The Compound
Systemic Risks
10/26/2025, 6:08:01 PM
Economic Summary
- The recent episode involving Tri-Color and First Brand caused market concern but is judged unlikely to be systemic and expected to blow over, similar to the earlier B-Read episode.
- Real estate stress—especially in office space—was previously more significant and nearly systemic, but those pressures did not result in a broader collapse, implying current issues may be more contained.
- Semi-liquid real estate vehicles held roughly $50–$60 billion in assets over the past two years, showing resilience; however, dispersion remains high, meaning some investors/funds will experience large losses while others profit, and clients ultimately bear real losses.
Bullish
- The Tri-Color/First Brand episode likely won’t be systemic and should blow over.
- Semi-liquid real estate vehicles proved resilient, assets stayed around $50–$60 billion.
- Previous stress events (e.g., B-Read) cooled off without systemic fallout.
Bearish
- If there are real losses, clients will have to absorb them.
- Some funds could face severe losses from overpromise or excessive leverage.
- Prior stress in office real estate showed potential systemic risk.
Bullish tickers
TRI-COLORFIRST BRANDB-READ
Bearish tickers
TRI-COLORFIRST BRANDB-READ
TRI-COLOR
Bullish
Viewed as not systemic and likely to calm down like past episodes.
Bearish
Episode may cause real losses for investors if fund specific issues like leverage surface.
FIRST BRAND
Bullish
Fund assets remained stable historically; market hysteria cooled off.
Bearish
Could suffer client-held losses if asset valuations or leverage problems materialize.
B-READ
Bullish
Ultimately blew over without causing systemic collapse, suggesting similar outcomes possible now.
Bearish
Previously posed more significant stress and was seen as potentially systemic at the time.
People mentioned
BatnickMichael