Key Takeaways
- Identify, assess, mitigate, and monitor risks across five categories; stress test against severe combined scenarios.
- Manage interest rate risk through fixed-rate bias, staggered maturities, rate caps, and conservative LTV.
- Build resilience with three-layer reserves (15–20% of gross revenue), low leverage, and geographic diversification.
- Performance attribution separates market returns from management returns—essential for evaluating true skill.
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Test Your Knowledge
1.What percentage of portfolio debt should ideally be fixed-rate to manage interest rate risk?
2.Total portfolio reserves should equal approximately what percentage of annual gross revenue?
3.Performance attribution decomposes portfolio returns into which four components?