INTREAL Solutions to Develop and Implement New Real Estate Risk Management System for Bavarian Pension Fund
19. Jan 2023
INTREAL Solutions, the IT services arm, consultancy firm and subsidiary of third-party AIF manager INTREAL, has been advising the Bavarian Pension Fund (BVK) on the development and implementation of a new risk management system for its global real estate portfolio. BVK handles the business of twelve occupational and municipal pension plans and has real estate investments under management whose equity interests add up to c. 32.4 billion euros (as of June 2022). The portfolio comprises properties of all types of use, spread across five continents.
Within the framework of its mandate, INTREAL Solutions developed a comprehensive scoring model for specific types of use and countries that uses a wide variety of indicators to monitor and control a global portfolio. In addition to standard risk indicators in the macroeconomic area, such as inflation, interest rate development or rates of rental growth and economic growth, it also appraises individual property risks and ESG risks. The findings are mapped in a return-risk matrix. In addition to setting up all necessary processes, the mandate also includes implementing the new system in IT terms.
Annika Dylong, Head of Consulting & Services at INTREAL Solutions, commented: “It was a pleasure and a privilege to get to advise Germany’s largest public-sector pension group. Covering such a large, heterogeneous and global portfolio from a risk management perspective and implementing a suitable valuation technique is certainly an exciting task. Especially when you bring the kind of experience to the job that we gathered by handling the risk management for hundreds of property funds over the past thirteen years. We will gladly share this hands-on experience with other institutes.”
Christian Schmidt, Managing Director of INTREAL Solutions, added: “The major advantage that sets us apart is the combination of professional consulting and IT expertise. We were also able to help BVK with the IT optimisation and automation of the new valuation tools that are needed to run the new risk management system. These include essentially the standardisation of data inputs provided to BVK by third-party managers, a more or less fully automated data transfer into the valuation tool, and the automated creation of conclusive return-risk assessments.”
Christoph Geirhos, the Head of Real Estate Portfolio Management at BVK, commented: “In line with the focus on the portfolio of about 850 assets, it was important for BVK to develop a holistic model capable of mapping the increasingly complex market requirements in a return/risk matrix. This will enable us to detect above average risks even faster and thereby speed up the derivation of adequate strategies and options for responding to them. Especially in the context of weighing relevant indicators and measuring the risk bandwidths, it was of key importance to us to be working with a company that has plenty of experience in the day-to-day application of the model. INTREAL Solutions has supported us in the effort to enhance the transparency of our real estate portfolio for us. The scoring model will serve as a central component of our in-house real estate risk management.”
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