Aristotle Funds has divested its holdings in Alexandria Real Estate Equities, Inc. (NYSE:ARE), citing persistent weakness in the laboratory real estate market as the primary reason. In its fourth-quarter 2025 investor letter, the investment advisor noted that the current oversupply of vacant lab space and weak demand attributed to constrained capital markets for biotech fundraising significantly influenced this decision.
The letter revealed that U.S. equity markets reached new heights in Q4 2025, with the S&P 500 Index increasing by 2.66%. Despite this overall market growth, the Aristotle Growth Equity Fund (Class I-2) recorded a return of only 0.95%, falling short of the Russell 1000 Growth Index, which achieved a return of 1.12%. The healthcare, communication services, and financial sectors led the growth, while utilities, real estate, and materials struggled.
As of February 25, 2026, shares of Alexandria Real Estate Equities closed at $54.06. Over the preceding month, the stock’s return was a modest 0.02%, but it saw a significant decline of 46.44% over the past year. The company’s market capitalization is currently valued at approximately $9.369 billion.
Aristotle Funds expressed concerns regarding Alexandria’s future in its investor letter, stating, “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.” The firm pointed to several key challenges, including an oversupply of lab space and slow approvals on new medications by the FDA. Additionally, reduced funding from the National Institutes of Health has contributed to a challenging leasing environment for Alexandria’s ongoing developments.
Despite a slight increase in hedge fund interest, with 34 portfolios holding Alexandria at the end of Q4, up from 31 in the previous quarter, the firm believes that other technology sectors, particularly artificial intelligence, present more promising investment opportunities. Aristotle Funds highlighted its conviction that certain AI stocks could offer higher returns in a shorter time frame compared to Alexandria.
In light of these developments, investors are encouraged to explore alternative options, including those identified in Aristotle’s reports, which detail promising AI stocks expected to yield significant upside potential.
For further insights, readers may refer to additional articles on Alexandria Real Estate Equities and the hedge fund landscape in the Q4 2025 letters.