Financial Asset Management – to in-house or outsource?

Poorti Tandon, RES’ Head of Finance, Asset Management discusses some of the factors to consider when deciding to in-house or outsource financial asset management.

When it comes to the management of renewable assets, owners and investors typically appoint third party specialist companies to manage aspects such as operational performance, HSE compliance, monitoring and optimisation.  Outsourcing these activities to an organisation with a large team of analysts and engineers ensures that the renewable projects deliver optimal performance and return on investment (ROI).  As our clients’ portfolios continue to grow, we are also now witnessing a shift towards outsourcing the financial side of asset management.

Financial asset management focuses on the end-to-end management, administration, and financial compliance of the portfolio whether this is regulatory, statutory, legal, tax or contractual compliance. At times financial asset management may be viewed as a simple bookkeeping service. However, it is so much more than this and its importance shouldn’t be underestimated. Overseeing everything from financial data management through to lender management, budgeting, treasury management and distributions, a good partner can provide you with a thorough financial analysis of your operations and, in turn, help you make better business decisions.

The three main reasons for outsourcing financial asset management include scaling up, reducing operational costs and gaining access to skilled experts without too much pressure on budgets. One of the biggest challenges asset owners and investors face is ensuring that with a growing number of assets to manage, all regulatory and financial compliance requirements are being met and cashflows are monitored to maximise ROI. With growing portfolios comes growing finance, accounting and compliance requirements. Scaling the portfolio requires additional investment in resource, whereas outsourcing is usually less expensive meaning that more investment can be allocated to the growth of funds. This creates sizeable additional revenue for asset owners and provides quicker and more efficient portfolio scaling. On the other hand, outsourcing could be viewed as incurring a degree of loss in control. The key is finding a trusted partner that delivers a fully comprehensive service spanning all renewable technologies.

Within RES, we have a large team of specialists ranging from tax and management accountants to administrators, currently servicing more than 150 projects for clients across the full lifecycle of wind, solar and energy storage projects. With multiple reporting lines and Project Boards, to ensure strong governance, quality standards and segregation of duties, their experience and skillsets ensure that clients are armed with the right information to make good commercial decisions to help grow the relevant funds. For instance, for one of our clients we ran the portfolio wide process of a business rates review which brought savings of over £750K net to the projects.

Whether financial aspects are managed in-house or externally, there are a plethora of software systems in the marketplace to help efficiently manage the volume of data pulled from different sources. These often have built in controls and compliance functionality and are useful when managing large portfolios of SPVs across different geographies and technologies. The blend of software and financial asset management specialists provides a holistic view which helps with planning moving forward as well as ensuring compliance and maximum return on investment.

To conclude, the most important thing to consider when making the decision to in-house or outsource, is the size and growth ambition of the portfolio and funds. Ultimately, a trusted partner enables investors and asset owners to scale up quickly without taking on additional risk and administrative burden as well as reduces operational costs, optimising investment revenues.