GLOBAL - Property researchers should be given greater decision-making powers and must work more closely with risk management, according to Jose Luis Pellicer from ING Wholesale.
Pellicer, who recently moved from Goldman Sachs to ING Wholesale to help set up their property index products desk, said: "The property research function needs to be more closely involved with risk management. Investment managers could achieve this goal by giving their researchers more decision-making power over portfolio strategy."
"They should put their money where their mouth is. As it is, many researchers do not sit on the boards of the investment managers they work for which makes it difficult for them to act on their findings. At present about half of property researchers' time is devoted to sales and marketing," he added.
Pellicer believes if risk management and property research were more closely integrated, investment managers would be able rebalance their portfolios more efficiently - through the use of property derivatives, for example.
"Investment managers are not sufficiently aware of managing beta (market exposure). They need to manage alpha and beta," he said.
According to Pellicer, very few investment managers currently have dedicated property derivatives professionals in-house.
Pellicer outlined the benefits of real estate hedging by stating: "Generally, managers who have put some thought and action into hedging some of their positions have done better at weathering the downturn than those who have not."
The ING Group announced in October 2008 it was preparing to push into Europe's young real estate derivatives market, after hiring Pellicer and Rawle Parris to help promote property swaps as hedging tools for internal and external clients.
ING Wholesale Banking is a Dutch banking group offering a wide range of financial services to large and mid-sized corporate companies and has a presence in 40 countries.