More Than 20% of Independent Investors Highlight the Value of Human Advice

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Independent investors consider themselves self-reliant; however, one in five finds value in human advice, according to The Cerulli Report—U.S. Retail Investor Products and Platforms 2024.

According to Cerulli Research, 22% state that it is important to be able to speak with a human specialist linked to their account, and another 33% say it is somewhat important to have this capability.

To convert these investors into formally advised clients, wealth management providers must successfully guide clients through their platform with targeted customer service offerings while removing key friction points between a client’s desire for greater financial advice and the platform’s ability to connect them with advisors who can provide it.

Apart from the importance of speaking with a human specialist, the majority are willing to pay for that privilege: 42% state that they would pay, at least to some extent, to speak with a human specialist.

Younger investors, who are the most inexperienced with self-directed investment accounts, are the most likely to offer to pay for periodic advice, with one in five stating it is very likely they would do so.

However, despite the high demand for human advice within self-directed platforms, only 39% of respondents have ever consulted an advisor.

Those with less than one million dollars in investable assets and those under 30 are the least likely to opt for this service. Low adoption is a significant hurdle for providers seeking to use human interactions as a foothold for more extensive financial advice delivery.

To facilitate this transition, platform providers must ensure that clients can easily contact specialists with questions as needs arise to foster relationship development.

“If a full-service provider’s goal in offering self-directed brokerage accounts is for those clients to eventually engage in advisory relationships, they must make those interpersonal services visible to these clients,” says John McKenna, analyst.

In this regard, McKenna emphasizes the importance of financial education.

“Early awareness, through targeted email campaigns and milestone notifications, can drive this awareness. With this increased awareness, clients are more likely to stay with the firm for future financial advice,” he added.

For large firms with multiple lines of business, the path to closer engagement can be very efficient if the walls between units are lowered.

“By identifying moments of greatest need, transitioning clients toward more advised relationships can lead to increased wallet share and a more harmonious one-stop-shop for all financial needs, creating loyal clients for decades,” concluded the analyst.

Inventories Weigh on the Global Lithium Market

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Litio (Wikipedia)

The outlook for lithium has become a topic of interest, given the mineral’s role in batteries, positioning it well to capitalize on trends in energy transformation and electric vehicles. However, inventories are weighing down the market, according to a recent analysis by Macquarie.

The commentary, signed by analyst Alice Fox, warns that the anticipated recovery in mineral prices this year has lost momentum sooner than expected. This is due to “insufficient supply being released at lower prices and the accumulation of raw material reserves dragging down the market.”

In March and April, there was a “strong seasonal recovery” in Chinese productin of carbonate and hydroxide, although it is estimated to have moderated in May, according to the analyst. This has led to an increase in lithium carbonate inventories, which now stand at 92,000 tons, their highest level since these data were first collected.

Additionally, Macquarie highlights that battery inventories in China slightly increased in March, despite original equipment manufacturers in the country seasonally increasing electric vehicle sales since the Lunar New Year.

Global sales of battery electric vehicles, meanwhile, increased by 10.6% between January and April, representing a “considerable year-on-year increase,” but also a “notable slowdown” compared to the 26.9% growth rate in 2023. Conversely, sales of plug-in hybrid vehicles increased by 49.7% between January and April, compared to 44.5% in 2023.

Looking ahead, Fox notes that “the pace of expansion in electric vehicle sales in China is expected to slow to 24.6% this year, from 30.2% last year. The Chinese market is maturing, with a penetration rate in cities of 67.9% in 2023, compared to the national average of 35.7%.” While total Chinese exports of such vehicles increased by 19.6% in the first quarter, exports to the European Union fell by 19.6% year-on-year in January and February.

“At this point, it is difficult to determine whether the reduction in exports to date is due to lower demand or a premature response to potential tariffs, which might need to be 40% or 50% for the market to become unattractive to Chinese exporters,” writes the analyst.

Regarding spodumene prices—a lithium aluminum silicate—they reached a high of $1,240 per ton in early May, 46% above their January lows, but have since lost momentum.

“Mainland China’s hydroxide and carbonate prices recovered marginally from their lows following the Lunar New Year holiday, driven by unconfirmed reports of an environmental crackdown on domestic producers, inventory replenishment, and concern over the cancellation of warrants in the GFE market for inspection. However, prices did not make significant gains and have recently weakened slightly due to increased inventories,” comments Fox.

Scala Capital Finds Peace of Mind in Profitability for Its Clients Through Private Credit, Says Alberto Siblesz

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RIA Scala Capital seeks to advise and educate its clients so they understand and are encouraged to invest in private credit, thus providing the peace of mind of achieving good returns, said the firm’s founding partner, Alberto Siblesz, to Funds Society.

“Although our portfolios can include fixed income, equities, ETFs, mutual funds, among others, we are strong believers in private credit. I feel more secure with private credit,” responded the executive who resides in Miami.

Siblesz also explained the “arduous” work done at Scala Capital to include alternative products in their portfolios. They conduct studies of private fund management firms in sectors such as real estate, private credit, private equity, and venture capital.

The firm emphasizes that there is a significant opportunity to invest in alternatives, but they also argue that financial education for clients is necessary due to the nature of these investments and the limited liquidity of the underlying assets in which these funds invest.

The RIA has a diverse client base, with 35% domestic market, 30% Venezuelans, 15% Peruvians, 10% Colombians, and 10% from other Central and South American countries.

“Latin Americans want more liquidity and less correlation with the markets,” and this way they can increase their exposure to alternatives, he assured.

Scala has $270 million under management, according to information provided to Funds Society at the end of April, and is looking to expand in South Florida.

A few months ago, they hired Estefanía Gorman and Nicolas Martinez.

“The firm seeks to continue growing with advisors who want to be independent and need some industry support,” concluded Siblesz.

Citi Will Remain in Mexico Even After the Sale of Banamex, According to Jane Fraser

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Citibank reaffirmed its commitment to Mexico, a country where it is currently in the process of selling its retail banking division, Banamex. This action by the U.S. bank is significant, highlighted by the visit of global director Jane Fraser to the virtual president-elect of the country, Claudia Sheinbaum.

On Wednesday afternoon, Jane Fraser, CEO of Citi, accompanied by Ernesto Torres Cantú, Director of Citi International, and Manuel Romo, General Director of Grupo Financiero Citibanamex, met with the winner of the presidential elections held on Sunday, June 2.

“Jane Fraser mentioned that Citi has had a presence in Mexico for over 100 years and that the country will continue to be very important for our operations. She expressed her enthusiasm for the opportunities ahead and the significant role Citi can play in supporting the growth plans, hoping to return to Mexico soon,” said Citibanamex in a statement.

Additionally, during the meeting, Fraser and Sheinbaum exchanged ideas about the opportunities the country offers in the coming years and Citi’s support for the sustainable and shared prosperity economic projects proposed by the president-elect, which both leaders share.

Fraser reaffirmed that during the second half of 2024, there will be two solid, specialized financial institutions operating, each in its business segment: Banamex and Citi Mexico.

The CEO of Citi congratulated the virtual president on her historic victory on June 2 and celebrated that it occurred in a democratic environment, expressing her pleasure that Mexico will have a female president for the first time.

“This was a notable event, bringing together the first woman elected to be president of Mexico and the first woman chosen to lead one of the most relevant and iconic banks on Wall Street,” said Citibanamex. The CEO of Citi also met with Rogelio Ramírez de la O, the Secretary of Finance and Public Credit, congratulating him on his reappointment in the next government and wishing him luck.

Vector Casa de Bolsa Aims to Surpass US$16 Billion in Assets by 2025

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Vector Casa de Bolsa announced that, according to figures from the National Banking and Securities Commission (CNBV), at the end of 2023, it reported a net operating income of 3.517 billion pesos ($195.38 million), which compares favorably with the same figure from the previous year, when it registered 3.201 billion pesos ($177.83 million), showing an almost 10% year-on-year increase. Looking ahead, the entity aims to reach 300 billion pesos ($16.667 billion) in assets under custody by 2025.

In fact, over the past five years, the brokerage firm led by Edgardo Cantú has achieved sustained annual growth of 10% between Vector Casa de Bolsa and VectorGlobal, its international arm. Recently, the company reported that it surpassed 251 billion pesos ($13.944 billion) in consolidated assets under custody at the end of 2023.

To achieve its goals, the Mexican firm will focus on three strategic pillars:

  • Asset Management (funds and asset management): It will consolidate its process of managing and supervising its portfolios of financial assets, such as stocks, bonds, investment funds, and other assets.
  •  Internationalization: Vector is the only independent Mexican brokerage firm with a global presence, operating in 11 countries through its subsidiary VectorGlobal. This year, the strategy of geographic diversification will continue to strengthen its presence in international markets, particularly in Canada, Colombia, Chile, Ecuador, the United States, Peru, Venezuela, Brazil, Uruguay, and Panama. It will also continue exploring other markets.
  •  Innovation and Digital Transformation: Vector has always been at the forefront of technological innovation, adopting new technologies to improve its services and provide a superior user experience. The company has made significant investments in cutting-edge platforms and applications that provide market data, trading tools, and real-time investment analysis, allowing users to make informed decisions and manage their portfolios effectively.

“Our strategic plan and vision for the future aim to drive our growth with a focus on investors and the evolution and strengthening of our core business. We are very proud to position ourselves as leaders thanks to our net operating income, a result of our commitment and efforts,” said Edgardo Cantú.”

Sustainable ETFs: A Polarized Global Market with Europe as the Leading Region

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Sustainable ETFs have experienced extraordinary growth, reaching $550 billion in assets under management by the end of 2023, according to a report published by State Street and JP Morgan AM, which outlines the key trends in the passive management industry. One of the main conclusions of this document is the significant disparity between the situation and evolution of ESG ETFs on both sides of the Atlantic.

The report explains that ESG ETFs have undergone substantial development over the past decade. The most pronounced increase occurred during the pandemic years, 2020 and 2021, when assets under management grew by $335 billion, a 275% increase compared to 2019. “The COVID-19 pandemic greatly accelerated ESG investment, highlighting the importance of addressing global challenges such as pandemics, climate change, and biodiversity loss. This period emphasized the need for a more comprehensive investment strategy that integrates traditional financial analysis with a broader consideration of a company’s social and environmental impact,” the report explains.

Europe Reigns Supreme

The growth and development of this segment of the industry have been uneven on both sides of the Atlantic. According to the report, European investors have consistently led the adoption of ESG ETFs, driven by strong legislative frameworks such as the SFDR (Sustainable Finance Disclosure Regulation) and a deeply ingrained cultural emphasis on sustainability.

As of 2023, the region maintains a dominant advantage, representing nearly three-quarters of the global ESG ETF market, with assets totaling $402 billion. While North America has slightly lagged behind Europe in the growth of ESG ETF assets, it has still maintained a strong presence, with total assets currently at $131 billion, just $10 billion less than its peak in 2021. The report indicates that this trend was supported by an increase in U.S. corporations adopting ESG standards and favorable changes in U.S. government policies, making ESG funds more attractive to retirement plans.

The Asia-Pacific region, while considerably smaller in scale compared to Europe and North America, has shown notable growth. From a modest start with $385 million in ESG ETF assets in 2014, the region expanded its portfolio to $15 billion by 2023.

According to the report’s data, from 2014 to 2023, the number of ESG ETFs globally skyrocketed from 148 to 1,826, highlighting a shift towards sustainable investment. “The EMEA region led this growth, with ESG ETFs expanding from 107 to 1,281, demonstrating a strong commitment to ESG principles. North American ESG ETFs grew from 34 to 430, reflecting an increasing interest in sustainable investment, although at a slower pace than in EMEA. The APAC region, starting from a smaller base, saw a steady increase from 7 to 115 ESG ETFs. The recent trend in ESG ETF launches, especially in North America, is quite distinctive. Despite a general slowdown in new ESG ETF introductions in 2023, the sharp decline in North America is particularly noteworthy,” the report adds.

After a period of robust growth culminating in 115 new funds in 2021, North America experienced a sharp decline to just 13 new launches in 2023. This drop starkly contrasts with the previously buoyant trend and reflects broader shifts in investment priorities.

Flows Tell the Full Story

The full stance of North American (NORAM) investors on ESG, as the study shows, is clearly illustrated through ETF flow trends, highlighting a significant move away from ESG investments in the region. “In 2020, global net flows into ESG ETFs soared to $93 billion, reaching a peak of $165 billion in 2021. During this peak, the EMEA region contributed an impressive $109 billion in net flows, representing 65% of the total, while NORAM also saw a significant increase with approximately $51 billion,” the report indicates.

However, this upward trajectory in North America changed notably in the following years. By 2023, net flows in this region not only decreased but also turned negative. The report explains that this sharply contrasts with the steady growth in EMEA, which recorded nearly $50 billion in net flows during the same period. “This shift dispels the previous assumption that North America was rapidly scaling and poised to surpass Europe in the ESG ETF space. Current trends, according to the report, point to a reevaluation of NORAM investors’ strategies towards ESG investments, particularly in the United States,” the document states.

A key conclusion is that the decline in ESG investment, particularly in the U.S. in recent years, can be attributed to several factors, with a significant one being the rise in anti-ESG legislation driven mainly by political changes. This trend began gaining momentum in 2021 and reached new levels in 2023, with over 150 anti-ESG bills and resolutions introduced in 37 states. Although many of these proposals were rejected or stalled, by December 2023, at least 40 anti-ESG laws had been passed in 18 states, according to Harvard Law School. Conservative factions have also initiated boycotts against brands they consider overly progressive, resulting in considerable opposition to such brands and the ESG initiatives they support.

Investor dissatisfaction is another important factor in the declining interest in ESG initiatives. There is a growing preference for strategies that emphasize financial returns and a profit-centric approach, leading to less focus on social causes that do not produce immediate economic benefits.

According to the report, as a result of these dynamics, companies, including ETF issuers, have started to downplay ESG discussions, leading to a decrease in the promotion of related products and a subsequent decline in net flows into ESG ETFs compared to previous years. This divergence in investment philosophy has allowed ETF issuers to introduce Anti-ESG funds, which have seen increased interest over the past year. These Anti-ESG funds emphasize a more traditional profit-focused approach, attracting investors who prioritize financial returns over broader ESG goals.

While Europe, according to the report, exhibits a less polarized approach to ESG investment and has largely set a global example in ESG adoption, the past few years have seen a slight slowdown compared to the momentum of 2020 and 2021. Despite significant investment flows in 2022 and 2023, European interest in ESG has somewhat waned due to economic uncertainties, high interest rates, inflation, and geopolitical tensions, which may have led investors to shift towards other investments.

Moreover, the underperformance of certain ESG strategies, particularly in thematic areas like renewable energy, affected by rising financing costs, material inflation, and supply chain disruptions, among other factors, has played a role in fostering this cautious sentiment. Additional concerns about greenwashing and evolving regulations, covering issues such as fund reclassification and SFDR implementation, have created uncertainty for ESG investors, potentially causing them to temporarily pause investments until greater clarity emerges.

The Active Approach

The analysis of NORAM’s negative net flows in 2023 reveals a distinctive pattern: $6.6 billion in outflows predominantly came from passive funds, while active ESG ETFs were in demand, attracting $5.3 billion in new capital. This shift indicates a growing preference for active management in ESG investment. Investors, according to the study, appear to be moving towards strategies that offer greater flexibility and alignment with their specific investment goals, diverging from the constraints often associated with passive funds. For some investors, active ESG investment could offer a more dynamic approach, allowing them to have a potentially greater social impact and more direct influence over corporate behavior through activism.

According to the report, this involves deep analysis and engagement with companies in the form of activism, although it typically carries higher fees than passive strategies. By the end of 2023, the proportion of actively managed ETFs within the total AUM of ESG ETFs in NORAM had significantly increased to 13%, compared to just 3% in 2018. This notable growth underscores a substantial shift in investor preference towards active management in the ESG space over the past five years.

In Europe, passive ESG ETFs remain the predominant choice for investors, holding a significant 94% share of total ESG ETF assets. They also maintain a dominant position in terms of annual net flows. This trend persists despite a general decline in inflows into ESG ETFs on the continent that leads in ESG.

The acronym ESG stands for environmental, social, and corporate governance, introduced by the United Nations in the 2004 document titled “Who Cares Wins.” This document marked a crucial moment, advocating for the integration of these critical factors into financial analysis and decision-making. Over the subsequent 19 years, ESG has transformed from a niche concept into a central element of corporate strategy, permeating every sector of the industry, including financial instruments like ETFs.

ZEDRA Will Expand Its Corporate and Fund Services Offering

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ZEDRA, a global specialist in Active Wealth, Corporate and Global Expansion, and Fund and Pension & Incentive Solutions, together with CreaPartners, an independent provider of corporate, investment fund, and family office services based in Luxembourg, have announced their plan to embark on a new collaboration project. This partnership will merge the strengths of both organizations, marking a pivotal moment for ZEDRA as it expands its corporate and fund services offering.

With over 1,000 current employees in 16 key locations and 28 offices, this latest development further underscores ZEDRA’s ambition to be recognized as an international leader in corporate and fund services, the company explains in a statement.

With nearly twenty years of experience, the CreaPartners team, consisting of 25 professionals, has been providing central administration services for corporations, developers, investors, alternative fund managers, issuers, securitization vehicles, wealth managers, high-net-worth individuals, and family offices.

Ivo Hemelraad, CEO of ZEDRA, comments: “The synergies between CreaPartners and ZEDRA further consolidate our joint approach of being the preferred partner for clients in the corporate and fund sectors. We look forward to working with the CreaPartners team. I am confident that this advancement will add great value to our clients and employees worldwide, who will benefit from the wealth of knowledge and experience that the CreaPartners team brings.”

The board of directors of CreaPartners Sàrl welcomes this new collaboration and comments: “Our clients recognize us as a preferred partner thanks to our working model, advanced technology, and our deep understanding of the legal, regulatory, and tax environment in Luxembourg and internationally. We are delighted to collaborate with ZEDRA as we evolve our operations in the alternative investment sector.”

North American Managers Opt for the European Passport as a Way to Reach Clients in the Old Continent

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North American managers plan to create European funds and use the passport to attract investments in Europe ahead of reverse solicitation and National Private Placement Regimes (NPPR), according to a new study by Ocorian. The study surveyed executives in venture capital, private debt, real estate, private equity, and infrastructure fund management in the US and Canada, responsible for $1.591 trillion in assets under management.

The latest survey reveals that 41% chose the passport for future fundraising in Europe, compared to 25% who selected NPPR and the same percentage who opted for reverse solicitation as their preferred methods for fundraising in the study of passports, reverse solicitation, and NPPR.

The study shows that 61% will use placement agents to raise capital in Europe over the next 18 months, nearly half (49%) will also use direct sales teams, and 47% will rely on third-party distributors. Around 28% will use private banks. Approximately 63% have used reverse solicitation in the past to raise funds in Europe, while 40% have turned to the passport and 36% to NPPR, with one in eight (12%) using all three methods.

When asked what makes the passport more attractive, 56% chose market perception and the ability to reach more investors in more countries among their top three reasons, while 44% rated efficiency as a key attribute. The same question about NPPR found that 70% cited cost-effectiveness and 64% flexibility as the two main reasons for using it, while 69% said the amount of capital they have raised from European investors through reverse solicitation has increased over the past two years.

The research found that 82% of North American fund managers are likely to increase pre-marketing activity in Europe over the next two years, with 73% saying it is much or more attractive to pre-market in Europe due to the lower initial investment before fully establishing. However, the study found varying levels of understanding regarding the pre-marketing changes implemented in Europe in June 2021, which included specific changes to the cross-border distribution of collective investment funds under the AIFMD and UCITS Directives in the EU. Only 38% said they understood them very well, while 58% said they understood the changes fairly well.

“There is a strong appetite among North American fund managers to raise capital in Europe and a growing debate about the best methods to do so. At Ocorian, we have supported several managers seeking to test European appetite for their strategy and proposed product through pre-marketing. It is a cost-effective way to decide whether to launch an EU-authorized AIF and use its passport to conduct distribution activities across the region. We only see demand for this service increasing as North American managers conclude that the passport is the most attractive distribution method for the future,” notes Paul Spendiff, Head of Business Development and Fund Services at Ocorian, in light of these findings.

State Street Names Dagmar Kamber Borens Head of Global Markets for Continental Europe

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State Street Bank International (SSBI) has appointed Dagmar Kamber Borens as Head of Global Markets for Continental Europe. Borens will report to Anthony Bisegna, Head of Global Markets at State Street, and Andreas Przewloka, CEO of State Street Bank International.

According to the company, Borens will also join the Global Markets Executive Management Group and will retain her current responsibilities as Country Head for Switzerland, in addition to continuing as a member of the SSBI Executive Management Board. “Borens’ professional experience and progress in developing our business in Switzerland make her the ideal candidate to take on the role of driving our growth in the broader region,” stated Andreas Przewloka, CEO of State Street Bank International.

Anthony Bisegna, Head of Global Markets at State Street, added, “State Street’s markets business continues to grow, so it is critical to have the right team structure in place to support the changing needs of our clients in Europe and globally.”

In her role, Borens will be responsible for delivering the bank’s global market strategy for Continental Europe, as well as collaborating with stakeholders in Global Markets and Investment Services to enhance client engagement. “European institutions and investors are facing challenging times and are looking more than ever for partnerships that help them achieve their goals. Deepening our client relationships while continuing to drive an innovative approach to developing client solutions is essential to our ability to help European clients continue to meet their growth ambitions in a volatile environment,” concluded Borens.

New Mountain Capital Hires John Camperlengo

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New Mountain Capital, a New York-based investment firm, has appointed John Camperlengo as Vice President.

Camperlengo is a seasoned professional with extensive experience in investor relations and alternative investments, having spent several years in the financial services industry. His appointment was shared by the man himself on his LinkedIn profile.

His professional experience includes managing alternative investments in private real estate, private credit, private equity, and growth equity.

Before joining New Mountain Capital, John Camperlengo also served as Vice President at Blackstone, where he worked for seven years.

New Mountain Capital currently manages over $45 billion in assets and has shown significant dynamism this year, including the previously announced acquisition of Broadcast Music, Inc. (BMI), the world’s largest performing rights organization, in November 2023.