Branzan Advisors Commentary | April 2025

We’ve been in the process of writing this commentary for weeks, but each time we start to narrow down the topics, things change materially. While it seems like the markets have settled down a bit and volatility has decreased (until yesterday), we expect we haven’t seen the last of it.

A number of our partners and friends have asked us what we are doing now as a result of the increased uncertainty and volatility. In short, we aren’t making any substantial changes to our investment strategy. We continue to focus on private investments and favor those investments that generate income and aren’t overleveraged. We tend to invest in real assets and in things people need: energy, real estate, infrastructure and commodities. Our strategy remains the same, but we are more cautious today given the rapid changes.  We try to remain opportunistic investors in all environments.

Many real estate investments continue to show stress under higher interest rates. In many markets, office is still struggling with low vacancy. However, we are beginning to see some green shoots as lenders in the office space are more open to taking write-downs and office buildings are starting to trade at significant discounts. A recovery in office is still predicated on employees returning to the office, but we think that trend will continue, especially if the economy pulls back and employers begin to exert more power over employees that want to keep their jobs.

We’ve all heard the new administration’s intentions to increase oil and natural gas production in the U.S. Expanding new drilling would increase supply and drive prices down further unless there is a corresponding increase in demand. While a price decline would be good for consumers, it wouldn’t be as positive for the operators.  When assessing new projects, a key metric for operators in determining their capital allocation budget is the price of oil or natural gas. If product prices are low, there is less incentive for an operator to drill new wells. We expect the administration will make it easier for operators to develop new acreage by reducing regulations and actively leasing Federal mineral acreage, but we don’t anticipate this will result in the collapse of the price of oil and natural gas. It’s not in the industry’s best interest to expand drilling to the point that prices collapse. While valuations have come down on oil and gas operators this year, we continue to favor owning mineral rights and royalties over the equities of those operators. We believe it is the best way to get direct exposure to the industry without many of the drawbacks and risks present in investing in operators.

We’ve held gold in one of our investment partnerships since 2003. Some years it is a positive contributor to returns and some years it isn’t. When we acquired the position, it was not our intention to trade around it. It still isn’t our intention. We hold gold and silver, to a lesser extent, as an insurance policy against a decline in the value of the U.S. dollar and as a safe-haven asset. Gold has certainly succeeded in that capacity in 2024 and 2025 year-to-date, outperforming most asset classes last year and this year. Surprisingly to many investors, gold has also outperformed the S&P 500 since 2000. We can’t say with certainty where gold is going from here, but we do believe it continues to play an important role in an investor’s portfolio, particularly in a scenario where the faith in the U.S. dollar is waning.

In 2025, volatility has been high in equity markets (domestic and foreign) and in the U.S. Treasury markets. Markets hate uncertainty and there’s been plenty of it going around with the recent announcements on tariffs. Companies struggle with making long-term capital allocation decisions when demand is uncertain. Correspondingly, investors have difficulty evaluating the prospects of those companies in an uncertain economic and trade environment. More concerning, we believe foreigners are losing faith in U.S. Treasuries as a safe-haven asset. Until we get clarity around tariffs and U.S. trade policy, we expect higher volatility to continue.

In the past, we have been accused of being too bearish and this letter might come off as such; however, that “bearish” title has resulted in the portfolio of real assets we have today, one that we feel is relatively attractive in today’s markets. We like to think of ourselves as pragmatists. As an investment manager, we focus on managing risk. If we manage risk appropriately, the returns should follow. Given today’s macroeconomic environment and heightened market volatility, we are treading cautiously, keeping our eyes open to new opportunities, and grateful that the portfolio has exposure to the asset classes it does.

If you’d like to learn more about Branzan, please let me know. Thank you for your continued support.

Branzan Investment Advisors

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