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Barings is a $382+ billion* global investment manager sourcing differentiated opportunities and building long-term portfolios across public and private fixed income, real estate, and specialist equity markets.

With investment professionals based in North America, Europe and Asia Pacific, the firm, a subsidiary of MassMutual, aims to serve its clients, communities and employees, and is committed to sustainable practices and responsible investment.

Barings is one of the world’s largest diversified real estate investment managers, with 180 real estate clients worldwide. The Barings Real Estate (BRE) team offers a broad range of investment opportunities globally across the private debt and equity markets. The team invests across all major property sectors, with a focus on global relative value and preferred strategies driven by our in-house proprietary research group. Barings’ distinctive investment style is executed by local teams and enables us to seek to deliver compelling returns to our investors.

Our competitive advantages:

· Depth of Team — The BRE team consists of 189 investment professionals* across debt and equity spanning the entire investment process. In-house acquisitions and origination, investment management, asset management, portfolio management, research and analytics, risk management, capital markets—as well as specialty roles such as engineering, tax and legal—ensure continuous collaboration throughout each investment’s life.

· Sourcing Capabilities — Locally embedded teams enhance market connectivity through their strong networks of property owners, institutional investors, developers and banks. This connectivity provides robust volume and access to attractive on-market and rare off-market deal flow.

· Focus on Asset Management — BRE has a fully integrated asset management team and unlocks value through active management, regardless of investment style. Asset Managers are sector specialists and regionally dispersed to best understand the nuances of each individual asset’s demands.

· Global Platform — BRE invests around the globe, with 16 offices across nine countries*. BRE’s equity, debt, private and public real estate capabilities are designed to promote constant market participation—uncovering the interconnectivity between markets, economies and cycles, with the objective of making better informed decisions on behalf of our clients.

· Cycle-Tested Approach — BRE’s long track record of investing across multiple cycles, the risk spectrum and geographies creates the experience necessary to understand how real estate responds to changing conditions.

· Diversified Solutions — BRE strives to be a strategic partner to our investors, and tailors solutions to each client’s goals and objectives. The platform offers investment solutions through funds, separate accounts and joint ventures. Solutions can include independent or multi-asset portfolios across BRE equity and debt, Barings Alternative Investments and Barings Fixed Income and Equity.

· Parent Company Stability — As part of MassMutual, BRE has the financial stability and flexibility to take a long-term approach. This support is illustrated by its long-standing investment management mandate for MassMutual’s General Investment Account, and its ongoing support for existing and new products. 

*As of June 30, 2021. Barings Real Estate is a part of Barings LLC, a Registered Investment Adviser.

Sector Forecasts

Industrial: After a brief pullback in demand in the initial months of the COVID-induced recession, fundamentals recovered sharply for the industrial property-type. The Q2 2021 national availability rate came in at just 40bps above the all-time low reported for the sector with demand once again exceeding supply levels by a comfortable margin. The national E-commerce sales share reported a record quarterly spike last year during the peak of the lockdowns and although the share has since retreated to a more normalized pace, it is well above the pre-pandemic rate. Broader macro drivers such as global and US imports as well as domestic manufacturing indices and trade barometers all point to the normalization of demand, further supporting fundamentals for the industrial sector. We expect the near and longer-term outlook to remain favorable for industrial, with the tailwinds of E-commerce along with functional obsolescence continuing to drive demand for the property-type.

Office: The U.S. office market has been in a state of suspended animation since Covid-19 sent most office workers home more than a year ago. Unsurprisingly, there is far less consensus among real estate lenders and investors about future demand for office than any other property type. At Barings, we believe broader adoption of remote work will be a net negative for office demand going forward, but the uncertainty and differentiated landscape going forward will create opportunity for discerning investors. For investors with or seeking office exposure, three drivers—the transition to a hybrid workplace, growth in creative and STEM employment and the escalating war for talent—will shape office demand in the recovery ahead and, in the process, determine which assets and markets will be the winners and which will be the losers. Changes in office demand, use and design will take time to manifest. While the wider adoption of remote work will render large segments of existing office stock less competitive, not unlike what has transpired in the retail sector over the past 20 years, office assets that meet the new standards should attract robust demand (and command premium rents) as companies seek to leverage the office to cultivate corporate culture, enhance innovation and productivity, and compete for talent.

Apartments: The apartment sector has been resilient since the pandemic shut down the economy and stay-at-home mandates kept workers home. Through the summer of 2021 we have seen prime leasing kick in to gear across the country. Concessions are less prevalent, occupancies have moved higher, and leasing momentum improved. We continue to see a bifurcation in performance as suburban garden/low-rise product continue to outperform high-rise CBD product. While prime leasing season has treated many markets well, we expect much of the upside for the year has been achieved as summer comes to an end. Supply challenges and uncertain return to office expectations put pressure on some major market CBDs providing headwinds in the near-term. Longer-term we still see structural tailwinds for the apartment sector. The single-family market remains incredibly competitive and rapidly rising home prices in tandem with continued tight credit availability from lenders restricts many from entering the buyer pool.

Retail: In August, retail sales continued to record strong growth as consumers signaled a possible shift back to pandemic spending patterns (i.e. more shopping online and a higher concentration of essential goods).  Clothing and restaurants, two retail categories which had benefitted from a recent spending shift toward more discretionary and services retailers, recorded flat month-over-month sales.  Meanwhile, nonstore retailers and general merchandise stores (likely benefiting from back to school shopping) recorded some of the strongest month-over-month growth in August and food and beverage retailers recorded their strongest growth since the start of 2021.  Neighborhood and community centers remained resilient in the second quarter as the national availability rate posted its second consecutive quarter-over-quarter (QoQ) decline. While still elevated compared to a year ago, and still 20 bps above Q4 2019, the drop in availability speaks to consumer shopping behavior during the pandemic and now in the midst of the recovery. Longer term, entrenched shopping behavior will remain as consumers utilize the omni-channel methods they became accustomed to during the pandemic, which in turn should drive retailer demand for well-located store space as a point of local fulfillment and customer engagement.

Hotels: The hotel sector is recovering from an unprecedented level of stress created by the pandemic. While there is still plenty of room for improvement before we hit pre-COVID performance, we have seen strong performance in the domestic leisure travel demand segment. As vaccines and lockdowns lift, drive to leisure travel dominated the recovery. As the summer progressed we saw improvement in fly-to leisure product types and locations as well. Signs of life are emerging in the corporate travel realm albeit gradually and are very metro area specific. We are seeing travel managers book increased levels of corporate travel for some of their largest clients and we expect this to continue to increase through the remainder of 2021.

It is still too early to predict the duration of the COVID-19 impact on the lodging sector, especially as the delta variant spreads rapidly. We expect to see continued outperformance of domestic travel dominant US markets versus major gateway markets that experience higher shares of international travel as COVID spread and vaccination status globally varies, creating headwinds for foreign long distance travel. Longer term, the pandemic will likely reduce the need for business-related travel, as tele-meeting technology has begun to be widely embraced. Convention and conference activity could be hurt by consumer preferences shifting away from attending large gatherings.

Investment principles & strategy

Barings maintains an absolute commitment to working with our clients to help them achieve their investment objectives, while remaining alert to the cyclical nature of real estate opportunities and the wisdom of balancing return potential with risk management.

Our Approach to Real Estate Investment

· We operate on a global platform. Our competencies cover a broad spectrum of real estate investment alternatives, comprising private real estate equity and debt across all major property sectors. Our breadth of capabilities allows us to respond accordingly to cyclical opportunities as they arise.

· Research is at the center of our investment decision-making, from formulating client-specific strategies across real estate, to tactical execution at the portfolio and asset levels. We apply fundamental research of global economics and the capital market forces that drive relative value.

· Real estate remains dominated by private market relationships and negotiated transactions. Our locally-based professionals bring years of cycle-tested experience, and our extensive history in real estate debt and equity markets provides a competitive advantage in accessing and negotiating transactions.

Strategic corporate development

BRE’s long-term strategic business plan represents a careful balance between the institutional appetite for real estate investment and the effective execution of prudent real estate investment and portfolio management strategies. Growth initiatives are undertaken as supported by our proprietary research and focused investment strategies, as well as the resources, capacities and competencies of the firm. We have consistently and strategically served our clients and are prepared to grow the business as opportunities develop. As a subsidiary of MassMutual, Barings has the resources to develop and execute new strategies and products. Future growth of the platform will occur as strategic opportunities arise, and we intend to expand our investment offering in response to compelling opportunities and investor requirements.

Performance verification

Performance of each portfolio is measured against the relevant benchmark(s) that are the accepted standard(s) for each of the funds under management. All of our real estate managed funds are audited externally each year. Additional performance information is available upon request.

COMPLIANCE STATEMENT

Commentaries on the economy and financial markets contained herein are based on information believed to be reliable, although there can be no guarantee as to its accuracy. They reflect the current opinion of the firm, which is subject to change based on changes in the economy and financial markets, and access to and reliability of relevant data. The forecasts should not be relied upon as investment advice. Data as of June 30, 2021.