Yes

PROCESS

Property shares a number of investment characteristics with both equities and bonds. Like equities, the income from property is driven by growth in the real economy and has historically risen in line with inflation. But in the UK, leases usually include provisions that prevent rents falling during periods of market weakness; as a result, property also has some ‘bond-like’ characteristics. 

 

The Investment Process

Research Process

The LGP Research team analyses the dynamics of the economy and of the property market to produce forecasts for investment performance. But as well as looking at the market as a whole, we look within the overall pattern to understand the drivers of retail, office and industrial property. Each has their own distinct supply and demand characteristics, and have historically displayed different investment characteristics. By splitting the market into 13 different segments, LGP Research works to identify areas of the market which are forecast to outperform on a risk-adjusted basis.

 

These forecasts are combined with the particular requirements of individual funds to develop Sector Strategy which sets out the holdings that each fund will maintain in different parts of the market to aim to achieve a return beyond that which would be delivered by ‘matching the index

 

Investment Process

The investment process is the means through which we apply our investment philosophy to meet the objectives and expectations of our clients. Construction of a portfolio follows from an understanding of a client’s return requirements and their risk tolerance. These define the limits within which the investment process is used to build their portfolio.

 

A Fund’s investment strategy flows from the combination of the property forecast and other research and market inputs to the client objectives. A formal strategy document is updated annually by the Fund Manager, but kept under review throughout the year. It monitors the current positioning of the Fund against its objectives and projects a plan of action for the year ahead.

Asset Analysis Process


Our Asset Analysis Process quantifies, in a judgmental but structured way, the return that we require from each property, both those which are already held and potential acquisitions. The purpose of this is to set a rate of return for the individual property, which reflects its unique characteristics. In this way we are able to exploit the ability of fund managers to pick stocks and ensure that the expected return adequately reflects the level of risk implicit in the asset.

The required return for an individual asset is derived from the projected sector return (generated from our research process) which is then adjusted for property specific factors including location, competing supply, tenant quality, lease terms and building specification.

The required return is compared with the expected return for the property based on the purchase price, income return, rental growth and exit yield at the end of the analysis period. Any proposed acquisitions must show an expected return in excess of the required return. Any existing properties which do not meet the required return are flagged up for potential disposal.