FORMATO, RESOLUCIÓN Y PESO DE CADA IMAGEN

In the broad commercial sense, “benchmarking is the process o f comparing business practices and performance levels between companies to gain new insights and to identify opportunities for making improvements” (Young, 1996). The concept behind, benchmarking is to learn from other approaches rather than to solve the problem from llrst principles. This results in faster implementation and improves the chance of, getting it right first time. Benchmarking provides a tool, which can close the performance gap between current performance and best in class. Selecting the right yardstick gives a number o f benefits (Godson, 1995), such as:

• Helping to define realistic targets;

• Evaluating relative performance by isolating the impact of trustee strategy or

constraints from the skill o f the manager;

• Assisting in setting agendas and providing a framework against which to record

the reason for decisions;

• Identifying the risk and rewards o f deviating from the average;

• Allowing trustees to match incentives with results on a fairer basis.

Property industry lags behind the rest o f the commercial world (Young, 1996) in

respect o f two particular issues. Firstly, it has become increasingly common among

industrial companies to undertake syndicate-benchmarking studies. Thus companies

can define appropriate benchmarks together, share information, and receive individual

feedback on relative performance, all based on confidentiality. It is similar to IPD's

service, but focusing on much more detailed performance measures. Secondly,

benclimarking has now moved beyond quantitative analysis, measuring the gap

M Sc C E M F inal R eport M arla M avrona 2001

between current and best practice. Recent developments have shown that greater

benefits can be derived from understanding the processes that bring about the

variations in performance, and identifying how to close the gap.

However, property has been shown to have specific features in comparison with the

other investment assets, which causes different performance for different types and

sizes o f funds (Godson, 1995). Moreover, the particular characteristic o f property

may affect implementation o f benchmarking in the context o f an effective property

portfolio performance measurement system. Therefore, setting the right benclimarks

for property portfolios is a crucial issue, which requires special consideration. Godson

(1995) offers more detail on theoretical and practical selection o f benclimarks that IPD

has to deal with. The practical agenda in the way forward is to:

• improve the understanding o f IPD benchmarks;

• bring more order into the construction o f customised benchmarks;

• take responsibility for explaining how they should be applied and interpreted.

In other words, a feeling that property markets need indices, or higher-quality market

information, camiot by itself lead to the creation o f an effective performance

measurement system. It has to be accompanied by a more sophisticated, and

widespread, appreciation o f the benefits o f portfolio benchmarking among property

owners (Horsey & Key,1997). Indeed, a benchmark differs from an Index:

• An Index is constructed to reflect the total performance o f all tradable assets in

a market and represents the ideal return achievable by an investor holding a

representative spread o f assets in that market (Godson, 1995). Equity and

bond indices are constructed from published prices o f tradable securities and

\/S c ( ' E M Final Report M aria M avrona 2001

e v e n pert'e et Index tra c k in g f u n d s c a n n o t m a t c h th e p e r f o r m a n c e o f a n Index

a l t e r c o s t s a re d e d u c t e d .

• A b e n c h m a r k m e a s u r e s the averag e p e r f o r m a n c e o f in v e s to rs in that m a rk e t net o f c o s ts . It is lim ited to the part o f the in v e sto r m arket, w h ic h is m e a s u r a b le ,

n o r m a l l y to th e p e r f o r m a n c e o f i n s titu tio n a l in v e s to r s . T h e r e m u s t be a d i s t i n c t i o n b e t w e e n “ c o m p a r i s o n " a n d " b e n c h m a r k i n g " , f h e la tte r s h o u l d be • r e s e r v e d f o r a - p r e d e t e r m i n e d . - c o n s i s t e n t a n d m e a n in g fu l ta r g e t o f p e r f o r m a n c e , a n d a l l o w s m o r e o b je c tiv e m e a s u r e m e n t o f fu n d m a n a g e m e n t s k ills in a c h ie v in g a b n o r m a l r e tu rn s . If a b e n c h m a r k is to be s u c c e s s f u l a s a m e a s u r e o f m a n a g e m e n t q u a lit}', it s h o u l d be • m e a n i n g f u l a n d m a tc h to th e fu n d ta rg e ts ( h a v e a high c o v e r a g e o f th e ta r g e t, it a d d r e s s e s ) . • b e c o n s i s t e n t w i t h o v e ra ll fu n d liab ilities. • r e l l e c t th e i n v e s t i b l e p o s i t i o n o f th e m a n a g e r so th a t he is able to h o ld th e full r a n g e o f a s s e ts a v a ila b le i f he c h o o s e s . • c o m p r i s e a h o m o g e n e o u s set o f fu n d s . • s ta b le , not a m o v i n g target. In p r a c t i c e t h o u g h , b e n c h m a r k s are o f t e n n o t w h a t th e y s e e m to be, e s p e c ia ll} reg ard in g p e r f o r m a n c e m e a s u r e m e n t o f p r o p e r t y p o r t f o l i o s . T h e in d i v i s i b i l i t y an d i l l i q u i d i t y o f p r o p e r t y a s s e t s i m p o s e s e v e r e c o n s t r a i n t s o n p r o p e r t y i n v e s t o r s , w h i c h m a k e t h e u se o f s i z e - s p e c i f i c b e n c h m a r k s n e c e s s a r y f o r th e m a j o r i t y o f fu n d s .

A d d i t i o n a l l y , th e d i f f e r e n t range o f p r o p e r t y r e t u r n s m a k e s th e s e le c tio n o f ratio n al

MSc ( ' E M Final Report M aria M avrona 2 0 0 1 I b e n c h m a rk in g o f i n v e s t m e n t p r o p e r t y p e r f o r m a n c e is challenging. B e t t e r s a id , it is a c h a llen g e w i t h i n a challenge, h a v in g in m in d t h e s o p h i s t i c a t e d a n d d y n a m i c s o c i o ­ e c o n o m i c f r a m e w o r k to th e p r o p e r t y i n d u s t r y . I P D , th e o n l y p r o v i d e r o f b e n c h m a r k i n g s e r v i c e s o n c o m m e r c i a l p r o p e r t y in the U K , h as ta k e n th e c h a l l e n g e , a n d in r e c e n t y e a r s h a s c h a n g e d in r e s p o n s e to th e d y n a m i c s o f th e m a r k e t. It r e v is e d its s t a n d a r d A l l - F u n d A n n u a l b e n c h m a r k , a n d h a s d e v e l o p e d a v a r i e t y o f c u s t o m i s e d ( s iz e a n d / o r t y p e o f f u n d b a s e d ) a n d s t y l e ( s e c t o r / s e g m e n t s p e c i h e ) y a r d s t i c k s to b e t t e r s e r v e fu n d m a n a g e m e n t in th e U K . A t th e s a m e tim e , w i t h its e x p e r i e n c e a t h o m e , th e c o m p a n y h a s a t t r a c t e d a r e s p e c t a b l e n u m b e r o f i n t e r n a tio n a l c lie n ts ,

i c lle c tin g t h e b eg in n in g o f in te r n a tio n a l p r o p e r t y p o r t f o l i o p e r f o r m a n c e m e a s u r e m e n t

a n d h o p e f u l l y , th e d e b a t e o n c o m m o n s t a n d a r d s for p e r f o r m a n c e m e a s u r e m e n t a c r o s s

n a tio n a l b o u n d a r i e s ( H o r s e y & K e y . 1997).