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Assessing risk: The inability to accurately gauge and price risk increases investors’ vulnerability
Do we need more reminders the world is a risky place? Recent global stock market volatility, particularly in a weakening China, shows no one really knows how far we may be from the next major downturn. The risk of a potential hard landing in China seems to increase weekly, and the corresponding impact on the region’s economic prospects and real estate markets could be devastating. The need and desire for more uniform and reliable risk assessment in real estate certainly exists, and the inability to properly identify and analyse risk elements leaves investors poorly protected.
It raises an important question: Are most investors any better today at assessing and pricing risk than they were before the global financial crisis? “As an industry, I’m really disappointed,” says John D’Angelo, managing director at RealFoundations. “I don’t think it’s being done significantly differently than it was done pre-GFC.” D’Angelo helps investment managers get systems in pl