Best ideas across asset classes

Section 5: Best ideas across asset classes

• Equities
• Fixed income
• Real estate
• Real assets

Equities

Saira Malik

Best ideas

• Our two most-favored areas are dividend growers and listed infrastructure.
• Both offer attractive fundamentals, compelling income levels and the potential for lower volatility and resilience in the event of slowing economic growth.

Investment positioning

The quickly shifting U.S. tariff and trade policy backdrop drove equity market volatility higher and made it harder for companies (and investors) to forecast future earnings. We expect markets will continue to be affected by ongoing headline risk, but we continue to see areas of value and opportunity.

Geopolitical headline volatility will likely persist, but the worst of the tariff volatility seems to be behind us. And, more importantly, the shakeup may have created opportunity. As mentioned previously, we are more positive toward U.S. large cap stocks. This shift is based on a positive view of mega-cap technology (strong earnings growth and high barriers to entry), expected tax cut extensions and a more favorable regulatory backdrop. We think European equities could represent a long-term value opportunity. In contrast, emerging markets equities look less attractive due to global trade policy risks. We had been positive toward U.S. small caps for the last couple of quarters, but concede we may have made that call too early, especially as economic growth remains under pressure.

From a sector perspective, in additional to tech, we favor financials (especially banks), which offer strong fundamentals. We are also focused on more defensive areas — including utilities, real estate and infrastructure — which should be resilient in the event of slowing growth.

Private equity markets remain under pressure, especially given a lack of fund distributions. But we continue to see select opportunities in private equity secondaries markets.

Fixed income

Anders Persson

Best ideas

• Securitized assets and preferred securities offer a compelling combination of attractive yields and value.
• For municipal bonds, we favor water/sewer bonds and select opportunities in health care and higher education.

Investment positioning

As with all parts of the global financial markets, bonds have experienced increased volatility in 2025 amid rising policy uncertainty. Nevertheless, we think yields overall offer a compelling entry point and believe the fundamental credit picture remains positive for fixed income investments.

Long-term rates will likely remain volatile over the next few quarters, then slowly decline amid weaker economic growth and potential Fed rate cuts later in the year. We encourage investors to take advantage of bouts of volatility amid policy shifts and a slowing economy using broad diversification and active management. Also, we continue to find attractive opportunities within credit and expect duration will reassume its role as a growth hedge going forward.

We remain positive toward senior loans, which offer compelling yields, but the likelihood of slowly moderating rates does warrant more caution when considering floating rate instruments. In contrast, we are more positive on preferred securities, which benefit from a strong issuer base and appear attractively valued. We also are constructive on securitized assets (especially mortgage-related investments that offer attractive yields and solid credit risks) and high yield (spreads are tighter but yields and fundamentals remain solid). We are less positive on investment grade corporate bonds (relatively tight spreads and a longer duration profile than we prefer).

Municipal bonds remain one of most-preferred areas of the market, and we believe prices have become dislocated from fundamentals. State and local governments remain resilient, and the market features attractive supply/ demand dynamics. Given that municipal bonds have been lagging the broader fixed income market this year, we think munis are essentially on sale.

Private credit markets remain constructive, and we generally prefer more defensive and higher-quality areas. Market growth has slowed but remains positive.

Real estate

Donald Hall

Best ideas

• We remain focused on “global cities” experiencing growing, educated and diverse populations with a particular focus on the health care, industrial and housing sectors.

Investment positioning

We believe the previous headwinds challenging private real estate have diminished. Real estate started its recovery toward the end of 2024, and that trend has continued through the first half of 2025. Broader market volatility could dampen flows into real estate, but a combination of attractive prices, solid fundamentals and the likelihood for slightly lower interest rates should be tailwinds.

The office sector remains challenged. Values may be troughing and vacancies may have peaked, but it will take time for a recovery to materialize. However, we see a number of opportunities outside of this sector. Outpatient medical buildings and senior housing benefit from shifting demographics and limited new supply; neighborhood retail features low vacancy rates and attractive pricing, and we expect industrial real estate to hold up well.

We have a slight bias toward real estate debt over equity, given valuations and relatively wider spreads, but the difference is narrowing.

Real assets

Justin Ourso

Best ideas

• In public markets, our best ideas include North American senior housing (demographic trends, plus opportunities for industry consolidation) and AI-related infrastructure, especially areas like electric utilities that have yet to fully realize potential benefits.
• Across private markets, we continue to focus on investments that align with climate and digital transformations, such as clean energy generation and data centers, as well as strong global demand for protein and healthy foods.

Investment positioning

Both public and private infrastructure investments remain preferred areas, and public infrastructure offers compelling value. Private infrastructure has seen softening deal volume, but tailwinds remain. The massive growth in power demand shows no sign of stopping. This leads us to favor investments across public and private equity and fixed income markets, such as data centers, power-generating utilities, electric transmission owners, independent power producers, energy pipeline owners and battery and storage investments. For utilities, we are focused on geographies with the largest increase in power demand and are less positive toward jurisdictions experiencing regulatory scrutiny.

Public real estate markets offer solid fundamentals and earnings prospects. They should perform relatively well amid a more stable interest rate environment and could weather a limited economic deceleration. We have a particularly favorable view toward senior housing, where supply is limited and demand is growing.

We favor long-term farmland allocations as a source of differentiated returns and an inflation hedge. But we expect the strong performance over the last few years to moderate in 2025 (especially for row crops) and anticipate tariff-related headwinds for areas such as U.S. soybeans.