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Kate Richard discusses her firm's unique data-driven approach to real estate and energy investment.
Key Takeaways
- Warwick Investment Group leverages data science and A.I. for real estate, energy, and digital asset investments, using algorithms to look to gain a competitive edge.
- Their success comes from finding unexplored market niches. By analyzing geospatial and diverse datasets, they can offer differentiated investment products tailored to specific needs.
- Warwick targets markets strategically, such as London's residential housing market, which has tax advantages, and specific energy projects that are difficult to access.
Transcript
My name is Kate Richard and I am the founder, CEO and CEO of Warwick Investment Group. We invest in real estate, energy and digital assets in discrete strategies. I founded Warwick 11 years ago and the thing that we saw was a gap in what was available in real asset private equity - which is really any real assets like energy, infrastructure, metals and mining, and certainly real estate - was the application of data science to the investment process. We went through Y Combinator (and our data science team originally came out of Y Combinator) and we built acquisition algorithms and predictive pricing algorithms to be able to attack these markets.
I think the most important question is why does this business exist? Why have people continue to invest in it? For us at least, I think it's that this business is creating products investors can't get anywhere else. And then the question becomes why? And I think that's because in the case of work, we're able to look at a market and dig so deep that we can find a niche that's not being accessed. So this is not a quant strategy, but we're using A.I. to use geospatial data sets and things that you would want in an investment committee process to rank and prioritize these assets versus one another.
On the real estate side, our acquisition algorithm has hundreds of data sets. So everything from noise pollution to air pollution to proximity to the best rate schools, median income data, rental duration data, Airbnb data, Uber pickup data, median income data, everything that you would really want to look at to say. Is this a place that we want to own long term in terms of capital appreciation? And so what we've done at work to carve out our niche and to carve out our license to operate and the attractiveness for LPs is go into a space and see what is not offered. So where is private equity not playing today and what parts of real estate can we buy that have value?
The prime example that we're investing in is London residential housing. First, from a macro standpoint, there's no annual real estate taxes. So we really like London because we have a lot more confidence under the yield because we don't have a risk of a rise in real estate taxes today; that's one. Two, we like the U.K. in general because it's not institutionally owned. It's unique for investors. They probably don't have it in their portfolio. It's going to be a unique source of alpha in. In addition, when we look at U.K. housing, the U.K. is structurally short housing. London is structurally short housing. So when we contrast that to another global city like York, which has nine years of housing supply, the macro looks really interesting. And then lastly, we like this opportunity today because we're able to buy at a discount in dollar terms, and that is a gift of covid and Brexit in such quick succession. So there's an overall macro opportunity we really like, there's a tax structure situation that we really like, and there's a micro valuation opportunity to date that we really like.
On the energy side, we use the acquisition algorithms to say what are the cheapest hydrocarbons using geochemical geological reservoir, engineering, financial accounting, commodity data, what are the best parts of the best fields? And so, we pursue aggregation strategies to buy parts of the field that are very difficult to get in today because they're already owned by the public companies. And then, we use the rights inherent to those interests to take over operations and take over control and put ourselves into majority interest control positions where appropriate.
Important disclosures
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