Despite higher interest rates, alternatives are continuing their transition from an optional portfolio allocation, to an essential one. However, not all alternatives are created equal, and we continue to advocate for an outcome-oriented approach. As the macroeconomic backdrop has shifted in recent quarters, we have seen both risks and opportunities arise across alternative assets, with commercial real estate a particular focus. 

The U.S. real estate market is expensive in aggregate, but this masks significant dispersion beneath the surface. Industrial assets remain expensive, whereas vacancy rates in the office and retail sectors are near all-time highs. As we look ahead, private real estate assets seem well-positioned to deliver stable cash flows and public market diversification, even if capital values decline. Looking across real assets more broadly, infrastructure can help hedge against inflation, and transportation assets should benefit as global trade continues to normalize.