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The risk exposure of property cash flows: evidence from the italian market

Claudio Giannotti, Gianluca Mattarocci
October 2009 - n°10
Keywords: rating, real estate funds, risk
Jel codes: G24, L85

The variability of cash flows of Real Estate investments is affected by specific characteristic of each investment and by the choices for the portfolio composition and for the debt structure. The Italian Real Estate funds could not be evaluated with the same approaches used for other international real estate vehicles because some characteristics are not comparable and so it is necessary to modify them. The aim of the article is to analyse the main characteristics that can define the Real Estate Investment Fund risk. Results demonstrate that the risk is highly influenced by portfolio construction choices respect to the capability of selecting best investment opportunities. The leverage policy must be considered evaluating the variability of expected inflows/outflows and the leverage sustainability.