A Passion for Performance. Katie Smith wants the numbers to do the talking
IQ spoke to Katie Smith, Head of Analytics at CBRE Global Investment Partners, about her interest in performance analysis, her role on the INREV Performance Measurement Committee, and in particular about INREV’s plans for a new asset level index.
Katie’s career – so far at least – has been beating a path towards performance measurement and analytics. Starting at PRUPIM (now M&G Real Estate), she progressed rapidly to become Head of Performance before leaving to join the hedge fund Man in 2011. She then returned to real estate in 2014, joining CBRE Global Investment Partners, where she took on responsibility for portfolio analysis across a range of vehicles. The information she provides acts as a regular input to portfolio strategy.
‘What appeals to me about this part of the profession, is that it’s all about the numbers,’ she explains. ‘It’s very black and white and the numbers tell a story – there’s no hiding from bad performance. Working in analytics also means you have to engage with many different parts of the business. Real estate – more than other industries – is all about relationships, and I find that part of my job very satisfying.’
Katie’s enthusiasm is now being harnessed by INREV, for whom she is set to chair the Performance Measurement Committee in the New Year, after a period as vice-chair. ‘This is a great committee to belong to,’ she says, ‘because it’s so focused on the needs of the industry. Last year I contributed to a white paper on fund performance measurement at NAV level and more recently we’ve been working on a new fund IRR index, which is very dependent on the current Historical Data Collection project (see separate article in this edition of IQ). But I’m most excited by the work we’re doing in the focus group devoted to developing an asset level index. This is a chance to change the industry – the sort of opportunity that only comes along a few times in your career.’
I’m most excited by the work we’re doing in the focus group devoted to developing an asset level index. This is a chance to change the industry – the sort of opportunity that only comes along a few times in your career.
‘The idea is to create a new index across Europe – both national and international – using data assembled asset by asset. Compared to INREV’s existing fund-level indices, this will have the advantage of providing results for many different detailed regions – not just by country and sector. So, for example, users would be able to access performance results for Frankfurt offices or logistics assets in Italy, providing there was a big enough sample to meet confidentiality requirements. Participants would be able to access this information instantaneously via an index tool, similar to the one already in place for INREV’s Fund indices.’
The focus group for the asset level index represents a wide spectrum of the INREV membership. ‘When we consulted with the wider industry,’ she explains, ‘the group identified frustrations in some organisations about the depth of market data currently available across Europe. So it became clear that we need to find a way of bridging this information gap in a way that will be practical for the industry to implement.’
‘This project is a big challenge,’ Katie admits, ‘not just because of the technical aspects but also the need to obtain a significant quantity of asset-level information on funds. I’m convinced it could bring about a step-change in the transparency of our industry, with quarterly assetlevel market results available for the first time across the continent. To make this possible we will need to collect asset cashflows and market values quarter-by-quarter, as well as fixed information like addresses on a one-off basis. This will mean about 50 data points for each asset, and we’re hoping for enough back data to start the index series with three years of history. This might sound daunting, but most funds will have the information to hand for their internal reporting, and we aim to make the data transfer process as painless as possible.’
I’m convinced this project could bring about a step-change in the transparency of our industry, with quarterly asset-level market results available for the first time across the continent.
‘At the moment we’re testing the blueprint with data from half a dozen keen supporters of the project, including my own firm, sampling assets that we manage across the European continent. This feasibility study should help us to streamline the data assembly and verification processes, preparing the way for a much larger cohort of participants. Initially the plan is to target those assets that are already held in the INREV Fund indices, but there is no reason why other kinds of vehicles that can’t participate in the existing indices – for example joint ventures, club deals and separate accounts, or even directly held assets – couldn’t also join. This may well appeal to them as a way of getting market information that closely matches the kinds of assets they hold, for example emphasising specific geographies or types of properties.’
‘Assuming we get the full project off the ground, we intend to produce three levels of reporting: first, the headline index numbers, which will be available to the whole industry. Then, an index summary document, available to all INREV members, setting out a page of results for the dominant countries and sectors. Finally, those organisations contributing data will be able to access detailed granular market outputs, only restricted by the need to preserve data confidentiality.’
Katie emphases that this project also has the potential to go beyond the boundaries of Europe. ‘For one thing, we will allow participants to include data on their holdings in other regions, such as America and Asia. Then, over time, we hope to combine this data with information generated locally, building on INREV’s close ties with NCREIF in the US and its sister organisation, ANREV, in Asia. There are also likely to be synergies with other big INREV projects, most obviously the work on standardising global definitions and data for funds, again in collaboration with ANREV and NCRIEF, as well as PREA in America.’
She sees this project as potentially having a number of big benefits for her work at CBRE Global Investment Partners. ‘Most importantly, the European asset level index should provide up-to-date measures of market trends across the Continent at a fine level of detail, something that is not available at present. It would also generate detailed information on direct markets with which to compare the European assets in our own funds, again on a regular basis throughout the year. All of this could also serve as the foundation for strategy discussions on each portfolio, as well as for forecasting future market performance.’
Katie Smith is Head of Analytics at CBRE Global Investment Partners and new Chair of the INREV Performance Measurement Committee.