 | | |  | | Risk management "Real estate markets are not efficient, you can therefore beat the market...
but be careful not to be beaten by the market!"
(Dr. Piet Eichholtz, Professor of Real Estate Finance at the University of Amsterdam, 1998)
The quote by Dr. Eichholtz underlines the importance of management in real estate markets. Attractive returns can be generated, but they need to be actively achieved. Although risks can be relatively low, appropriate risk management structures and procedures need to be implemented.
Pre-commitment measures:
| - | Thorough asset manager due diligence (trustworthiness, real estate skills, real estate network, general business skills etc.)
| | - | Thorough investment due diligence (sector, location, tenants, costs, legal setup, developer etc.)
| | - | Implementation of effective incentive structures (allocation of roles and responsibilities, performance-based compensation)
| Post-commitment measures:
| - | Financial planning
| | - | Active asset management (analysis of asset reporting, issue management, strategic management etc.)
| | - | Ongoing macro and micro market monitoring
| Portfolio diversification is a widely accepted risk management measure. With regards to currencies it is important to first analyze ones liabilities. In order to secure your credit standing your liabilities should be balanced with equally liquid assets of the same currency. Apart from this guideline an investment portfolio should include a variety of currencies in order to diversify and thereby lower contained unsystematic risk. | | |
