By Rodney Walt, Head of Private Wealth, EG
When it comes to building your personal investment portfolio, it’s easy to feel overwhelmed or out of your depth. There don’t seem to be any clear directions to follow; no clues that lead to the place where ‘X’ marks the spot on the map. Rather than feeling lost, your instinct is to seek a guide – a professional or expert investor you can trust to deliver you safely to the destination because they have walked the route a hundred times before.
But professionals are still human. Like everyone else, our intuition is also seeking patterns that reveal an underlying order. Patterns enable us to quickly analyse a situation and ask the right questions, shaping our response to achieve our objectives.
And here lies the danger; patterns can be imagined, paths can change, a guide can still get lost.
The real estate market is non-homogeneous, opaque and infrequently traded, which means that the data observed is less reliable or consistent compared to other markets. Finding patterns and paths to follow requires a little more work.
People can develop biases about certain buildings because of their past dealings, their experiences in the industry or the building’s reputation (be it good or bad). Humans are prone to this judgemental bias because our brains make decisions based on only a few data points. For example, “we’ve turned left here before; we should do it again.”
But when we are tasked with investing money that isn’t ours, we cannot let our behavioural biases dictate the trail we blaze. Behavioural ideas can’t be mapped into economic models or spreadsheets, so how do we account for human emotion and avoid being fooled by human irrationality?
The property risk management software, PRISMS®, developed in-house by EG, has been tackling this issue since its inception in 2008. PRISMS® helps to remove many behavioural biases when assessing acquisitions to quantitatively score risk in real estate deals.
In many ways, PRISMS® acts as our GPS navigation system. It forces discipline by systematically auditing almost 30 key assumptions in financial models and over 50 contextual market data sets to inform those assumptions. This prevents EG’s Private Wealth Division from justifying deals based on only a handful of signposts.
At EG, we apply a consistent method to measure risk and compare real estate deals across markets and sectors that seemingly aren’t comparable. Numbers and technology are the only shortcut to outperform the markets. PRISMS® continually orients us so we can build you a better path to better returns.
About EG Private Wealth
EG grows the wealth of our private investors through commercial property syndication opportunities. Achieving consistent, above-average returns and capital security, EG takes a personalised and aligned approach to every opportunity.
As a team, we have invested over $250 million of private wealth in the property sector, achieving an average 27.8% IRR. The team you meet at the outset is the team who you will work with throughout the lifecycle of your investment, providing you with hands on, personalised service at every stage.
EG is committed to utilizing property technology to uncover new opportunities and to enhance returns for investors. Our proprietary risk assessment model clearly measures and prices real estate risks, providing a disciplined, data-led approach to decision making.
Our investors include sophisticated wholesale investors, trusts, SMSFs and companies who want investments that deliver strong yields and potential for capital growth in the medium to long term.