You Won't Believe Why Aristotle Fund Just Dumped Alexandria Real Estate—The Shocking Truth Revealed!

In its recent fourth-quarter 2025 investor letter, Aristotle Funds shared insights regarding its “Growth Equity Fund,” amid a backdrop of robust U.S. equity markets that reached new all-time highs. The S&P 500 Index experienced a modest increase of 2.66%, while the Bloomberg U.S. Aggregate Bond Index rose by 1.10%. Notably, the Russell 1000 Growth Index highlighted healthcare, communication services, and financials as the top-performing sectors, in contrast to utilities, real estate, and materials, which lagged behind.

The U.S. economy exhibited resilience, yet consumer confidence began to deteriorate toward the end of the year, raising concerns about future spending patterns and the labor market's stability. Against this challenging backdrop, the Aristotle Growth Equity Fund (Class I-2) reported a return of 0.95%, trailing slightly behind the Russell 1000 Growth Index, which stood at 1.12%. The underperformance was attributed to poor security selection within the information technology and consumer discretionary sectors, although gains in healthcare and industrials helped mitigate some of the losses.

Among the stocks highlighted in the investor letter was Alexandria Real Estate Equities, Inc. (NYSE:ARE), described as a leading player in the life science Real Estate Investment Trust (REIT) sector. As of February 25, 2026, its stock closed at $54.06 per share, reflecting a modest one-month return of 0.02%. However, the company faced a significant decline over the past year, losing 46.44% of its value, with a current market capitalization of $9.369 billion.

“We sold the position in Alexandria Real Estate Equities, Inc. (NYSE:ARE) because the weak market in laboratory real estate is expected to persist for longer than our previous expectations,” stated Aristotle Funds in its letter. “There is an oversupply of vacant lab space and demand for the space is weak due to weak capital markets for biotech fundraising, slow approvals on new medications by the FDA, and less funding for the National Institutes of Health (NIH). Alexandria Real Estate Equities has developments under construction that will be delivered into a weak leasing environment. The company is selling assets to fund these developments, which will likely reduce future earnings power.”

Despite its challenges, Alexandria Real Estate Equities, Inc. garnered attention from hedge funds, with 34 portfolios holding the stock at the end of Q4 2025, up from 31 the previous quarter. However, Aristotle Funds noted a shift in focus, suggesting that certain artificial intelligence (AI) stocks might present greater upside potential with less downside risk. They highlighted the importance of looking into undervalued AI stocks that could benefit from recent economic trends, including onshoring and tariffs.

The economic landscape remains fluid, and the performance of sectors such as healthcare and technology will be crucial as investors navigate uncertainties in consumer confidence and spending. The underperformance of the Aristotle Growth Equity Fund relative to its benchmarks underscores the importance of strategic stock selection in volatile markets.