Standard Life Investments (SLI) has designed a new tool aimed at helping institutional investors manage real estate risk and informing their decisions when investing in global real estate.
The Global Real Estate Implementation Risk tool (GREIR) provides country-wide ratings for 60 countries, based on market size, ease of doing business, competitiveness, innovation, public sector corruption, credit default swap spreads, and transparency.
The tool produces a risk score for each country that can be converted into a risk adjustment mfactor, to achieve a more accurate comparison of the ‘at risk’ portion of expected returns from a global real estate portfolio.
Anne Breen head of Real Estate Research and Strategy at SLI, said: “The level of risk in real estate investment varies enormously from country to country, and the historic measures used for these can mean investors miss changes in risk.
“Cross border investment requires a three dimensional assessment of how the mix of risks affects expected returns. The aim of the GREIR tool is to address the need for a robust framework on which to base decisions about global and regional real estate investment strategies. It provides a more coherent measurement of the domestic risks involved, and helps investors find the right markets for their level of risk appetite” she adds