GY472: Real Estate Investment
Individual Report – Portfolio Investment
Winter Term 2025
This document provides a guideline for completing the Individual Report summative assessment. It first gives the details of the exercise to be conducted and then an example structure of the report. You do not necessarily need to follow the points in each suggested section, and you may add, remove, or reorganize points (and sections) as you prefer. You can also include additional analysis/discussion beyond the scope of this guideline in your report as you see fit.
1. Portfolio Investment Strategy Assignment
As part of the analyst job at the High-Level Investment Fund, you are requested to provide a further alternative strategy within the evaluation of the Battersea Power Station investment plan. In particular, the board of the Fund is interested in knowing how the Battersea Power Station project would compare to investing indirectly in real estate via financial markets.
For this purpose, you are assigned to study an alternative strategy consisting of building a portfolio of REITs and standard stock market indices (FTSE1000, S&P500, etc.). Keeping the same investment horizon of 5 years, and having at disposal the Fund,s equity, you need to acquire information on the performance of publicly traded RE ITs, estimate their expected returns, and construct a portfolio that combines them with stock market indices accordingly. To be comparable to the other investment options, the portfolio should be set in a way that it holds the same risk as the proposed best strategy for the Battersea Power Station Shopping Centre from your team’s Report.
Given your experience in forecasting and text analysis methods, the Fund is interested in evaluating multiple types of analysis. First, the output of estimates from a standard approach to forecasting and portfolio methods. Second, an analysis that includes the use of alternative sources of data as inputs, such as real estate market reports (e.g., the IPF Consensus Forecasts). Accordingly, they request you submit the results of at least two different methods of analysis.
Finally, given the outcome of your analysis, you should give and justify your advice to the Fund about what is the best strategy to follow for their investment plans. Specifically, you are expected to comment on the profitability of the portfolio investment vis a vis the preferred strategy for the Battersea Power Station Shopping Centre from your team’s Report. This should be based on the estimates of the rate of return of the portfolio investment, its level of risk, and your confidence in the forecasts. Your detailed discussion will inform the final decision-maker and should include your personal recommendations, having worked on preparing both the direct and indirect investment options.
2. Structure of the Report (2,000 words)
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Section
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Guidelines
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Executive summary
(Max 200 words)
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• Clear, concise summary of the expected returns from the proposed portfolios.
• Clear recommendation as an individual expert on which investment strategy to follow.
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Introduction & market research
(Around 400 words)
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• Comments on the costs and benefits of indirect real estate investments against the direct strategies.
• Provides an overview of the advantages of a portfolio investment strategy relying on REITs.
• Reports on the historical performance of REITs in the UK.
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Recommended portfolio strategy
(Around 800 words)
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Overview
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• Provide a summary of the explored strategies.
• Discuss the asset choices for the portfolio strategy among REITs and stock market indices.
• Introduce the data to perform the forecasts.
• Present the unstructured sources of data that can improve the forecasting exercise.
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Forecasting and portfolio
composition
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• Include the basic strategy to forecast the performance of each asset, and its results.
• Present the methodology to determine the portfolio shares of each asset, for given level of risk.
• Discuss results, for chosen level of risk.
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Text and sentiment analysis
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• Discuss the benefits of including information from unstructured texts in the analysis.
• Demonstrate how the use text analysis to inform. the performance prediction of assets.
• Present the new forecasts and portfolio analysis.
• Discuss results, and how they change with respect to the standard approach.
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Investment proposal
(Around 300 words)
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• Provide a clear recommendation on the portfolio
investment based on the analyses executed above.
• Provide a discussion of the preferred strategy against the expected return for the Battersea Power Station project.
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Conclusion
(Around 300 words)
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• Summarizes the returns and risk of the prospective portfolio investment.
• Discusses your view as an expert on
outstanding/upcoming issues that may be of concern to the Fund for each investment strategy: portfolio versus
Battersea Power Station.
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References
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• Consistently formatted according to an appropriate, accepted style.
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Individual Appendices (unlimited)
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Appendix
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Guidelines
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Forecasting and portfolio analysis
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• Further discuss the forecasting and portfolio methodology and
analysis. Add relevant details that cannot be included in the
text of the main report, because they are too technical.
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Text Analysis
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• Further details on the data sources used and the text analysis methodology.
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Coding files and data
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• Excel/Stata/R files that show how the results were obtained.
• Excel/Stata/R files need to be reproducible.
• Code is clear with documentation delineating important sections of code and calling out which sections produce results for which table and/or graphs.
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