How To Rate Italian Real Estate Funds

The rating offered by independent credit assessment institution represents an easy way to summarize the risk return profile of an investment and, especially in the United States, this tool is used also to evaluate the risk return profile of Real Estate investment products. The more relevant rating agencies published rating criteria for the evaluation of real estate indirect investments and defined some guidelines to evaluate fund manager choices and capabilities. In Italy, the law and the characteristics of the markets are quite different from other U.S. or E.U. experience and rating criteria defined for real estate investments in other countries could not be applied directly to Italian real estate funds. The aim of the paper is to study which are the main difference of Italian market respect to other markets that could impact on rating evaluation and how international best practices on real estate rating could be applied to this new scenario. The analysis proposed will consider all real estate funds listed in Italy looking at investment and financing solutions adopted. The last section of the paper tries to make a detailed analysis of the portfolio of real estate investments made by one relevant real estate Italian fund manager. The aim of the analysis is to test which are the limits of standards procedures for evaluating Italian real estate funds and how real estate fund managers can improve the rating assigned by the external credit rating agency according to the real estate investment selection process.