3. Risk framework and constraints

This section explains how RETF handles risk. The ETF is simple for users, but internally it follows conservative rules so NAV, withdrawals and allocations stay within safe limits.

3.1 Liquidity and redemption risk

RETF promises easy redemptions, but actual liquidity comes from real cash, not from theoretical property valuations.

Capital is split into a liquid bucket and a locked bucket. The liquid bucket holds stablecoins in program custody or in instant redeem venues. A target buffer percentage, a minimum USDC floor and an instant withdrawal limit define what “healthy liquidity” means for the fund.

When flows are balanced, withdrawals simply come from this buffer. If many users try to exit at once and paying everyone would break the floor or the buffer target, the system moves new requests to a pending queue. Those requests must be approved within a target window, for example 48 hours, funded by repayments from matured properties, harvested DeFi parking or external liquidity if needed.

3.2 Property selection, realtors and diversification

The ETF does not buy random properties. It works with verified realtors that already manage large portfolios, typically above 10 million in real estate. They onboard specific deals in the 150 to 250 thousand range, which means the assets inside RECC and RETF are a small slice of a much larger book.

Properties are chosen balancing yield and safety. The goal is to be attractive for investors without loading the ETF with highly speculative or marginal projects.

If a crowdfund is moving slowly or is at risk of failing close to a deadline, RECC can supply the remaining funds so the deal does not collapse purely due to a shortfall in the last stretch.

For single property investors, if a deal is cancelled, the default outcome is returning funds to holders if RECC does not step in. Inside the ETF, that situation is softer. Capital can be reallocated to another live crowdfund, keeping investor money working without manual decisions. Multiple exposures bundled into one asset, RETF, reduce the impact of a bad or cancelled deal on any single user.

3.3 Risk overview table

Risk	Description / Possibility	Mitigation
Realtors do not repay the loan	Developer or realtor defaults due to project failure, insolvency or fraud, causing loss of principal and yield.	Lending only to verified realtors with audited track records and multi million portfolios. Credit agreements with collateral, mortgages over the property, SPV share pledges, and an opt in insurance fund for extreme cases is under development.
Property value changes drastically	Market downturns or damages reduce property value and returns.	Diversified portfolio across types (renovations and rentals) and regions. Properties on RECC are a small slice of each realtor’s larger portfolio, which reduces concentration risk.
Crowdfund stalls or fails	A raise moves too slowly or risks missing a deadline and the real world operation could be cancelled.	RECC can top up the last part of the raise. If a deal cannot proceed, ETF allocations can be redirected to other active properties so capital keeps generating yield.
Insufficient liquidity in the ETF	Heavy withdrawals drain the liquid bucket, delaying redemptions or forcing bad exit timing from deals.	Configurable liquid buffer and USDC floor. Instant withdrawals allowed only inside these limits. Pending withdrawals target approval within up to 48 hours, funded with matured repayments or external liquidity.
Smart contract vulnerabilities	Bugs in ETF, property contracts or DeFi adapters corrupt accounting or affect funds.	Minimal, modular program design using standard SPL primitives, external audits (for example Halborn), strict upgrade and deployment process.
Yield mismatches versus expectations	Projects underperform or delay, producing lower APY than the linear accrual curve.	Conservative accrual assumptions and an allowed deviation band. Large negative deviations, for example beyond three percentage points, can be smoothed using RECC liquidity when appropriate so ETF performance stays within the communicated range.