| dc.description.abstract | This study was prompted by a need to look into the management of property portfolio investments
as alternative long-term investments. The issues of concern were the factors considered during the
construction of property portfolios and after portfolio construction, the presence or absence of
procedures for the assessment of the performance of these portfolios in order to obtain a rational
basis for portfolio revision. Property as an investment involves an immense capital outlay which
should give optimal returns either individually or as part of a portfolio. To this end it was
recognized that unlike securities and equity, the property investment market is uniquely inflexible
and its assessment is limited by insufficient information.
Bearing in mind the foregoing, this study looks at the current practice in the construction of property
portfolios and the analysis of their performance. It also looks into the role of the players in portfolio
construction and performance analysis with particular reference to pension schemes. These are
investment managers hired by registered pension schemes trustees to construct their investment
portfolios in a manner that ensures that they obtain market returns on the investments. The study
further looks into the challenges faced in the construction and the assessment of the performance of
property portfolios. Finally, the researcher makes recommendations that will enable the
performance of property portfolios to be continually assessed and analyzed in a similar manner as is
done for other long-term investments such as securities and equities.
The outlook of many investment managers is that property investment analysis is property valuation.
This research has sought to bring out the difference between property valuation and property
appraisal. While property valuation is the estimation of worth to the owner, assessment/ appraisal
or analysis is the process through which its performance is compared either against set benchmarks
or against alternative il!yestments within the existing economic environment.
Investment policies and targets for returns within a specified level of risk are a prerequisite for
successful portfolio construction. Investment policies are required to guide investment in various
media while investment targets are necessary to ensure that market returns are achieved and if they
cannot be achieved then the portfolio is revised.
The study also looks at the Retirement Benefits Authority regulations and investment guidelines in a
view to determining if they are practicable. In the study, a brief comparison is made between actual
proportions of fund values invested in immovable property by local pension schemes against
investment levels by a sample of European Pension Schemes and Retirement Benefits Authority
Guidelines.
Data for this study was collected through interviews and administration of questionnaires to
registered investment managers and to a randomly selected sample of in-house fund managers. The
findings revealed that contrary to the common belief that many pension schemes have over invested
in immovable property, this is not the case in practice. Over investment in immovable property was
only experienced where the schemes were run as public corporations or parastatals and were
therefore susceptible to political influence. In this case, immovable property constituted up to 60%
of the pension scheme fund value. For the rest of the pension schemes, the average level of
investment in immovable property ranged from 0-8% of total fund value.
The study also determined that investment managers had procedures which they followed when
assessing alternative investments prior to portfolio construction. The managers also had procedures
for assessing the performance of long-term investments although this was not usually applied to
property. It was further determined that the major challenge faced during property portfolio
performance analysis is the lack of adequate, up to date information on the current state of the
various property sub-sectors.
The study revealed that while there are procedures for the assessment of long term investments,
these were not applied to property on a continuous basis like in securities or equities but only during
acquisitions or disposals. The study established that property portfolio performance assessment
could be out-sourced to property management firms since they are in constant touch with the
property market. | en |
