Alternative Investment Opportunities Through a Slowing Economy

Given the lack of liquidity in publicmarkets for new issues, the overall availability of debt has fallen, and newbuyout deals in the latter half of 2022 intoQ1 2023were being structuredwith 1.0x to 2.0x lowerdebtmultiples than in 2020and 2021. 8 Private lenders suchas direct lending funds and Business Development Companies (“BDCs”) may benefit from a market where companiesare not able to rely on public bondand high yield markets for their financingneeds. For example, in the aftermath of the collapse of SiliconValleyBank, one of the largest primary lenders to the technologysector, adirect lender providing senior secured floating rate direct loans to technologycompaniesbecomesa key liquidityprovider to the sector. The technology sectorprovides mission-critical solutions to customers, potentially leading to high customer retention rates and stable revenues. This and the long-term secular tailwindsaround digitizationmake for a compelling investment thesis for lending. Real estate funds seeking income generation, downside risk mitigationand our high conviction subsectors, suchas multi-family residential and industrial, may bewell positioned to benefit fromunderlying income growth. These sectors canbenefit from the secular and market dynamics that are driving higher demand for space relative to the supply, such as urbanization, digitizationand inflationmitigation. Despite newsupply, US industrial vacancy was 3.5%as of Q1 2023and remains below the 5.0% historical average. For themultifamily sector, while rental growth is moderating frompandemic highs, as of Q1 2023 net effective rent increased4.5% relative toQ1 2023, which remains above the pre-COVID average of 2.7%. 9 Comparatively, in terms of the office sector, post-pandemic global office utilization isat 50% of inventoryand the sector faces additional headwinds from volatile capital markets and a slowdown in the economy, particularly in theUnitedStates. 10 In particular, “return to office” in theUS is lagging Europe and Asia, since in theUS there are larger living spaces affordingmore in home flexibility, generally longer commutesand a tighter labormarket. 8 LCD, as of March 31, 2023 9 CBRE Multifamily Report Q1 2023 10 UBS as of December 31, 2022 OPPORTUNITIES | WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 13