Private Real Estate – Overton Pension Fund
Table of Contents
1. Mandate
2. Quantitative Analysis
3. Qualitative Analysis
4. Investment Policy Statement
5. Asset allocation
6. Repartition of assets
7. Going forward
1. Mandate
Dear Ms. DeSoto,
To support you into taking a decision that will affect the asset allocation that Overton Pension Fund will take in the upcoming years, we, the John Molson School of Business portfolio management interns present to you, in this following report, our analysis of the OPF. Backed up by our analysis, we will give suggestions as to how much of the fund should be allocated to real estate and whether should the fund venture into public real estate, private real estate, or even both. By the end of this report, we will have conveyed to you recommendations for a complete asset allocation.
The main recommendations are:
We would allocate 16% to real estate in general, 5% in public real estate and 11% in private real estate
We recommend pursuing core strategies and value-added strategies
We recommend Angosia Instl Real Estate Securities, due to lower expense ratio and good performance over the past five years
We recommend looking towards funds such as Aqua Vista Equity Fund III, as it has compatible strategy, lower fund term in high IRR
We believe that progressively, our asset allocation should shift towards safer strategies, due to the unique circumstances of the pension fund
Regards,
The John Molson Business School Portfolio Management Interns
2. Quantitative Analysis
Required return
Since Cadim right now make 14% risk adjusted IRR, the required rate of return if we invest in China and India should be at least more than 14%.
3. Qualitative Analysis
Different time periods require different returns
Many factors, including the bell-shaped distribution that is assumed, put an asterisk next to the discount rate on fund liabilities. While it is true that in the long run, we would discount it by about 4.5% per year, we doubt