Investors are closely monitoring social unrest in Europe, led mainly by France. According to experts at international asset managers, October could be a complicated month for global markets considering the US midterm elections, rising bond yields, and geopolitical and domestic political risks, which do not appear to be losing momentum.
“October is a month that strikes fear into the heart of many investors due to the dramatic, high-profile sell-offs experienced that month in 1929, 1987, and 2008. The negative perception of October is more psychological than real, as historically it has not been the worst month for stock market investing. However, psychology is important when it comes to the markets, and with bond yields hitting multi-year highs, several major elections around the corner, and the US midterm elections just a month away, it seems October is taking us straight into the danger zone,” acknowledges Kristina Hooper, Chief Market Strategist at Man Group.
From Aberdeen Investments, they note that short-term selling pressure may not be over. “Rising oil and gas prices have highlighted pre-existing weaknesses in the fiscal credibility of the US, the UK, and France, as well as persistent inflation, while forced liquidations by leveraged investors have amplified these moves. The only factor that could clearly halt this trend is an improvement in the geopolitical situation in the Middle East,” they indicate.
The Case of France
For now, the big focus is France, as spreads on its sovereign debt have reached new highs while fiscal consolidation seems increasingly distant. It is worth noting that the wave of riots and violence that has broken out responds to social discontent resulting from government cuts and rising inflation. “With the French 10-year bond close to 5%, the 140-billion-euro net savings program proposed by Le Pen arouses skepticism by requiring a gross adjustment of 185 billion euros and relying on unrealistic GDP growth of 1.8%, compared to real estimates of between 0.5% and 0.8% for 2026. The lack of a solution to the French deficit revives the ghost of the 2012 sovereign debt crisis, placing the European Central Bank before the dilemma of letting debt fall and harming confidence in the euro, or intervening and rewarding fiscal indiscipline, creating moral hazard in the rest of the region,” points out Javier Cabrera, analyst at XTB.
For Erick Muller, Director of Product and Market Strategy and Co-Head of the Asset Allocation Group at Muzinich & Co, political gridlock and the proximity of the 2027 elections make it difficult to adopt corrective measures and could prolong uncertainty in the markets. “France is a good example of the difficulties developed economies face in controlling public spending. In 2026, its deficit stands at around 5.6% of GDP, and the interest cost on debt is increasing considerably. This year, interest expenditure has gone from a forecast of 70 billion euros to approximately 80 billion. In 2027 it could reach 92 billion, and in 2028 be close to 100 billion. To put these figures in perspective, the government is trying to find savings of 53 billion euros, something I don’t think it will achieve. We are talking about an increase of around 30 billion in interest payments in just three years. It is a very difficult situation to solve,” he explains.
In his opinion, France’s problem is that the economy is slowing down and the political landscape makes any fiscal response extremely difficult. “Expected growth for 2026 has been reduced to practically half of what was initially expected, which also affects public accounts. Markets are asking what the answer is to this deterioration, and for now, they are not finding any satisfactory one,” he adds.
Return of the Bond Vigilantes?
In this context, investors are paying close attention to the spike in debt yields and the course of the Federal Reserve—have the “bond vigilantes” returned? For Giordano Lombardo, founder, CEO, and CIO of Plenisfer Investments (Generali Investments), yes; furthermore, he warns that the boom in AI investment, increasingly financed by debt, and rising public deficits are increasing pressure on fixed-income markets and elevating stagflation risks.
According to his analysis, the increase in bond yields extended to public securities of other countries. “All major fixed-income markets registered negative returns, except China. In recent weeks, concerns surrounding government bonds of certain Eurozone countries have resurfaced strongly, and France seems to be the epicenter of the crisis this time due to the sharp increase in its public deficit and the prospect of elections that could further worsen the sustainability of public finances,” he states. Moreover, he considers that waves of pessimism in the fixed-income market also affected the technology sector.
His main conclusion is that we have entered a phase of structural bear market conditions for bonds. “However, in recent months, the role of the Federal Reserve has once again become the dominant factor driving short-term movements in the bond market. In addition, the fiscal policies of major economies have all been expansionary, at least over the last fifteen years and especially following the post-pandemic measures introduced in 2020. In the US and Europe, there do not appear to be political forces interested in returning to the fiscal discipline of previous decades,” he qualifies.
Fabrice Chemouny, director of Chief Client Officer.
Natixis Investment Managers (Natixis IM) has announced the creation of the Global Client Development division, which will bring together all teams involved in client services across the entire value chain. According to the asset manager, the new division will feature three areas: Client Markets, organized into six geographic regions; Partnerships; and Product Range & Solutions.
Additionally, it announces that Fabrice Chemouny, current Head of International Distribution, will lead this division as Chief Client Officer. He will assume his new role on January 1, 2027, reporting directly to Philippe Setbon, CEO of Natixis IM. As clarified, this new organizational structure will be implemented following the conclusion of the information and consultation process with the relevant employee representative bodies.
This new organization is part of Groupe BPCE’s VISION 2030 strategic plan. Based on Natixis IM’s ambition for organic growth, this transformation aims, in particular, to adapt the firm’s distribution model to accelerate its global growth and better respond to client needs.
According to the announcement, the creation of a single global platform, which will integrate the United States and other international markets, will foster synergies across regions, provide clients with access to the full range of investment capabilities of Natixis IM and its affiliated investment managers, and enhance operational agility.
The new division will be structured around three main pillars. First, Client Markets, which is a single distribution platform organized into six regions, with each region focused on meeting the needs and investment preferences of its clients, taking into account local market regulations and specifics: United States; Northern Europe and Canada: United Kingdom, Netherlands, Nordics, and Canada; Continental Europe and Latin America: Western and Southern Europe, including France; Central and Eastern Europe; Latin America; and US Offshore; Middle East, Central Asia, and Africa; Asia-Pacific, excluding Japan; and Japan.
Second, a new Partnerships area, whose mission will be to strengthen existing strategic distribution alliances and establish new ones with banking networks, insurers, and other distributors worldwide, with the goal of making Natixis IM’s offering accessible to a broader client base. And finally, a new Product Range & Solutions department. As explained, this area will define the product range strategy based on client needs, developing solutions in areas such as retirement, long-term savings, and wealth management, drawing upon the offerings of investment managers affiliated with Natixis IM.
“We are a global player with deep local roots. In an increasingly fragmented international environment, we want to strengthen both dimensions. Our strategic plan has proven successful, and we want to take it a step further. This new organization further reinforces the central role of clients in our model across all regions and helps accelerate our growth,” stated Philippe Setbon, CEO of Natixis Investment Managers.
For his part, Fabrice Chemouny, who will assume the role of Chief Client Officer of Natixis Investment Managers effective January 1, 2027, added: “By bringing our teams together into a new global organization, we combine a deep understanding of each market with the strength of an international player. Furthermore, we will make our offering accessible to a greater number of clients through new distribution alliances and work with them to develop solutions tailored to their long-term needs. This transformation will provide us with the agility needed to navigate volatile markets, foster synergies across regions, and drive innovation for the benefit of our clients.”
Authorities will evaluate governance based on its effectiveness under stress, prioritizing the use of “better data” rather than a higher volume of reports to detect risks in time. ESMA drives new UCITS rules to standardize information, while the CSSF intensifies supervision of conflicts of interest in delegation agreements. Luxembourg plans to make its unregulated funds more flexible through segregated compartments, and the United Kingdom has just presented its largest post-Brexit asset management reform.
Regulators are increasingly examining how governance and delegation operate in practice, using higher quality data and more visible on-site supervision to drive targeted supervisory actions. Therefore, the central theme of Carne Group’s third-quarter update points to how companies are being driven toward more resilient models of delegation and fund structuring, through “smart” supervision that uses standardized, high-quality data to detect issues early rather than after the fact.
In the report, the firm analyzes the Central Bank of Ireland’s review of the delegation framework and the growing expectation that governance will be evaluated by how it functions under stress, not just on paper. In addition to ESMA’s ongoing effort toward reporting harmonization, the recent work by the CSSF on conflicts of interest, the potential for segregated liability compartments in unregulated funds, and the Financial Conduct Authority’s (FCA) proposal for the new U.K. asset management framework.
Review of the CBI Delegation Framework
The Central Bank of Ireland’s (CBI) July 2026 delegation review marks an important evolution in regulatory expectations, rather than a challenge to the delegation model itself. It concludes that delegation remains fundamental to the European fund industry. The broader issue it addresses concerns how effectively governance operates in practice, rather than simply what structures exist. For managers and delegates, this means a greater emphasis on demonstrable supervision, accountability, and resilience.
Effective governance increasingly depends on factors such as timely, reliable, and connected information. For this reason, the Central Bank identified fragmented systems, manual reconciliations, and weak contingency planning as areas for improvement. What they seek with this is to prioritize quality over quantity; that is, “better data” as opposed to “more data.” If companies collect information intelligently and connect it effectively, they can identify risk areas without creating unnecessary layers of reporting. Consequently, they can scale their business and become much more effective supervisors of delegates.
ESMA Drives Supervisory Convergence
ESMA continues to drive supervisory convergence and the harmonization of reporting, particularly through new UCITS reporting rules expected in the autumn. These will require more detailed information on liquidity, risk management, delegation arrangements, and investment markets and instruments. Implementation will require operational work, but in turn, it creates an opportunity to move away from ad hoc reporting toward consolidated and flexible reporting capabilities. Standardized data requirements could reduce point-in-time regulatory requests and allow companies to use regulatory data more proactively across all their businesses.
UCITS is already a fully harmonized European framework, making it a logical vehicle for greater standardization across all markets. However, at Carne Group they perceive some caution regarding ESMA assuming a broader supervisory role, with a preference for harmonization when it creates a level playing field while retaining the expertise of national regulators, such as those in Ireland and Luxembourg. Amendments in the European Parliament are also not in favor of ESMA becoming a single supervisor. This falls within a broader macroeconomic dynamic amid a growing focus on European champions.
Therefore, the question is how far supervisory convergence can go while maintaining national expertise, which remains important for Europe’s fund industry. ESMA’s Common Supervisory Action is also analyzing the risk management function, including whether companies have genuinely independent risk functions, adequate expertise, sufficient authority, appropriate staffing, and effective oversight by senior management. Unlike previous thematic reviews, the focus is centered directly on whether the function can operate effectively and independently.
On September 28, ESMA set its priorities for 2027, which include delivering on key elements of the Savings and Investments Union (SIU) agenda and advancing capabilities in data, artificial intelligence, and tokenization.
Conflicts of Interest: The CSSF Identifies Key Areas of Focus
Recent work by Luxembourg’s CSSF on conflicts of interest underscores the growing regulatory focus on how governance operates in practice, particularly where delegation arrangements exist. The CSSF has identified conflicts that can arise when commercial partners or initiators are appointed as investment advisors or portfolio managers. For example, when an initiator acts as a portfolio manager, they must have both the capability and the willingness to operate independent controls. If the investment manager retains portfolio management, there is a risk that the investment fund manager (IFM) will follow the initiator’s guidelines rather than acting independently in the best interest of the fund.
Another concern is that commercial partners or initiators may attempt to influence asset valuations, potentially affecting the independence of the valuation process and the IFM’s ability to act in the best interest of investors. The CSSF is also analyzing “white-label” firms, where conflicts may arise from the allocation of responsibilities, particularly when individuals linked to commercial partners or initiators occupy roles, functions, or positions in reporting lines that give rise to conflicts.
Segregated Liability Compartments for Unregulated Funds
A proposed change to Luxembourg’s fund framework could provide greater flexibility to private equity managers using Société en Commandite Simple (SCS) and Société en Commandite Spéciale (SCSp) structures. Standard SCSps are widely used in the world of private equity and infrastructure funds. However, an unregulated SCSp cannot legally create umbrella “sub-funds” with ring-fenced liabilities. Managers seeking segregated compartments typically need to use structures like RAIFs, SIFs, SICARs, or a Part II Fund, all of which carry additional legal product requirements.
The new proposal introduces a new Article 28bis to the Luxembourg AIFM Law, allowing eligible SCS and SCSp AIFs to legally create segregated compartments. Each compartment would have legally separate assets, liabilities, investors, and creditors, and creditors of a compartment would generally have recourse only against the assets of that compartment. Therefore, a single SCSp could contain multiple compartments representing different strategies, vintages, parallel vehicles, co-investment tranches, or separate groups of investors within a single legal entity. Individual compartments could also be liquidated independently, while cross-investment between compartments would be possible subject to safeguards.
If the proposal (still subject to Luxembourg’s parliamentary process) moves forward in its current state, managers currently using separate SCSp vehicles or RAIF umbrellas to achieve segregated liability could achieve the same result through a single unregulated SCSp platform managed by an authorized AIFM.
Regulation of Asset Management in the U.K.
In mid-July, the FCA launched the largest reform of the U.K. asset management framework since Brexit, consulting on an entirely new U.K. AIFM regime alongside Treasury (HM Treasury) legislation. Rather than maintaining inherited EU rules, the FCA wants a more proportionate, simpler regime tailored to different manager sizes. It has also proposed simplifying remuneration requirements and reviewing fund reporting.
The U.K. regulator has a number of statutory objectives, including promoting the global competitiveness of the U.K. financial sector. However, “it remains to be seen whether the new framework will ultimately drive greater divergence or alignment with European regulation,” notes the study. Therefore, the firm asserts that for the market, the key point will be how a simpler and more proportionate U.K. regime operates alongside the requirements faced by managers operating in Europe.
The Center for Climate Prediction of the National Oceanic and Atmospheric Administration (NOAA) maintained an advisory on the El Niño phenomenon and stated that it is intensifying, with a probability exceeding 90% that a very intense episode will occur during the autumn and winter of the Northern Hemisphere in 2026-27. The starting point for any outlook on the agricultural market facing 2027 is that meteorological agencies have reached a consensus, and have done so with unusual certainty.
The World Meteorological Organization reached the same conclusion on September 3, indicating a probability close to 100% that El Niño will persist during the periods from September to November 2026 and from December to February 2027, with the forecast that the phenomenon will reach a very strong intensity before reaching its peak toward the end of the year. Monitoring data from the Australian Bureau of Meteorology agree: the so-called relative El Niño 3.4 index reached +2.51 °C in the week ending September 13, compared to an El Niño threshold of +0.80 °C, while most models indicate that a maximum exceeding +3.0 °C will be reached and it is forecast that the phenomenon will persist until the autumn of 2027.
Oceanic Niño Index (ONI), from 2000 to Present. Source: National Oceanic and Atmospheric Administration (NOAA), Bloomberg Finance L.P. and WisdomTree, as of July 31, 2026.
The effects of El Niño on agriculture occur with a delay of between six and twelve months relative to the peak, due to the time it takes for atmospheric changes to modify local climate, affect crop cycles and impact global supply chains. Therefore, an event that reaches its peak at the end of the year impacts more directly the 2026/27 crops that are currently being sown or prepared: the Southern Hemisphere summer harvest, India’s Rabi season, West Africa’s main harvest, and Southeast Asia’s oil palm and robusta coffee cycles. The price impacts of what is happening in the Pacific will be felt mainly starting in 2027.
The Gulf Conflict Has Shifted from Focusing on Energy to Being a Matter of Inputs
The Gulf conflict has lasted seven months now and, instead of stabilizing, it has escalated. The ceasefire agreed upon in April and the memorandum of understanding signed in June were rendered ineffective when hostilities resumed in July. The recent event with the greatest impact took place on September 11, when Saudi Arabia closed its 1,200-kilometer east-west pipeline following a drone attack, which meant the closure of the main route by which Gulf crude bypasses the Strait of Hormuz.
In the agricultural sector, main exposure derives from the trade of fertilizers and raw materials transiting through the same waterway, and it is precisely the difference compared to 2022 that makes it lasting. The war between Russia and Ukraine in 2022 diverted trade flows, whereas this one has diminished productive capacity. It is estimated that 31 ammonia plants across the Middle East have been directly affected or closed down completely; another 49 in South Asia have reduced production or are halted due to raw material shortages; and at least 20 Russian plants have suffered damage due to drone attacks.
Their reactivation will require time and capital far beyond the end of hostilities. Persian Gulf countries account for approximately 43% of seaborne urea exports and 44% of seaborne sulfur trade. Even in the United States, which obtains two-thirds of both its urea and phosphate from the domestic market, 12% of the urea supply and 17% of DAP/MAP (diammonium phosphate/monoammonium phosphate) comes from beyond the Strait. This points to a capacity constraint extending across several seasons, rather than a freight transport issue.
Grains: A Group of Annual Crops That Already Carries a Risk Premium
The energy sector has recorded the largest individual variations of the year 2026, and refined products and crude oil occupy four of the top five spots. However, what is most revealing about the year-to-date performance table is the breadth, rather than the magnitude. Agriculture occupies virtually the entire space of the ranking between rice and sugar.
Cumulative Performance Year-to-Date Across Commodity Groups. Source: Bloomberg Finance L.P. and WisdomTree, as of September 21, 2026.
What has driven crops throughout the year has been almost exclusively geopolitical and input factors, rather than weather factors. Wheat is the clearest example: the World Agricultural Supply and Demand Estimates (WASDE) report for September was clearly bearish, as world production for the 2026/27 campaign was revised upward by 3.1 million tons to 822.4 million due to increased harvests in Australia and Canada, and ending stocks were increased by 3 million tons to 276.3 million. However, wheat prices have risen 42% year-to-date, as continued Russian and Ukrainian attacks against Black Sea port infrastructure have disrupted the physical route for nearly a quarter of world wheat exports. Net speculative positioning in wheat increased 130% last month, reflecting an improvement in confidence regarding this grain. For this commodity, the structural outlook could depend on whether the current risk premium proves persistent, rather than sporadic. Black Sea infrastructure has now become a recurrent target, rather than representing a one-off disruption, and Australian wheat is in the highest exposure band to El Niño for the 2026/27 harvest.
On the other hand, corn markets are highlighting a genuine supply contraction. U.S. production for 2026/27 was cut by 5.4 million tons to 401.3 million due to hot conditions and uneven rainfall. Global production was reduced by 7.9 million tons to 1,291 million, and global ending stocks fell by 2.6 million tons to 272.1 million. Net positioning increased 92%. In the case of corn, the argument that has been made for years is the constraint in inputs. Corn is the most nitrogen-intensive crop, and fertilizer prices are projected to remain above pre-conflict levels until 2028. Where prolonged under-application of phosphate and potassium is already observed, doses have decreased between 10% and 15% in recent years. Consequences on yield manifest with a three-year lag. This is a slow, cumulative drag that affects the yield trend, rather than a one-off single-season disruption, and is the mechanism by which this conflict extends beyond itself.
Meanwhile, the soybean sector has been driven more by demand than supply. The United States Department of Agriculture (USDA) has raised U.S. production to 123.4 million tons, but China has already purchased nearly 13 million tons this season, representing more than half of its annual commitment of 25 million tons, valid until the year 2028, in addition to a broader commitment to purchase $17 billion worth of agricultural products. China’s purchase commitment extends until 2028 and could provide some demand support that depends less directly on weather conditions. The reason for short-term caution is stocks: soybean and soybean oil reserves stand 7.9% and 8.5% above their five-year seasonal averages. Soybean oil features an additional and underappreciated support factor in the energy context: with crude oil above $100, biofuel demand could strengthen the vegetable oil sector independently of oil production.
Soft Commodities: The Sector Where the Meteorological Signal Is Least Reflected in Prices
The cumulative year-to-date performance table makes it clear. Sugar is up 20%, cotton up 25%, but cocoa is down 9%, coffee down 22%, and orange juice down 28%. The soft agricultural products sector, which historically has shown the greatest sensitivity to El Niño, has been the weakest link in the agricultural sector this year.
The exception is sugar and the clearest expression of the double impact. In early September, raw sugar was trading at 18.44 cents per pound, near the 16-month high located at 18.77 cents, as supply reduction reinforced expectations of a deficit in the 2026/27 campaign. Production in center-south Brazil fell 7.9% during the first half of August, and high energy prices continue to encourage mills to prioritize ethanol over sugar. India has authorized the duty-free import of one million tons of raw material, while drastically reducing ethanol diversion, a combination of measures suggesting domestic stocks are tighter than official figures indicate. Monsoon rainfall has been significantly below normal in Maharashtra, Karnataka, and Marathwada, regions representing close to one-third of Indian production. Sugar is affected by both meteorological conditions and energy price pass-through, and holds the thinnest inventory cushion among major soft agricultural products.
Cocoa is the crop generating the most controversy. Prices have recovered strongly since the low recorded in the second quarter, with New York futures standing around $6,250 per ton, and rainfall in West Africa during the August mini-drought was well below normal levels for this time of year, representing a real risk to pod survival and main crop development if rain does not fall. In contrast, the stock situation is fundamentally different from that of 2023/24. ICE-certified stocks have recovered to near their two-year high, while European cocoa grindings in the first quarter fell 4.6% year-on-year to reach their lowest level in 17 years. The cocoa sector faces this El Niño episode with reserves it lacked two years ago, and with demand clearly damped by the previous price crisis. The bullish thesis is based on weather conditions overcoming those reserves; it is not the same strategy as in 2023.
Regarding Arabica coffee, it faces improving supply: the Brazilian harvest is well advanced and revised export registry data indicate significantly higher flows than previously reported. Certified stocks remain near multi-year lows and physical availability is tight, but the supply trend is positive. The Robusta variety is the most interesting investment. It has been trading near multi-month lows, around $3,296 per ton, precisely as drought spreads across Indonesia and Vietnam during a critical flowering period. Since coffee is a perennial plant, damage suffered during flowering affects the 2027/28 crop, not the current one. Robusta coffee prices stand near their recent lows, even though major producing regions lie in the highest exposure band to the El Niño phenomenon. This creates a divergence between current prices and potential meteorological risks threatening supply.
For its part, cotton is up 25% year-to-date and is the commodity most dependent on demand. Recent price evolution has been downward due to improving U.S. crop conditions, declining export sales, and a strengthening dollar. The curve is in contango, somewhat steepened compared to wheat or corn, which contrasts with cotton stocks being the tightest of the group seasonally. That divergence highlights that the market is placing more weight on current crop conditions than on previous harvest scarcity, and that should a weather disruption occur in 2027, there would be very little margin for error. However, the long-term evolution of cotton is more closely tied to global textile demand and the dollar than to the Pacific region.
Conclusion
Two disruptions impact the same production window from different directions. The Gulf conflict increases cost and limits availability of inputs used prior to the 2026/27 campaign, doing so over a multi-year horizon, as damage affects production capacity rather than trade routes. El Niño increases the likelihood that the yields those inputs aim to protect fall below trend, with a lag in market transmission between six and twelve months relative to the oceanic peak, meaning its effects will be felt mainly in 2027.
The intensity of El Niño and its regional meteorological effects could differ from current forecasts, while an easing of geopolitical tensions could reduce pressure on energy and fertilizer markets. Better-than-expected harvests, inventory replenishment, lower demand, or changes in government policy could also offset pressures arising from meteorological conditions and input costs, resulting in commodity price performance different from that analyzed above.
For years, investing in private markets implied accepting a demanding commitment: locking up capital for eight, ten, or more years, with no real possibility of early exit. Semi-liquid funds emerged to soften that restriction and bring these asset classes closer to a broader investor audience.
It is a middle ground between two worlds. A semi-liquid fund is a vehicle that invests in non-publicly traded assets, such as unlisted companies, private loans, infrastructure, or real estate, but offers the investor a certain capacity to enter and exit on a periodic basis. It is thus situated between traditional funds with daily liquidity and classic closed-end private equity funds.
The key difference lies in frequency. While a conventional equity fund allows participations to be redeemed on any business day, a semi-liquid fund typically opens liquidity windows on a monthly, quarterly, or even semi-annual basis.
How Liquidity Is Managed
The underlying assets cannot be sold overnight without sacrificing value. For this reason, these funds incorporate protection mechanisms for the benefit of all unitholders. The most common are:
Advance notice: Investors must communicate their intention to exit weeks or months in advance.
Redemption caps: Many funds set a limit per period, for example, a percentage of total assets. If requests exceed this limit, they are met on a proportional basis.
Initial lock-up periods: A minimum holding period is common before requesting an exit.
Liquidity reserves: Part of the portfolio is kept in more liquid assets to meet ordinary redemptions.
These mechanisms are not a flaw, but part of the design. They acknowledge that the illiquidity of the asset is inherent to the strategy.
What the Investor Looks For
The main appeal is the illiquidity premium: the additional return that, in theory, is obtained by holding assets that cannot be sold quickly. Added to this are diversification—since private markets have dynamics different from public ones—and access to opportunities not available on the stock exchange.
Furthermore, the format lowers barriers. Many semi-liquid vehicles allow lower minimum investments than traditional closed-end funds and avoid staggered capital calls, where investors must contribute funds as the manager requests them.
Risks and Points of Attention
Liquidity is “semi,” not total. In stress scenarios, when many unitholders want to exit at the same time, limits can be activated and delay payment. It is crucial, therefore, not to consider these investments as capital for immediate use.
Attention should also be paid to valuation. As these are unlisted assets, their price is calculated through models and periodic appraisals, rather than daily market quotes, which can artificially smooth apparent volatility. And, as with any alternative strategy, fees tend to be higher than in traditional management.
A Tool, Not a Universal Solution
Semi-liquid funds expand options for those seeking to diversify beyond equities and fixed income. Their usefulness depends on the investor’s time horizon, liquidity needs, and understanding of the exit terms. Reading the prospectus in detail, understanding the redemption rules, and allocating only a prudent portion of the portfolio are basic practices before investing.
Inflation concerns continue to be the heaviest factor explaining short-term equity movements. The consensus among economists anticipated a strong U.S. inflation reading for September, which ultimately surprised on the downside: headline CPI reached +0.6%, in line with the year-over-year rate moving from 3.4% to 3.7%, while core CPI came in at +0.3% versus the +0.2% expected, shifting from 2.4% to 2.6% year-over-year. Its impact was amplified by the proximity of the Federal Reserve meeting scheduled for the 28th.
However, we believe the release was not strong enough to justify another rate hike in October. Beyond the impact of rising energy costs and the effect of AI investments on the prices of PCs, software, and mobile phones, the only aspect to monitor is the uptick in Owners’ Equivalent Rent (OER), which rose compared to the previous month.
The market’s immediate reaction to the data was to push expectations of a 25-basis-point rate hike in federal funds higher: probabilities spiked above 70%, only to quickly retreat to 12.7%, the lowest level since June. The September retail sales data (which deteriorated relative to August), the moderation in import prices shown in the Philadelphia Fed survey, and comments from Mary Daly (San Francisco Fed) and Michelle Bowman—who do not foresee a rate hike this month—exerted downward pressure on that probability, aiding the Treasury bond market. Regarding the U.S. Treasury bond, we do not believe that developments in the neocloud sector, discussed in the next section, were the main driver behind the yield compression. Investment in AI will continue to contribute positively to GDP in the coming months.
AI: Neocloud Strain and Ongoing Adoption
Inflation and its initial effect on the Treasury yield (which exceeded 5.32% on Wednesday before stabilizing near 5.08% on Friday) was also the catalyst for the sharp drop in share prices among neocloud companies. CoreWeave alarmed investors at the worst possible time by communicating that it would like to achieve an investment-grade credit rating to finance its growth on an “unlimited” basis. Its debt fell below 80 (against a par value of 100), having traded at par just a few months ago, while its CDS priced in a more than 50% probability of default over the next five years.
We consider this an isolated case affecting a subsegment of technology companies with higher financial leverage and greater sensitivity to rate hikes, rather than a red flag for the broader set of companies linked to the AI theme.
For now, the adoption of paid AI services among both large and small enterprises continues to advance, rising from 8% in large firms and less than 4% in small ones at the start of 2023 to 67% of large, 62% of mid-sized, and 50% of small businesses today—all within just three and a half years. Moreover, investments are being monetized: aggregate cloud revenues among major compute providers grew 43% year-over-year in the second quarter, based on nearly $370 billion over the last twelve months.
Geopolitics and the “Incompetence Premium” in U.S. Debt
In the short term, the evolution of inflation readings will be determined primarily by geopolitical factors. In this regard, uncertainty has heightened recently: Iran, through its Revolutionary Guard, has intensified threats against vessels that might “illegally” attempt to trade or load oil in the strait. Similarly, the Wall Street Journal reported comments from Iranian authorities regarding the deployment of troops to carry out retaliatory actions against U.S. allies in the Gulf.
As we have been explaining, one of the Iranians’ objectives is to keep the price of crude oil near $100 per barrel to minimize Trump’s chances of retaining control of the Senate as much as possible. However, the escalation in hostilities places Iran in a difficult situation to manage: overreaching in its pressure could hand Trump the justification he needs to strike with greater force once control of both houses is lost on November 3.
A poorly explained war, an imprecise central bank, and Treasury buybacks too small to move the needle have exasperated fixed-income buyers. Some strategists are already referring to an “incompetence premium” impacting the pricing of U.S. sovereign debt.
Woodford, Warsh, and the Abandonment of Forward Guidance
This is why the coincidence surrounding Kevin Warsh’s abandonment of forward guidance—which likely affected the structure of the yield curve—and the Nobel Prize in Economics awarded to Michael Woodford, arguably the academic who put the most effort into establishing a theoretical foundation for that concept, remains curious. The award arrived last Monday, October 12, four months after Warsh dropped the concept in the FOMC statement on June 17. That said, the contradiction is smaller than it appears at first glance.
In Interest and Prices (2003), Woodford argued that monetary policy operates primarily through expectations of the future rate trajectory rather than the rate applied today. At Jackson Hole (2012), he extended that concept to zero-lower-bound (ZIRP) environments. His recommendation was to communicate guidance state-contingent on the economy rather than tied to a calendar date. The Fed implemented this in December 2012 by incorporating unemployment and inflation thresholds into the FOMC statement.
His subsequent work with García-Schmidt (2019) on economic agents planning over finite horizons significantly tempers the impact of long-term projections. Thus, within his own body of work, we find reasons to believe that guidance was less potent than the models suggested.
In reality, the disagreement with Warsh lies in substance, not form. For Woodford, what must be communicated is the central bank’s reaction function to incoming data, not the path of interest rates. Warsh states that guidance has “outlasted its usefulness” and offers instead a “framework” or “roadmap,” provided it is not termed forward guidance. This closely aligns with abandoning the rate trajectory while retaining the reaction function—which is precisely what Wall Street requested.
Furthermore, an important nuance exists: Woodford advocated guidance as a tool specifically when rates are at zero. With federal funds at 3.75–4%, its marginal utility is significantly lower. Therefore, in my view, extrapolating what occurred post-COVID (in 2021, the issue lay in committing to a rate path in an unprecedented environment amid runaway inflation) with Powell’s “transitory inflation” commentary and the resulting loss of credibility would be a mistake.
What occurred then does not prove that communicating the Fed’s reaction function to the market is useless. The risk lies in leaving the market to guess it, which inherently increases uncertainty, noise, and volatility in the fixed-income market.
In summary, the Fed’s reaction function is the rule, explicit or implicit, that translates the state of the economy into a rate decision. Communicating it means telling the market how the Fed decides, without promising what it will do.
Communicating the reaction function establishes the rule: the market continues to react to data, but in the direction and magnitude intended by the Fed—exactly what Woodford advocated. The question with Warsh is whether, in removing guidance, he will also cease to communicate the rule.
Photo courtesyLarry Fink, CEO and Chairman of BlackRock.
In its third-quarter results presentation, BlackRock announced that it has crossed the $15.5 trillion threshold in assets under management (AUM), driven by $869 billion in net inflows over the last twelve months, representing organic growth in base fees of 10%. “These results demonstrate the value of our integrated platform, as clients increasingly choose us as a partner in investment, financing, and technology. That client trust is translating into greater earnings power, with shareholders benefiting from a more than 35% year-over-year increase in adjusted earnings per share, an adjusted operating margin of 47.8%, and annualized organic base fee growth of 11% in the third quarter,” highlighted Larry Fink, CEO and Chairman of BlackRock.
This momentum is reflected in the $205 billion in net inflows recorded during the third quarter and an 11% annualized organic base fee growth, reflecting broad-based strength across iShares ETFs, systematic active equities, private markets, and cash. In this regard, Fink added: “Clients entrusted us with $205 billion in net inflows this quarter, and $869 billion over the past year. Our results reflect BlackRock’s scale, with 12% growth in technology ACV (Annual Contract Value) and net inflows across all asset classes, client types, regions, and in both active and index management.”
Solid investment performance drove $66 billion in active net inflows led by fixed income and systematic franchises, while iShares generated $135 billion in net inflows. “BlackRock brings together issuer relationships built over decades, financing expertise, investment performance, and the technology and data that connect everything. That combination is differentiating us in every region,” commented the CEO, highlighting the securing of mandates at the forefront of capital markets, raising $68 billion in private markets over the past year, and the first deployment of its AI Infrastructure Partnership. “We are entering our seasonally strongest fourth quarter with accelerating momentum and a broad pipeline. Demand for capital is growing across the global economy, and BlackRock is increasingly at the center of how that capital is deployed and managed,” Fink concluded.
Business Lines
On a financial level, investment advisory, administration fees, and securities lending revenue increased by $990 million compared to the third quarter of 2025, driven by organic base fee growth and the impact of market beta on average AUM. Compared to the second quarter of 2026, the increase was $310 million, also supported by the effect of one additional day in the quarter. Within this category, securities lending revenue reached $253 million (compared to $203 million in the third quarter of 2025 and $239 million in the second quarter of 2026), reflecting higher spreads and higher average balances of securities on loan.
On the other hand, performance fees grew by $114 million compared to the third quarter of 2025, primarily due to higher revenues from liquid alternative products related to a single hedge fund, partially offset by lower revenues in private markets. Compared to the second quarter of 2026, these fees increased by $325 million, driven by liquid alternative and private market products.
The firm’s technology business continued its expansion with 14% growth in technology services and subscription revenue year-over-year. In figures, this represented an increase of $73 million compared to the third quarter of 2025 and $22 million compared to the second quarter of 2026, reflecting sustained demand for Aladdin and multi-product solutions, with ACV increasing 12% year-over-year.
Finally, distribution fees experienced an increase of $59 million compared to the third quarter of 2025, an increase directly driven by the company’s higher average assets under management (AUM).
Franklin Templeton has today announced the launch of the Franklin Putnam Focused US Research UCITS ETF, which it explains is the first actively managed ETF from Putnam Investments in Europe. The firm details that the fund will list on Deutsche Börse Xetra, the London Stock Exchange, and Borsa Italiana on October 15, 2026. In addition, the fund is registered for distribution in Austria, Denmark, Finland, France, Germany, Ireland (country of domicile), Italy, Luxembourg, the Netherlands, Spain, Sweden, and the United Kingdom.
The firm notes that the launch “builds on the strong momentum of Putnam’s investment capabilities in Europe and follows the recent launch of the FTGF Putnam Global Research Fund.” Both new products are based on Putnam’s distinctive investment approach, which centers on stock selection and combines deep fundamental research, collaboration among sector specialists, and disciplined portfolio construction. The new ETF provides access to a more concentrated portfolio consisting of the U.S. equity investment ideas in which the investment team has the highest conviction.
“The launch of Putnam’s first active ETF in Europe represents a new step in expanding our investment offering in the region. European investors are increasingly seeking differentiated alternatives for accessing U.S. equities, and we see significant opportunities to meet this demand by combining Putnam’s investment expertise and track record with the flexibility and accessibility of the ETF format,” commented Javier Villegas, Head of Iberia and Latin America at Franklin Templeton.
In his view, bringing Putnam’s established US Research strategy in an ETF format also reflects their commitment to bringing Franklin Templeton’s full range of global investment capabilities closer to European clients, “offering them a wider variety of strategies and investment vehicles tailored to their needs.”
About the Fund
As explained, the Franklin Putnam Focused US Research UCITS ETF is a high-conviction U.S. equity strategy focused on large-cap companies with a core approach, delivered in an actively managed ETF format. It will invest in between 30 and 45 securities representing the investment ideas in which the team has the highest conviction within the broader US Research strategy, which has outperformed the S&P 500 index in 7 of the last 8 years across both growth-driven and value-oriented markets.
The managers collaborate with sector specialists to develop high-conviction ideas through rigorous fundamental research, which are subsequently integrated into a concentrated equity portfolio. Matt LaPlant, CFA, is responsible for implementing the integrated risk management component in order to mitigate any bias toward specific investment factors or styles. The ETF will be managed by Kate Lakin, Matt LaPlant, CFA, Jackie Cavanaugh, Robert Gray, and Will Rives, CFA, who bring an average of 22 years of investment industry experience.
“The ETF leverages the deep sector expertise of our research team, with stock selection as the core of the investment process. By focusing on our strongest ideas, we aim to generate superior returns while utilizing disciplined risk management to limit exposure to specific factors or investment styles,” explained Kate Lakin, portfolio manager at Putnam Investments.
Not one, nor two, but three: three have been the shocks that markets have been experiencing this year. A shock produced by AI, the energy price shock on account of the conflict between Iran and the United States, and, more recently, the sharp correction seen in sovereign debt. Josefina Rodríguez, an economist with Vanguard’s Investment Strategy Group team, recently shared at a media breakfast in Madrid how her firm’s macro vision is articulated around these three shocks. A clue: the central scenario her team’s experts are working with is more optimistic than the consensus, particularly regarding AI.
Artificial Intelligence Shock
Consensus estimates capex spending by major hyperscalers at around 1.3 trillion euros for 2026, a figure that rises to 1.7 trillion looking toward 2027… six times higher than the numbers these companies were handling a year before the pandemic, in 2019. Rodríguez noted that market expectations are high, but added that if these companies actually manage to capitalize on their investments, it will have a direct impact on the real economy and, in turn, drive private investment, particularly in the U.S.
The expert added that Vanguard’s view is that “the investment cycle will be higher and longer than the historical average, and with greater demand.” According to the firm’s calculations, private investment in the U.S. could reach 10%. Considering that investment accounts for 20% of total U.S. GDP, she anticipates that the country will grow next year at a rate of 3%, compared to the 2% anticipated by the consensus.
This optimistic view on AI will obviously be reflected in equities. The economist recalled that the current environment features high valuations backed by solid earnings, “which offer breathing room to face today’s high rates,” and indicated that the consensus forecast for next year is for corporate earnings to grow once again at a double-digit rate.
However, the expert clarified that the trajectory of the AI investment cycle will not be linear. Vanguard’s baseline scenario foresees continued gains at a rate similar to the current one over the next 12 to 18 months, followed by an inevitable market correction triggered by one of these catalysts, or a combination of several:
Lack of monetization
Commoditization of competition, with high levels of uncertainty driven by the launch of new models
Physical bottlenecks
Potentially stricter regulation
Energy Shock
The expert described the recent surge in gas prices and Brent crude climbing back above $100 as “a second wave,” referring to the initial peak recorded following the outbreak of hostilities between the United States and Iran. The difference is that this time it has been accompanied by a decoupling between refining margins and crude prices, which is also impacting final consumer prices. Furthermore, she highlighted that the spike in natural gas prices has left Europe in a vulnerable position as it entered this autumn with inventories at very low levels.
How is this energy price escalation impacting inflation? Rodríguez asked to frame the data within the context that major central banks have failed to maintain inflation at their 2% target on a sustained basis over the past five years. For her, the issue is that now the base effect of rising prices is also being channeled via goods-related inflation (transportation, for example), which carries a larger weight in the CPI calculation. Thus, Vanguard forecasts that both the ECB and the Bank of England (BoE) will raise interest rates twice each over the next six months.
The expert also detailed another important consideration when approaching inflation under these macro conditions: the possibility that the neutral interest rate could be higher than in the past. Two main factors would press against financial conditions and justify a higher neutral rate: elevated government deficits and an increase in capital demand from both governments and corporations.
Specifically, the thesis Vanguard is working with is that this neutral rate should sit above 4% in the U.S., compared to the Federal Reserve’s estimate that it should lie between 3% and 3.5%. “This could explain why the Fed has not been able to get inflation back down to its target,” commented Rodríguez.
Bond Shock
The third component of the equation is the recent correction in bonds, with the yield curve under particular pressure at the long end. Here, the economist detailed that Vanguard is working with three baseline scenarios, with its central scenario being the most optimistic of the three: a macro environment similar to that experienced in the 1990s during the expansion of telecommunications, with interest rates near 4% and inflation at 2%. This environment would be marked by AI’s ability to meaningfully boost productivity, driving growth and reducing government deficits. Additionally, the firm considers that part of AI’s transformative power could also impact longevity and healthy habits, translating into a reduction in healthcare expenditures.
The second scenario to which the firm assigns a higher probability is similar to the 1980s: AI is not transformative enough to drive productivity demand with a positive impact, leaving interest rates at 5% and inflation between 2% and 3%. It would also be a scenario marked by higher fiscal pressures.
The final scenario, assigned the lowest probability, would resemble the 1970s: a period of fiscal dominance where the Fed’s margin for maneuver would be narrow, as it could not raise interest rates sufficiently due to fiscal risks. In this scenario, rates would sit at 4% with inflation above 3%, pushing nominal rates above 7%.
Which Assets Could Perform Best?
The final part of the presentation revolved around Vanguard’s estimates regarding performance across different asset classes over the coming decade. The firm expressed a preference for fixed income assets, calculating based on its central scenario that annual returns for both equities and fixed income will hover around 5% per year over the next ten years, making fixed income the alternative offering the best risk-adjusted return.
Large institutional investors have demonstrated strong resilience in their adoption of digital assets, as Bitwise asserts in its latest report, “Inaugural Report on How the World’s Largest Institutions Are Investing in Crypto Today,” noting that none reduced their exposure during the recent 50% market decline, and several even took advantage of the dip to buy more.
The report reveals that all of these investors hold Bitcoin as their core and longest-held position, increasingly treating it as an asset paired with gold within allocations that mostly range between 1% and 2% of their portfolios. Likewise, although they maintain secondary positions in Ethereum and Solana with shorter horizons and explicit exit conditions, the report emphasizes that price is not a reason to sell for any of them; they would only liquidate their investments in the event of a failure in their initial thesis, adverse regulatory changes, or an industry credibility crisis.
These institutions rarely disclose their crypto asset positions, whether for competitive or reputational reasons. This study aims to break that silence by asking managers directly which assets they hold, in what amounts, for what reasons, and under what circumstances they would sell.
The findings suggest that adoption is occurring faster and more permanently than the general public perceives, supporting Bitwise’s forecast that a majority of institutional investors will hold crypto assets in their portfolios within five years.
“Institutional investors are adopting crypto assets as a major component of their portfolios. Adoption is happening faster and more consistently than the general public may realize,” notes Matt Hougan, Chief Investment Officer at Bitwise. He adds: “Markets fell by roughly 50% between Q4 2025 and Q2 2026, yet not a single institution we interviewed reduced its allocation during the sell-off, while several bought more. When asked what would trigger an exit, none mentioned price. That directly contradicts the common assumption that institutions are weak-handed investors during pullbacks.”
According to Ryan Rasmussen, Head of Research at Bitwise, what stands out from these conversations is the consistency reached across industry criteria. “Institutions with different mandates, governance structures, and constraints have arrived at a strikingly similar framework for approaching crypto assets in their portfolios,” he states. “Bitcoin serves as the anchor, often alongside gold, while Ethereum and Solana are earning their place. This pattern holds true across the world’s largest institutions, from sovereign wealth funds to university endowments, pensions, and foundations,” he concludes.
