Italian Real Estate Investment Funds: Market Structure and Risk Measurement
34 Pages Posted: 23 May 2012
Date Written: April 27, 2012
This paper describes the Italian real estate investment funds industry, providing an overview of the distinctive features and risk factors of this sector. By using accounting and supervisory data, we: (1) compute the returns of the real estate assets in the portfolio of these funds; (2) construct a price index and a total return index of the real estate assets held by the Italian funds; (3) define a risk assessment process based on three different aspects - their financial profile, income structure and property price behaviour. This analysis allows us to select funds with a weak financial structure, poor returns, and a high probability that in a three-year interval their property portfolio will fall below their net liabilities (defined as the difference between debt and liquid assets). The proposed risk assessment can be seen as the first step towards a more intensive supervisory analysis and can also be useful for investment purposes.
Keywords: real estate investment funds, asset management, firm value model, non-normal distributions, Monte Carlo simulation
JEL Classification: G21
Suggested Citation: Suggested Citation