity of the information they provide.

Importantly, this push to improve communication has not only focused on formal reporting structures, such as the quarterly reports issued by fund manager, but also on less structured mechanisms. These have included conference calls, newsletters and a real push to provide more information through digital platforms.
The focus has been both on financial performance and other data, and more qualitative analysis and explanation – many fund managers have sought to provide a much clearer narrative about the performance of their investments, often using presentational devices such infographics, and invariably through a variety of different channels. They haven’t always got it right – PwC notes that some investors now complain about being overwhelmed by information – but the quality of communication, both analogue and digital, clearly stands well above where it was a decade ago.
All of which has proved crucial over the past month or so. For the vast majority of investors, the news that their real estate funds were now facing some challenges did not come as a bolt from the blue – even before the Brexit vote and the turmoil it caused, investors were much more engaged and informed. The bad news may have been disappointing but for many investors it wasn’t surprising.
This is not to suggest fund managers haven’t had to work very hard at communicating effectively during this period of crisis. The key has been to set out the position in the clearest possible terms, with dedicated resources for investors with questions or problems to resolve: fund managers have worked hard to explain why they’ve suspended trading, what that means for investors, and how long they expect the issue to remain resolved. They’ve also endeavoured to keep in constant contact with their investors, often issuing daily updates on the ongoing situation, even where there hasn’t necessarily been new information to share.

This approach to communication provides a case study for fund managers beyond the real estate sector to follow. Real estate fund managers have concentrated on building strong relationships with their investors during happier times and worked hard to be open and honest now that the market environment is more challenging. As a result, while investors are hardly delighted to be locked into their funds, they’ve generally been understanding and patient, rather than angry, or even litigious.
The lessons are clear – and should be heeded by fund managers from beyond the real estate sector, who will inevitably suffer problems of their own, sooner or later. Those difficulties might be the loss of a star investment manager, the failure of an important portfolio holding, a patch of bad performance or something else entirely.
But the key is to communicate loud and clear: what is the exact nature of the problem, how will investors be affected, when will the problem be resolved, and how will investors be kept updated in the meantime?
Those managers which have worked consistently hard at effective communications will find crisis management much less stressful – partly because they’ll be speaking to an audience that is much more engaged, but also because they’ll be experienced communicators.
Use every tool at your disposal, both online and offline, to keep talking to investors. When it comes to fund management, the old sayings don’t apply: investors won’t shoot the messenger if the information keeps flowing, but providing no news will almost certainly produce bad news in the end.