François Trausch, CEO of PIMCO Prime Real Estate, offered attendees at the IPE Real Estate Global Conference & Awards 2025 in Copenhagen a unique perspective on navigating the current market climate, highlighting the often-overlooked role of behavioural science in investment decision-making.
In conversation with Piet Eichholtz, professor of real estate finance at Maastricht University, Trausch began by agreeing with economic sentiment, acknowledging that tariffs are likely to lead to lower growth, more inflation and higher rates in the US. He said a 50/50 probability of recession is something he agreed with.
He dismissed the likelihood of stagflation, saying that ”central banks hate stagflation, so [they will do] everything they can to stop stagflation”. This uncertainty is “not conducive to any fast decisions”, he added.
Trausch also addressed the challenge of making real estate an “attractive asset class” again, especially given that “fixed income is back in the game”, and now offering appealing returns, with investment-grade bonds yielding around 6.5%.
He said that broad sector allocations are no longer sufficient, and instead investors must find “the very good asset”.
He believes that the next phase of recovery would be “definitely going to be income-led”, with “core-plus” emerging as the “new core” to achieve attractive yields closer to 10%.
This shift doesn’t necessarily mean taking on more risk, but rather showing the “alpha you bring to an asset”, implying active asset management rather than relying solely on market movements.
Responding to Eichholtz’s question on the challenges for global investors posed by the shift towards more operational and alternative real estate assets, Trausch said investors could rely on operating platforms managed by specialists to handle operational risk, rather than doing it themselves. He pointed to PIMCO’s approach of onboarding specialists in retail, logistics, student housing, who “direct the operating partner in the right direction” globally.
A central theme of the conversation revolved around the integration of behavioural science into PIMCO’s investment process, a learning derived from exposure to other asset classes like fixed income. Trausch highlighted the importance of “reliable investment processes” built on macro and asset-level analysis, but pointed to behavioural science as an “overlooked” area for mitigating “cognitive biases”.
He talked about specific measures implemented to combat biases, particularly within the investment committee, and advocated for “pre-mortems”, a process performed in advance of transactions to assess what could go wrong after an investment has been made. This technique, he said, is more effective than traditional strengths-and-weaknesses analyses, forcing a deeper exploration of potential failures.
He detailed several pervasive biases that investors should be aware of, including the anchoring bias, where one relies too heavily on the first piece of information received.
Another was ‘recency bias’, which involves putting more weight on recent events or information. He also mentioned ‘halo and horns’ biases, where initial positive or negative impressions unduly influence subsequent interpretations and finally, ‘herding bias’, a significant issue in real estate often fueled by the “fear of missing out”.
While acknowledging that “you cannot change biases” as they are “human nature”, Trausch said it was important for investors to become aware of them when making decisions.
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