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HEIGHTENED POLITICAL DISRUPTION ADDS WEIGHT TO THE ARGUMENT FOR EUROPEAN REAL ESTATE INVESTMENT RISK RATINGS TO BE GIVEN A STANDALONE MODEL

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HEIGHTENED POLITICAL DISRUPTION ADDS WEIGHT TO THE ARGUMENT FOR EUROPEAN REAL ESTATE INVESTMENT RISK RATINGS TO BE GIVEN A STANDALONE MODEL

By Emmanuel Lumineau, CEO and Thomas Schneider, CIO at BrickVest, the international online real estate investment platform 

While investors paid little mind to political risk until recently, Brexit and the Italian referendum has made it a reality, and established a new paradigm in the realm of real estate investment. Evaluating political risk using qualitative and quantitative tools has now become essential.

As the largest market in Europe, London is traditionally part of any real estate investment strategy for international investors. Yet the lead-up to the referendum already froze approximately £1 billion worth of transactions, and investors today are not only still wary, some are in fact pulling out.

Having a dedicated risk rating for real estate is essential 

Contrary to the bond market (which has much more sophisticated methods than its real estate counterpart for evaluating default risks), there is currently no structured, precise evaluation of political risk as it applies to real estate assets. This is hardly surprising, since it would involve considerable data collection from real estate markets in terms of demand (transactions, average square footage, rise and fall of rental rates), supply (rate of vacancy and unoccupied stock) and investment (volatility, ROI for real estate transactions). Establishing a tool dedicated to the political risk premium for real estate also requires access to data in real time, as well as demanding that information from different countries be normalised.

To date, the available real estate data has been supplied by private initiatives (Land Policy, owners, universities etc.) and concerns a very limited portion of the world’s markets. It is thus essential to avoid the conflation of real estate and sovereign risks. The Brexit referendum caused the UK’s debt rating to fall from AAA to AA, according to both Fitch and Standard & Poor’s rating agencies. But investors cannot effectively rely on such ratings to assess the change in real estate market risk, since real estate asset and sovereign risks are not always correlated.

The UK possesses one of a very few highly transparent real estate markets in the world, along with that of the US. Data collection initiatives, which are conducted by the Investment Property Databank (IPD), have been underway since 1986. In this respect the German and French markets remain murkier and data is harder to come by – something that is largely due to a lack of committed resources.

The first element of concern regarding political risk comprises real estate assets themselves. Relevant data available concerns transactions and yields, but also includes location-based rental risks. This data is now accessible, having been rendered public as part of the Open Data project: crime statistics, school density, neighbourhood economic activity, unemployment rates, turnover, etc. The key is using them to deduce the inevitable macroeconomic consequences that are a result of any social or political upheaval.

The second element associated with political risk concerns the business plan – these are risks associated with the investor and investment scenarios. Issues of taxation figure prominently, as well as performance, managers and so on. A particular risk profile depends on the type of investments planned.

In short, a political risk premium (or discount) may be assigned if a high level of risk is identified.

Since the 23rd of June it has become impossible to consider the Western European market as an integrated whole. As such, as we finished a year of significant turmoil across Europe, and indeed the rest of the world, with more likely to follow over the next 12 months, it is about time that the available data was aggregated to evaluate the political risks associated with real estate investments worldwide, emancipating them from sovereign debt ratings.

There is no doubt that such a risk indicator would prove extremely valuable both in terms of yields and for regulation. Data remains the golden goose of the digital economy, an environment that real estate investment is embedded in today.

At BrickVest, we understand the need for greater risk transparency. We have assembled a Board that includes European real estate research specialists. Earlier this year we announced an appointment of Remi Antonini (former head of European real estate research at Goldman Sachs and former partner & head of European real estate at Exane BNP Paribas) as the head of BrickVest Rating Committee.

Together with Remi, BrickVest is designing a proprietary algorithmic risk-based rating model, which will enable investors to classify real estate investments according to risk, using a similar approach as fixed income rating agencies. In this way BrickVest Ratings intends to make investing in real estate more transparent and comparable.

Investing

What is the procedure for proving a missing or lost Will?

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Intermediaries will be key to Investment Houses navigating the Covid19 crisis

By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty

Contentious Probate Hub & Area

Initial steps

When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.

Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:

  • making enquiries of the deceased’s family and friends;
  • making enquiries with the deceased’s professional advisors;
  • instructing The National Will Register to undertake a Certainty Will Search.

Presumption of revocation

Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.

Procedure for proving a copy Will

The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).

The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.

The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).

The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.

The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.

It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.

What is a Certainty Will Search and why is it necessary?

A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.

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Oil prices rise as investors look to higher demand seen in second half

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Oil prices rise as investors look to higher demand seen in second half 1

By Shadia Nasralla

LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.

U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.

China also avoided an economic contraction last year.

Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.

The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

(Additional reporting by Florence Tan, editing by Louise Heavens)

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Can Thematic Investing provide investors with growth opportunities in uncertain times?

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The impact of COVID-19 on the investment market

New whitepaper from CAMRADATA explores

CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.

Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.

“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”

The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.

After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.

Key takeaway points were:

  • Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
  • It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
  • One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
  • There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
  • In terms of successful themes, one clear winner due to COVID had been digitalisation.
  • One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
  • One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
  • The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
  • But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.

The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:

  • CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
  • Sarasin & Partners: ‘Theme or fad? How to invest for the long term’

To download the Thematic Investing whitepaper, click here

For more information on CAMRADATA visit www.camradata.com

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