A global fund manager asked for PPR’s help to examine the risk and return impact of adding Emerging Markets in Europe and Asia to a core U.S. and European fund.
PPR began the engagement by using information on all of the U.S., European, and Asian markets to conduct a mean-variance analysis on a global basis. The analysis was then constrained to optimize both the client’s existing expertise and experience in certain markets, and appropriately message the fund’s strategy to potential investors.
We then examined which markets had the highest and most stable ingoing yields, in order to meet an expected level of income return. It then became possible to measure the incremental impact of adding various emerging markets on the portfolio risk of a core European and U.S. fund. Finally, we discussed and modeled the impact of currency risk on potential allocations within the fund.
The project culminated with a meeting with senior management, where we went through a series of analyses that helped to determine the best asset allocation, based on risk-return requirements, among other items.
A U.S.-based investor who had rapidly acquired hundreds of properties without a clear strategic plan engaged PPR to assist them.
The initial project work included reviewing their existing portfolio and understanding their relevant investment universe. We then calculated the efficient frontier and located their current portfolio in risk and return space. After executing a set of diagnostic exercises, we identified which assets and markets are most and least helpful in achieving their portfolio goals.
We then proposed and debated potential strategies, and provided the analytics to support their exit and entry into new markets and a framework for making investment decisions in the context of the new strategy. Using quantitative methods and our custom market-screening model and overlaying qualitative market knowledge, we targeted appropriate markets and property types for diversification while taking into account cyclical timing considerations. The final result was the disposition of many assets, and the entry into new markets and asset classes.
A prominent real estate lender had a growing commercial real estate portfolio requiring more in-depth research and risk management tools.
The company had problems managing this growing portfolio without a consistent platform to evaluate expected losses for these assets and set reserve requirements for its portfolio.
The lender turned to PPR’s CompassCRE model to provide a direct comparison of systematic risk across time, market, property type, loan structure, and other asset classes. Compass’s three standard scenarios allowed the company to evaluate results for numerous economic conditions. Compass also permitted the company to stress test its portfolio; its flexibility allowed the lender to build custom scenarios by performing DSCR, LTV, Cap Rate, NOI, and Interest Rate stress tests. Coupled with PPR’s industry-leading research, Compass was the user-friendly risk management solution that enabled this client to effectively manage the risk in its growing portfolio and determine appropriate reserve requirements for economic capital.
An established investment management firm needed a risk management tool via Trepp that would allow it to perform pricing and expected loss analysis on its large commercial real estate portfolio.
The firm faced complicated risk analysis for a portfolio comprising many bond classes from various CMBS transactions.
PPR’s CompassCMBS product supplied Expected Losses for four standard scenarios, including the Base Case, Oversupply, Severe Recession, and Stressed Recession. The firm could build its own portfolio using CUSIPS and performing risk analysis on these custom portfolios. Compass allowed the user on Trepp to effortlessly run Price/Yield Analysis and view tranche losses for all four pre-built scenarios. The firm was also able to access Probability of Default, Loss Given Default, and Expected Loss results on a loan and portfolio-level basis for all transactions in the CMBS universe. These results can be calculated using PPR’s primary CompassCRE model, driven by PPR’s industry-leading market research. In addition to the standard scenarios, CompassCMBS allowed the user to run Credit-Based Assumptions by identifying its own default parameters and re-underwriting the loans upon default. Collectively, these tools offered the firm a powerful and easy-to-use solution to analyze risk in its custom portfolio.