
Real estate Why US REITs may shine in a rate-cutting environment
Income-generating real estate investment trusts (REITs) tend to demonstrate resilience and often perform well following interest rate cuts. Here’s why
Due to the combined impact of high stock valuations and the elevated cost of financing, we remain neutral on how we’re allocating risk within our alternatives portfolio. In general, we’re more bullish on defensive alternatives, favoring private debt, real assets, and hedged strategies versus private equity. Here are key takeaways from each asset class. (Read the complete Q3 Alternatives opportunities report.)
As market volatility subsides, we’re watching for signs of renewed mergers and acquisitions (M&A) activity. In the meantime, patient credit investors may continue to benefit from a favorable higher-for-longer rate environment. We’re overweight real estate credit due to the high levels of current income and the recovering real estate equity market.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Direct lending |
Overweight |
Neutral |
Neutral |
Attractive |
Real asset credit |
Overweight |
Attractive |
Neutral |
Attractive |
Alternative credit |
Overweight |
Neutral |
Neutral |
Attractive |
We remain underweight private equity, especially traditional buyout strategies, which generally require leverage to generate returns. The combined impact of high equity valuations with an elevated cost of financing may be a significant headwind.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Private equity |
Underweight |
Unattractive |
Neutral |
Neutral |
We’re slightly increasing our exposure to real estate because our conviction that valuations have bottomed is beginning to form. While we’re optimistic amid easing financial conditions, we remain vigilant because of tight cap rates and a murky outlook from policymakers.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Real estate |
Overweight |
Attractive |
Neutral |
Neutral |
Infrastructure |
Overweight |
Unattractive |
Attractive |
Attractive |
Hedge funds with lower betas to market risk may be a valuable alternative within a portfolio, in our view. Spreads within event-driven strategies remain high despite limited capital markets activity from M&As because private equity has remained sidelined.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Event-driven and arbitrage |
Overweight |
Neutral |
Neutral |
Attractive |
Systematic trend |
Overweight |
Neutral |
Neutral |
Attractive |
Read the complete Q3 Alternative opportunities report.
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Income-generating real estate investment trusts (REITs) tend to demonstrate resilience and often perform well following interest rate cuts. Here’s why
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We believe falling supply and strong demand should spur stronger rent growth in the next year or two. Some areas will see strong rental gains faster than others.
Important information
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Information is provided as of Sept. 11, 2025, and sourced from Invesco unless otherwise noted.
Arbitrage is the strategy of taking advantage of price differences in different markets for the same asset
Beta measures a stock's price volatility relative to the overall market. It is an important factor for investors to check when they want to choose a stock that matches their tolerance for risk.
A spread in finance is the difference between two related values, such as prices, rates, or yields.
Alternative products typically hold more non-traditional investments and employ more complex trading strategies, including hedging and leveraging through derivatives, short selling, and opportunistic strategies that change with market conditions. Investors considering alternatives should be aware of their unique characteristics and additional risks from the strategies they use. Like all investments, performance will fluctuate. You can lose money.
Event-driven strategies refers to an investment strategy in which an institutional investor attempts to profit from a stock mispricing that may occur during or after a corporate event.
Trend following strategy is an investment or trading approach that aims to profit by identifying and riding sustained price trends in various markets
Investments in real estate-related instruments may be affected by economic, legal, or environmental factors that affect property values, rents, or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small- and mid-cap companies, and their shares may be more volatile and less liquid.
The opinions referenced above are those of the author as of Sept. 11, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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