Fool's gold: mining for “true” value in the US commercial real estate debt market
Investors are forgetting that high risk needs to be compensated for with high return. They are likely to end up with “fool’s gold”
Distinguishing between income oriented investments with a safer risk profile and investments which offer yield, but have highly binary potential outcomes, is crucial in today’s lower yielding environment. The concept of proper compensation for risk should have been the primary lesson learned post global financial crisis.But after nearly 10 years, the market has lost its memory and many investors are now combing through riskier securities in a search for yield. In many cases, we believe investors will end up with “fool’s gold”.