Assets Invested in ETFs Reached a New Record of $9.74 Trillion in the U.S.

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Récord en activos de ETFs

Assets invested in the U.S. ETF sector reached a new record of $9.74 trillion at the end of August, according to a report by ETFGI.

The sector recorded net inflows of $66.31 billion during the month of August, bringing year-to-date net inflows to a record $643.52 billion, surpassing July’s $9.49 trillion, according to the August 2024 report.

Additionally, assets have increased by 20.1% year-over-year in 2024, rising from $8.11 trillion at the end of 2023 to $9.74 trillion, marking 28 consecutive months of net inflows, the report adds.

“The S&P 500 index rose by 2.43% in August and is up 19.53% year-to-date in 2024. The developed markets index, excluding the U.S., increased by 2.78% in August and 11.13% in 2024. Israel (+7.47%) and Singapore (+5.59%) posted the largest gains among developed markets in August. The emerging markets index rose by 2.01% in August and 10.89% in 2024. Indonesia (+10.79%) and Thailand (+8.62%) recorded the highest increases among emerging markets in August,” said Deborah Fuhr, managing partner, founder, and owner of ETFGI.

In the U.S., the ETF sector had 3,669 products by the end of August, with assets worth $9.74 trillion from 337 providers listed on three exchanges.

On the fixed income side, ETFs saw net inflows of $25.61 billion in August, bringing year-to-date net inflows to $129.54 billion, exceeding the $109.87 billion in net inflows in 2023.

Commodity ETFs registered net inflows of $715.56 million in August, putting the year-to-date net outflows at $1.73 billion, lower than the $5.8 billion in net outflows for the same period in 2023.

Active ETFs attracted net inflows of $20.67 billion during the month, bringing year-to-date net inflows to $180.4 billion, significantly higher than the $74.2 billion in net inflows in 2023.

The substantial inflows can be attributed to the top 20 ETFs by new net assets, which collectively gathered $46.13 billion in August. The Vanguard S&P 500 ETF (VOO US) gathered $7.88 billion, the largest individual net inflow, the report explains.

Miami Is the City With the Highest Real Estate Bubble Risk, According to UBS

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Riesgo de burbuja inmobiliaria en Miami

Miami currently holds the highest bubble risk, according to this year’s edition of the UBS Global Real Estate Bubble Index.

Driven by the luxury market boom, prices in Miami have increased by nearly 50% in real terms since the end of 2019, with 7% of that rise occurring in the last four quarters, the report adds.

The U.S. homeownership market is becoming increasingly unaffordable, as the monthly mortgage payment as a percentage of household income is now much higher than during the peak of the 2006–2007 housing bubble.

In Los Angeles, real housing prices have barely increased since mid-2023. Due to the decline in economic competitiveness and the high cost of living, the population of Los Angeles County has been shrinking since 2016. As a result, rents have not kept pace with consumer prices, the study explains.

Despite its low affordability, New York housing prices have not corrected significantly. They are only 4% below 2019 levels and have even increased slightly in the last four quarters.

The Boston housing market has seen a 20% price increase since 2019, outpacing both the local rental market and income growth. However, the local economy has recently taken a hit, particularly due to layoffs in the tech and life sciences sectors, which could signal a shift in this trend.

Globally, real estate bubble risk has decreased in the cities analyzed. In addition to Miami, Tokyo and Zurich also saw their index rise.

However, cities like San Francisco, New York, and São Paulo present a low bubble risk.

The SEC Fines 11 Firms for Misuse of Their Communications

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Sanciones de la SEC

The SEC announced charges against 12 firms, including broker-dealers, investment advisers, and a dual-registered broker-dealer and investment adviser, for widespread and prolonged failures in the maintenance and preservation of electronic communications, violating the recordkeeping provisions of federal securities laws, according to the regulator’s statement.

The firms admitted to the facts outlined in their respective SEC orders, acknowledged that their conduct violated the recordkeeping provisions of federal securities laws, agreed to pay combined civil penalties totaling $88,225,000, and have begun implementing improvements to their compliance policies and procedures to address these violations.

The sanctioned firms are as follows: Stifel, Nicolaus & Company, which agreed to pay a $35 million fine; Invesco Distributors, along with Invesco Advisers, with a $35 million fine; CIBC World Markets, along with CIBC Private Wealth Advisors, which will pay $12 million; Glazer Capital with $2 million; Intesa Sanpaolo IMI Securities with $1.5 million; Canaccord Genuity with $1.25 million; Regions Securities will pay $750,000; Alpaca Securities with $400,000; Focused Wealth Management agreed to pay $325,000, and Qatalyst Partners will not pay any fine.

“Today’s enforcement actions reflect the range of consequences that parties can face for violating the recordkeeping requirements of federal securities laws. Widespread and long-standing failures, especially when they potentially impede the Commission’s investor protection function by compromising a firm’s response to SEC subpoenas, can result in substantial civil penalties,” commented Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

The SEC’s investigations into all the firms, except Qatalyst, uncovered widespread and long-standing use of unapproved communication methods, known as “off-channel communications,” within these firms.

On the other hand, firms that self-report and otherwise cooperate with the SEC’s investigations may receive significantly reduced penalties. In this case, despite recordkeeping failures involving senior management communications that persisted even after the SEC’s first recordkeeping matters were announced in 2021, Qatalyst took significant compliance steps, self-reported, and remedied the situation, resulting in a no-penalty resolution.

As outlined in the SEC’s orders, the firms admitted that during the relevant periods, their personnel sent and received off-channel communications that should have been retained as required under securities laws. The failure to maintain and preserve these records deprived the SEC of key communications during its investigations.

Black Salmon Tokenizes Its First Real Estate Project With Fintech Wbuild in the U.S.

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(cedida) Proyecto de Black Salmon en St. Petersburg, en Tampa, Florida

With the goal of expanding access to real estate investment, U.S. real estate investment manager Black Salmon completed its first tokenization of a real estate project in Florida. The transaction, carried out through Chilean fintech Wbuild’s technology, was valued at nearly one million dollars.

According to a joint statement, the two firms partnered to distribute a share of one of Black Salmon’s projects: the development of a 23-story multifamily building located in the heart of St. Petersburg, in Tampa, Florida. The building is situated next to Tropicana Field Stadium and the area’s main commercial districts and entertainment zones.

The companies hailed the operation as a success. The tokenized share was sold in just one week, for a total of nearly one million dollars. This portion represents 10% of the total project, which has an estimated annual return of between 17% and 20%.

Tokenization allowed investors to acquire a token starting at $50,000. Without this technology, the minimum external investment would have been $500,000.

As a result of this success, Black Salmon—managing over $2.1 billion in assets (AUM)—is preparing to launch another project using this method. This second asset is located in the heart of the Medical District in Miami, Florida, and involves the construction of two multifamily buildings.

The tokenization of real estate assets has become a growing trend, allowing property ownership to be divided into small digital tokens, thereby lowering the investment amounts required to access this class of alternative assets.

Jorge Escobar, co-CEO of Black Salmon, highlighted the partnership with Wbuild. The fintech’s expertise, he said in the press release, “enables high-value real estate projects from the United States to be brought closer to Latin American investors.”

Daniel Pardo, CEO of Wbuild, emphasized that the partnership enables direct participation in high-quality investment opportunities. “More family offices, companies, and individuals will be able to access diversified and flexible investment portfolios through our platform,” he commented.

Wbuild offers real estate investments in the U.S., structured as tokens. According to Pardo, in an interview with Funds Society a few months ago, these tokenized assets function as “digital shares” of a company holding the real estate assets.

Patria Launches a Fund to Restore Grasslands and Ecosystems in Latin America

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Fondo de Patria para restaurar ecosistemas

Patria Investimentos announced the creation of the Reforest Fund, in partnership with Pachama, with the goal of raising up to $100 million for reforestation and degraded land restoration projects in Brazil and other Latin American countries.

The fund aims to promote the ecological recovery of these areas by using both native and unconventional exotic species, while also encouraging the bioeconomy through the sale of carbon credits, reforestation timber, and agroforestry products.

According to the announcement, the fund will be structured around two types of projects: ecological restoration, aimed at selling carbon credits, and productive restoration, which includes the sale of timber and other products like cacao and coffee, along with carbon credits. The initiative also focuses on generating social benefits, such as job creation and economic development for local communities.

“Productive ecological restoration, in addition to promoting biodiversity and ecosystem services, generates social benefits for local communities,” the company stated.

The first projects of the Reforest Fund will concentrate on the Atlantic Forest (Mata Atlântica), a highly degraded biome with significant recovery potential. Future plans include expanding to other biomes across Latin America.

The partnership between Patria Investimentos and Pachama leverages the complementary strengths of both companies. Patria contributes “best governance practices, local presence, and the ability to mobilize long-term capital,” while Pachama brings “credibility to access high-quality carbon credit buyers and proprietary technology for project origination and monitoring,” according to the statement.

José Augusto Teixeira, a partner at Patria Investimentos, stated that “this new fund is part of our strategy to expand our product portfolio, complementing our offering with an alternative asset class in which we do not yet operate.” He emphasized that the fund’s projects combine differentiated returns with a positive impact on society and the environment. “The projects respect the environment while delivering positive social and economic impacts for communities,” he added.

The fund marks Patria’s entry into a new segment of sustainable investments, aligning with the growing interest in long-term environmental and social solutions in Latin America.

DAVINCI TP Announces a Strategic Alliance with Brookfield Oaktree Wealth Solutions

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Strategic alliance of DaVinci TP
Photo courtesy

Brookfield Oaktree Wealth Solutions, a global provider of alternative investments, is expanding its presence in the wealth management sector in Latin America, with DAVINCI Trusted Partner leading support and marketing efforts for private placement in Argentina and Uruguay, both firms announced in a statement.

DAVINCI Trusted Partner announced its strategic alliance with Brookfield Oaktree Wealth Solutions to offer alternative investment solutions to financial advisors and private banking in Argentina and Uruguay. Brookfield Oaktree Wealth Solutions’ parent company, Brookfield, manages approximately $1 trillion in assets, with a distinguished track record and notable expertise in Real Estate, Infrastructure, Private Equity, Credit, and Renewable Power & Transition.

“We view DAVINCI as an extension of our support team in Latin America. We are fortunate to partner with them as they share our commitment and passion for serving our clients in the region,” said Oscar Isoba, Managing Director and Head of LatAm at Brookfield Oaktree Wealth Solutions.

“The combination of Brookfield Oaktree Wealth Solutions’ global scale with DAVINCI’s local expertise will enable us to offer our investment capabilities to wealth advisors and private banks in the region, with a focus on education about alternative investments and how advisors can position these unique strategies in their clients’ portfolios. We are very excited to bring these solutions to Argentine and Uruguayan investors, and we look forward to expanding our reach to other countries in the region,” Isoba added.

Santiago Queirolo, Managing Director of DAVINCI Trusted Partner, highlighted: “We are fully committed to our clients, and our main objective is to help financial institutions assess the best investment solutions available in the market. There is growing interest in alternative investments in the wealth management sector, seeking to diversify traditional portfolios and enhance long-term returns. With this strategic alliance with Brookfield Oaktree Wealth Solutions, we will help financial institutions navigate the alternative investment universe with the goal of educating while introducing the best alternative investment solutions.”

“We are very excited about this alliance with Brookfield Oaktree Wealth Solutions, one of the most prominent firms in the credit and private assets market. This agreement will allow us to offer the best alternative investment solutions to intermediaries in Argentina and Uruguay,” said James Whitelaw, Managing Director at DAVINCI TP.

DAVINCI Trusted Partner specializes in the independent distribution of investment funds in Latin America, providing access to investment solutions from leading global managers. With a highly experienced team and deep knowledge of the regional regulatory framework, it offers specialized consulting to financial intermediaries, establishing itself as a trusted partner in the region.

Brookfield Asset Management is a global alternative asset manager. It invests clients’ capital for the long term, with a focus on real assets and essential service businesses that form the backbone of the global economy. It offers a wide range of alternative investment products to clients worldwide, including public and private pension plans, endowment funds and foundations, sovereign wealth funds, financial institutions, insurance companies, and private wealth investors.

The U.S. Real Estate Market Needs More Fed Rate Cuts to Boost Supply and Affordability

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Fed Rate Cuts Will Ease Pressure on U.S. Real Estate Market, but Mortgage Rates Unlikely to Fall Below 5% Before 2027, According to Fitch Ratings

The 30-year fixed mortgage rate and the 10-year Treasury yield have already priced in the Federal Reserve’s 50 basis point rate cut. Even with additional rate cuts, a decline in the 30-year mortgage rate to around 5% depends on the spread with the 10-year Treasury bond returning to the pre-pandemic average of 1.8 percentage points.

Fitch analysts note that the 10-year yield has less room to fall following rate cuts, especially after this summer’s declines in anticipation of monetary policy easing. They expect the 10-year yield to end 2026 around 3.5%, down slightly from its current level of around 3.7%. A 3.5% 10-year Treasury yield plus the historical average spread of 1.8 percentage points results in a mortgage rate of around 5.2%.

The spread between the 30-year mortgage rate and the 10-year Treasury yield has widened relative to the historical average since the Fed began raising policy rates in March 2022. This reflects a higher prepayment risk and the Fed’s reduction in its holdings of mortgage-backed securities (MBS). The spread peaked near 3% in November 2023 when the average 30-year fixed mortgage rate reached a cycle high of 7.8%. It has since narrowed slightly, averaging 2.6 percentage points since January 2024.

Demand Remains Above Averages

Housing demand, as measured by homes sold above the list price and the average sale price relative to the list price, has softened since August 2023 but remains above long-term averages. A further decline in mortgage rates will help improve affordability and support demand, but low inventory will likely constrain home sales until rates approach 5%.

Around 24% of outstanding mortgages have rates above 5%. As mortgage rates approach that figure, likely by 2026, homeowners with these higher-rate mortgages, along with those with rates between 4% and 5% (around 19% of outstanding mortgages), should become more willing to sell their homes and take on a new mortgage, according to Fitch Ratings.

Housing Supply Needs to Improve

According to Fitch, “Total U.S. inventory has broadly increased this year, but it remains below pre-pandemic levels, driven by a 27% drop in existing home supply since February 2020. While the new home inventory has grown by 29% since the start of the pandemic, the supply of existing homes, which accounts for roughly 80% of home sales, needs to improve in order to enhance pricing and market activity.”

Mortgage originators are already benefiting from higher volumes as refinancing activity has gradually recovered with the decline in mortgage rates. Homeowners with mortgage rates above 6%, representing 14% of outstanding mortgages or roughly $1.5 to $2 trillion, are in a prime position to refinance as the average 30-year rate approaches 6%.

BNP Paribas Signs Agreement with HSBC to Acquire Its Private Banking Activities in Germany

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prueba 3

BNP Paribas has announced the signing of an agreement with HSBC to acquire its private banking activities in Germany. The deal aims to position BNP Paribas Wealth Management among the leading players in Germany and raise the amount of assets under management to over 40 billion euros (around 45 billion dolars).

Germany, a key geography for BNP Paribas, offers significant growth potential for wealth management activities, particularly within the “mittelstand” segment (German SMEs), as well as with entrepreneurial clients and German families. Leveraging BNP Paribas’ diversified and integrated business model, BNP Paribas Wealth Management aims to provide these entrepreneurial clients with a comprehensive service offering, ranging from investment and corporate banking to asset management, drawing on BNP Paribas’ well-established franchises.

HSBC’s private banking activities, primarily focused on HNW and UHNW clients, and with a complementary regional presence, especially in North Rhine-Westphalia, fit perfectly within BNP Paribas Wealth Management’s model. This will allow BNP Paribas to rank among the top wealth managers in the country, according to the statement from the French firm.

BNP Paribas Wealth Management, part of the Investment and Protection Services division, is the leading private bank in the eurozone, with global assets of 446 billion euros (498 billion dolars) as of the end of June 2024.

The transaction is expected to close in the second half of 2025, pending regulatory approvals.

“This acquisition is a crucial step in positioning BNP Paribas Wealth Management among the leading players in Germany, where we believe our model is best suited to meet the long-term needs of entrepreneurial clients, leveraging the Group’s strong franchises to meet both their personal and corporate needs. It will, therefore, contribute to consolidating our position as the leading wealth management player in the eurozone,” said Vincent Lecomte, CEO of BNP Paribas Wealth Management.

Lutz Diederichs, CEO of BNP Paribas Germany, added, “Germany is a key strategic market for BNP Paribas, with a local presence of over 75 years. Our twelve business lines make our business model one of the most diversified and resilient in the German banking sector. Developing our wealth management franchise is an integral part of our growth plan in the German economy. Wealth Management in Germany serves as a gateway for our clients to the full range of services offered by the BNP Paribas Group, particularly in Corporate & Institutional Banking, Real Estate, Asset Management, and Securities Services.”

New Interest Rate Environment, Capital Preservation, and Meeting Family Expectations: The Three Priorities of Family Offices

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Following the stock market rally in 2023, family offices are shifting their portfolios, reducing cash holdings, and positioning in risk assets with the expectation of gains in the coming year, according to Citi Private Banking’s report, *Global Family Offices 2024. Survey Insights*.

“We are delighted to share the results of this year’s survey, which offers an inside look at the investments and priorities of some of the most diverse and sophisticated family offices in the world. Over the last two years, we have seen the number of participants grow from 126 to 338 globally, highlighting the increasing need for unique perspectives on the main challenges and opportunities family offices face today. The broad-ranging questions cover the most current global topics, revealing significant shifts in concerns and interests. We look forward to continuing our close collaboration with family offices to provide access to all areas of Citi that support the ambitious goals and needs of the world’s most global and sophisticated investors,” said Hannes Hofmann, Head of Citi Private Bank’s Global Family Office Group.

**Top Concerns for Family Offices**

The survey results show that the preservation of asset value is the top concern for families, followed closely by preparing the next generation to be responsible stewards of their wealth.

Citi highlights that this underscores the dual priorities of family leaders: preparing wealth for their families and preparing family members to manage that wealth. Furthermore, the adoption of formal governance systems is uneven among family offices. While over two-thirds have governance systems for investment functions, less than half rely on formal governance for other family office and family-related matters.

“While family offices are inherently unique, our survey demonstrates that there are many similarities in their concerns and behaviors. Findings like these reveal the new ways they are managing their wealth, diversifying portfolios, and implementing sophisticated investment approaches while preparing families to achieve both financial and familial well-being,” emphasized Alexandre Monnier, Head of Family Office Advisory for Citi Private Bank’s Global Family Office Group.

Key Findings

Amid ongoing market volatility and geopolitical challenges, the report highlights key challenges and areas of potential opportunity for the year ahead. Among the most notable conclusions of this year’s edition is that asset preservation and preparing the next generation for future responsibilities are top concerns for families. Respondents also noted that meeting family members’ expectations is their biggest challenge.

The report reflects how family office portfolios are shifting and what concerns investors have. “Family offices are moving cash into significant portfolio changes, shifting from liquid resources to fixed income and both public and private equity,” the report concludes.

Additionally, there has been an increase in exposure to artificial intelligence, which “likely contributed to the strong returns last year.” However, the report notes that the adoption of AI technology in family office operations remains slow.

A notable finding is the continued optimism about portfolio performance over the next 12 months, with 97% of respondents expecting positive returns. However, the report shows that the future of interest rates is the primary concern, followed by geopolitical issues such as U.S.-China relations and the conflict in the Middle East.

Regarding the family office business itself, the report confirms that investment approaches are becoming more sophisticated. Sixty percent of family offices now have investment teams led by a CIO, investment committees, and formal investment policy statements, with a strong commitment to alternative asset classes.

“As they professionalize, family offices are increasingly collaborating with external partners. Investment management (54%) and reporting (62%) are the only two services most family offices manage internally; all other services are either outsourced or handled jointly,” the report points out.

The report also revealed changes in portfolio allocations. Equities and fixed income saw an increase in their weightings, rising from 22% to 28% and from 16% to 18%, respectively. Private equity declined from 22% to 17%, potentially due to delayed revaluations compared to public equities. North America received the highest allocations (60%), followed by Europe (16%) and Asia-Pacific excluding China (12%). Allocations to China nearly halved, dropping from 8% to 5%, due to economic challenges and market uncertainty in the country. The share of North American allocations increased from 57%, driven by a strong equities market.

Expert Analysis

For Citi, it is notable that for the first time since 2021, inflation is no longer the top short-term economic concern for respondents. Instead, interest rate expectations became the top priority for more than half of respondents, followed by U.S.-China relations and market overvaluation. Concerns about the Middle East conflict are now more prominent than those regarding the war between Russia and Ukraine.

Looking ahead, sentiment towards asset classes was more positive compared to last year’s survey, with increased confidence in direct private equity, private equity through funds, and global developed market equities.

Compared to the 2023 report, positivity towards developed global investment-grade fixed income dropped from 45% to 34%, reflecting an increased appetite for risk. Regarding portfolio returns, nearly all respondents (97%) expected positive returns, with almost half anticipating returns above 10%.

“Our family office clients are becoming increasingly global as they seek to create and preserve wealth amid new challenges and opportunities in the markets. As interest rates evolve and geopolitical challenges persist, investors and their families are mobilizing their cash and shifting their portfolios towards public and private equity. Family offices are focused on the future as they navigate evolving markets around the world,” concluded Ida Liu, Head of Citi Private Bank.

The survey was launched during Citi Private Bank’s 9th Annual Family Office Leadership Program in June 2024 and later distributed to Citi’s global family office clients. With 50 questions aimed at capturing investment sentiment, portfolio positioning, family governance, and best practices, the survey received responses from 338 participants, which were included in the report.

The Assets Of The Largest Pension Funds Reached 22.6 Trillion Dollars In 2023

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The 300 largest pension funds in the world returned to growth in 2023, leaving much of the previous year’s decline behind. However, the assets of the largest pension funds have not yet returned to their historic peaks, according to the Global Top 300 Pension Funds report, prepared by the Thinking Ahead Institute of WTW in collaboration with *Pensions & Investments*, a leading U.S. publication on investments.

In 2023, the assets of the top 300 pension funds increased by 10%, reaching $22.6 trillion, compared to $20.6 trillion in AUM at the end of 2022. This recovery comes after a 13% drop in assets in 2022, as markets stabilized following the high level of global economic uncertainty from the previous year. According to the report, growth has been faster among the largest plans, with the world’s top 20 pension funds registering a 12% increase in assets over the last year, outperforming their smaller counterparts. This faster growth has also been sustained over time, with a compound annual growth rate (CAGR) of 5.4% for the top 20 pension funds over the last five years, compared to 4.7% for the top 300 as a whole.

Japan’s Government Pension Investment Fund (GPIF) remains the largest pension fund in the world, with $1.59 trillion in assets under management, a position it has held since 2002. However, with $1.58 trillion in assets, Norway’s Government Pension Fund, only 0.5% smaller, could take the top spot next year after recording a 22% growth in assets over the past 12 months. “While it is encouraging to see a return to growth among the world’s major pension funds in 2023, the combination of a more uncertain macroeconomic environment and rising geopolitical instability creates greater complexity in the investment landscape,” said Oriol Ramírez-Monsonis, Director of Investments at WTW, in light of the study’s findings.

WTW also explained that last year was marked by an environment of rising inflation and interest rates, which have since moderated, but the outlook remains uncertain. “While the first half of 2024 has provided some stability, uncertainty remains high, and volatility persists in the global economy, exacerbated by geopolitical events, including major presidential elections in many countries,” they said.

In Europe, the report notes that funds continue to allocate a significant portion of their investments to fixed income, at 47%, followed by equity investments, which account for nearly 40% of the allocation. This distribution marks a significant difference compared to other regions and highlights the need to continue working on diversifying strategies. “To continue making progress, it is crucial to optimize asset allocation in our portfolios, reducing investments in traditional assets. While in North America, investment in alternative assets already reaches nearly 30%, in Europe, we have yet to surpass the 15% threshold, leaving us ample room for improvement and growth,” concludes Ramírez-Monsonis.