We maintain our existing tactical tilts: underweight U.S. equities, overweight short-duration fixed income/cash, and tilted towards value stocks in Large Cap U.S. and Developed non-U.S. The economic “bumpy road back to normal” highlights the challenges with establishing fair prices for assets in this environment where short-term interest rates are theoretically far from normal. There very likely could be some surprises still ahead of us.

Pathstone’s “Meet the Manager” interview series features some of the passionate and committed asset managers with whom we have developed strong relationships. Our goal is to share the depth and breadth of expertise and collaboration that goes into our investment process and to gather timely insights on the investment environment across asset classes.

This installment features Ben Brady, Partner and Portfolio Manager at Bain Capital Real Estate (BCRE). After a decade-plus at Harvard Management Company’s Real Estate Investment Group, Ben and team joined Bain Capital in 2018.

BCRE takes a research-driven approach in developing their investment strategies, focusing intently on identifying long-term themes that shape demand growth in the types, locations, and features of real estate assets in key sectors. The BCRE team has deep industry expertise that they use to drive operational improvements and create portfolios with consistent success across their targeted themes.

Notable real estate themes include infill industrial, life science, media/content space, horizontal apartments, medical office, residential, and self-storage. In this piece we include remarks around residential and life science.

Pathstone has worked with select Bain Capital strategies for a number of years. In this conversation, Pathstone’s Dave Freudenberg, Director of Private Markets, gets Ben’s perspectives on real estate markets and select investment opportunities.

Please note, this interview has been edited for length and clarity and includes excerpts from the complete conversation.

U.S. stocks experienced their worst month in September and Q3 was the first negative performing quarter since Q3 2022 due in part to the Fed’s message that interest rates will remain higher after leaving the Fed Funds rate unchanged at 5.50%. The 10-year treasury yield jumped +75 bps and higher yields caused bonds to be negative for a second consecutive quarter. The S&P 500 and Nasdaq fell -3.3% and -3.9%, respectively. Oil prices surged close to +30%, leading to commodities’ strongest quarter since Q1 2022. With oil prices rising, consumer prices came in hotter than the previous month at +3.7% YoY in August. The U.S. economy added 336,000 jobs in September, the first month since January to deliver over 300,000 net payrolls. Jobless claims and continuing claims are hovering around 8-month lows, and a strong labor market could push bond yields higher.