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APC > Investment Management > Flashcards

Investment Management Flashcards

1
Q

What is a Risk-Return Trade off?

A

The risk-return tradeoff states that the potential return rises with an increase in risk.

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2
Q

What are some different requirements clients may have for their portfolio?

A

Relative Return

Absolute Return

Real Return

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3
Q

What is a Real Return?

A

The return an investor receives after the rate of inflation is taken into account.

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4
Q

What is a Relative Return?

A

The performance of a fund against a market benchmark

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5
Q

What is an Absolute return?

A

What an asset or portfolio returned over a certain period.

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6
Q

Why would a client invest in real estate?

A
  • Predictable cashflow
  • Appreciation
  • Diversification
  • Leverage
  • Inflated hedge
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7
Q

Why would you diversify a portfolio?

A
  • Spread the risk
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8
Q

What are some investment strategies?

A 
Risk profile
Direct Investment
Indirect Investment
Lending
REITs
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9
Q

What are the benefits of a direct investment strategy?

A

More control over decision making

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10
Q

What are the benefits of an indirect investment strategy?

A

Real estate profits without having to own, manage, or finance property

Higher than average dividends and potential for appreciation

Liquid (easy to buy and sell

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11
Q

What are some different risk investing strategies?

A
  • Core (safe, good quality, strong location)
  • Core Plus (opportunity to enhance returns)
  • Value Add (renovation or stablisation opportunities)
  • Opportunistic (high vacancy, redevelopment)
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12
Q

What is a total return?

A
  • Actual rate of return over a given period including income, capital growth and expenditure
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13
Q

How would you calculate total return?

A

(Value Change - Capex + Cap receipts + Rent )/ (Previous value + Capex)

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14
Q

What is a capital return?

A

Capital return is the growth in the value of the original investment

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15
Q

How would you calculate capital return?

A

Capital value - capex + Cap receipts / Previous Capital value + Capex

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16
Q

What is an income return?

A

The income received for an investment divided by the sum of the original investment

17
Q

How would you calculate income return?

A

Rent / Previous value + Capex

18
Q

What is the internal rate of return?

A

Annual rate of growth expected from an investment

i.e. when the NPV is 0. It’s a uniform measurement that can be used to rank several investment opportunities

19
Q

How would you calculate IRR on excel?

A

Include initial outlay and income flows

20
Q

What is an NPV?

A
  • Net present value, or NPV, is used to calculate the current total value of a future stream of payments.

If the NPV of a project or investment is positive, it means that the discounted present value of all future cash flows related to that project or investment will be positive, and therefore attractive.

21
Q

How would you calculate NPV?

A

To calculate NPV, you need to estimate future cash flows for each period and determine the correct discount rate.

22
Q

What is the difference between a Total Return and an IRR?

A

IRR considers the time value of money and the timing of the return. It is more precise but more complex

Both can be forward looking or backward looking

23
Q

Who are the main investors in UK real estate?

A
  • Institutions ( insurance companies, pension funds)
  • REITs
  • PropCos
  • Overseas Investors
  • Traditional estates/ charities
  • Private Individuals
24
Q

What are some other forms of investment?

A
  • Stocks
  • Bonds
  • Commodities
  • Cash
  • Forex
25
Q

What is the BOE base rate?

A

0.1%

26
Q

What is the 10yr average return on FTSE 100 stocks?

A

7.38%

27
Q

What are some Investment Management KPIs?

A
  • Occupancy rates
  • Rent collection
  • WAULT
  • Yields
  • Total Return

APC (17 decks)

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