Navigating the Real Assets Strategy in a Geopolitically Turbulent Q2 2025

In the second quarter of 2025, the global investment landscape was defined by a paradox: sticky inflation and geopolitical volatility fueled demand for real assets as a hedge, yet sector-specific underperformance exposed the fragility of certain strategies. As trade policies shifted and markets reacted with sharp corrections, investors were forced to recalibrate their allocations. Lazard’s Q2 results offer a microcosm of this dynamic, illustrating both the resilience and vulnerabilities of real assets in a turbulent environment.

The Case for Real Assets in Q2 2025

Real assets, broadly defined, outperformed traditional equities in Q2 2025, rising 2.91% as investors sought inflation protection and diversification [1]. This outperformance was driven by a combination of resilient economic data and improved risk appetite, despite macroeconomic headwinds. The broader market, represented by equity indices, saw a 2.5% return, underscoring the relative strength of real assets [1]. However, this aggregate success masked significant sectoral divergences.

Sectoral Underperformance: Commodities and REITs

While real assets as a category thrived, commodities and REITs lagged. Energy prices fell 10.9% and natural gas dropped 22.2% for the quarter, dragged down by global economic slowdowns and oversupply concerns [1]. REITs fared no better, with the Dow Jones US Select REIT Index declining 1.7% amid uncertainty over trade policy and job growth [1]. These declines highlight the risks of overexposure to sectors sensitive to macroeconomic shifts and regulatory changes.

Lazard’s Real Assets Portfolio, which saw institutional and open shares appreciate by 2.1% and 2.0%, respectively, underperformed the broader real assets benchmark [2]. This discrepancy underscores the challenge of active management in a fragmented market. The firm’s multi-asset approach, while generating positive net flows in its Asset Management segment, struggled to capitalize on the outperformance of resilient sub-sectors like precious metals [3].

Trade Policy and Market Volatility

The U.S. trade policy developments in Q2 2025 were a double-edged sword. A reciprocal tariff package triggered a 12% drop in the S&P 500 within days, only to recover 9.5% as the policy was rolled back [1]. This volatility rippled through real assets, with REITs and energy-linked investments bearing the brunt. Meanwhile, the U.S. dollar’s 10% decline over the first half of 2025 further complicated the landscape, eroding confidence in traditional safe-haven assets [1].

Lazard’s Strategic Positioning

Lazard’s Q2 results reflect a firm navigating these challenges with a mix of caution and ambition. Total net revenue rebounded to $770 million, driven by a 20.3% year-over-year increase in Financial Advisory revenue and an 8.3% rise in Asset Management revenue [3]. Assets Under Management (AUM) reached $248 billion, up 1.5% from the prior year, driven by net inflows and strategic diversification [4]. Yet, the firm’s Real Assets Portfolio underperformance suggests a need to refine its active management strategies, particularly in sectors like commodities where macroeconomic headwinds were pronounced.

A Defensive Yet Growth-Oriented Allocation

The Q2 2025 experience reinforces the importance of a defensive yet growth-oriented real assets allocation. Investors should prioritize sub-sectors with strong inflation-hedging properties, such as precious metals (gold up 5.2%, silver up 3.7%) [1], while avoiding overexposure to cyclical assets like energy and REITs. Lazard’s emphasis on fixed income and emerging markets within its multi-asset approach offers a blueprint for balancing risk and return [3].

Conclusion

As Q2 2025 demonstrated, real assets remain a critical tool for navigating inflationary and geopolitical turbulence. However, success requires granular sector selection and disciplined risk management. Lazard’s mixed performance—strong revenue growth but underwhelming Real Assets returns—serves as a cautionary tale: even in a favorable macroeconomic environment, strategic missteps can erode value. For investors, the lesson is clear: a well-allocated real assets portfolio must be as agile as it is defensive.

**Source:[1] Real assets insights: Q2 2025 [https://www.ssga.com/us/en/institutional/insights/real-assets-insights][2] Lazard Real Assets Portfolio Q2 2025 Commentary [https://seekingalpha.com/article/4818471-lazard-real-assets-portfolio-q2-2025-commentary][3] Lazard Q2 2025 presentation slides: revenue rebounds amid strategic expansion [https://www.investing.com/news/company-news/lazard-q2-2025-presentation-slides-revenue-rebounds-amid-strategic-expansion-93CH-4150241][4] Lazard Q2 Earnings Top Estimates, Advisory Revenue & AUM Rise Y/Y [https://www.nasdaq.com/articles/lazard-q2-earnings-top-estimates-advisory-revenue-aum-rise-y-y]