The Tariff Heading Continues With Corrections in the Bags and the Managers Adjusting Their Scenarios

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The world’s major economies are making their move in response to the Trump administration’s tariff game. Meanwhile, markets are feeling the impact of commercial and geopolitical uncertainty, and investors are beginning to consider a scenario of economic recession in the U.S. alongside rising inflation. This heightened volatility translated into another turbulent session on Wall Street, with declines in the S&P and Nasdaq, as well as European stock markets falling for the fourth consecutive session (EuroStoxx 50 -1.4%; Ibex -1.5%).

“The fear of a U.S. economic recession and its spillover to the rest of the world, partly driven by Trump’s unstable trade policy in these early months of his term, is leading to profit-taking after an excellent start to the year for European stock markets,” explain analysts at Banca March.

According to Gilles Moëc, chief economist at AXA IM, “there is a revolutionary atmosphere in Europe.” He believes that “the reaction of EU institutions and national governments to the U.S. challenge has been quicker and stronger than expected.” He warns of two key issues: first, “whether national governments have the willingness and capacity, given already unstable fiscal positions and watchful markets”; second, “the magnitude of the multiplier effects that this additional spending will have on GDP, both in Europe and in Germany,” a country about which he notes, “the revolution could be relatively painless.”

Where Are We in This Tariff Game?

To summarize quickly, Trump has implemented 25% tariffs on all steel and aluminum imports, with Canada, Brazil, and Mexico being the most affected. Additionally, the U.S. president has threatened to double tariffs on Canadian steel and aluminum to 50%, in response to a 25% increase in the electricity price Ontario exports to the United States.

On the receiving end of these new tariffs, the latest response has come from the European Union. Ursula von der Leyen, president of the European Commission, has just announced countermeasures worth €26 billion, which will affect U.S. products such as textiles, appliances, and agricultural goods starting April 1. The European Commission “regrets the U.S. decision to impose such tariffs, which are unjustified and harmful to transatlantic trade, damaging businesses and consumers and often resulting in higher prices.” Brussels estimates that these tariffs on steel, aluminum, and derivative European products will have an impact of around $28 billion.

How Much and How the Landscape Has Changed

In response to this situation, international asset managers are adjusting their scenarios. According to Lizzy Galbraith, political economist at Aberdeen Investments, the rapid adoption of executive measures by President Trump, particularly in trade, has led them to update their outlooks from several important perspectives.

“We now see the U.S. weighted average tariff rate continuing to rise to 9.1%. We assume a reciprocal tariff will be implemented, though with several exemptions. We anticipate higher general tariffs on China and more sector-specific tariffs, including those applied to the EU, Canada, and Mexico. Additionally, the risk that trade policy becomes even more disruptive has increased,” she notes.

Galbraith acknowledges that their “Unleashed Trump” scenario assumes reciprocal tariffs are systematically applied and include non-tariff trade barriers, while the United States-Mexico-Canada Agreement (USMCA) collapses entirely. “This results in the average U.S. tariff reaching 22%, surpassing the highs of the 1930s,” she explains.

The Aberdeen Investments political economist believes that the economic fundamentals remain strong. However, she acknowledges that “our updated baseline political expectations, along with the risk bias in our forecasts, will present headwinds for U.S. economic growth and inflation.”

Finally, according to Enguerrand Artaz, strategist at La Financière de l’Echiquier (LFDE), part of the LBP AM group, “the market scenarios that prevailed at the beginning of the year have been erased.” Artaz explains that the U.S. exceptionalism that had been shining for the past two years—and that consensus expected to continue—is now faltering. “Weighed down by the collapse of the trade balance, driven in turn by a sharp increase in imports in anticipation of tariff hikes, U.S. growth is expected to slow significantly, at least in the first quarter. On the other hand, Europe, a region in which very few investors had any hope at the start of the year, has returned to center stage.”

Implications for Investments

Given this backdrop, Amundi‘s latest Investment Talks report states that “the Trump trades are over, and the market rotation away from major U.S. tech stocks continues.” They explain that despite the recent sell-off, they believe the expected correction in excessively valued areas of the U.S. equity market could continue, leading to further rotation in favor of Europe and China.

“In fixed income, it is crucial to maintain an active duration approach. Since the beginning of the year, we first became more bullish on European duration, and more recently, we have started moving toward neutrality. We have also shifted to a neutral stance on U.S. duration and expect the U.S. 2-10 year yield curve to steepen. Regarding credit, we remain cautious on U.S. high-yield bonds and prefer investment-grade European credit. As our original euro/dollar target of 1.10 approaches, we expect volatility to remain high and believe there is still room for further dollar correction. Overall, we believe it is essential to maintain a balanced and diversified allocation that includes gold and hedges to counter the increasing downside risk in equities,” Amundi analysts state.

Meanwhile, BlackRock Investment Institute highlights that political uncertainty and rising bond yields pose risks to growth and equities in the short term. “We see further upward pressure on European and U.S. yields due to persistent inflation and rising debt levels, although lower U.S. yields suggest markets expect the typical Federal Reserve response to a slowdown. However, we believe that megatrends like artificial intelligence (AI) could offset these drags on equities, which is why we remain positive over a six- to twelve-month horizon,” they indicate in their weekly report.

Trump, Central Banks, or the Climate: What Dynamics Are Driving the Commodities Market?

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Even as the world enters a phase of deglobalization, the connection between markets and the global economic and geopolitical landscape remains strong. That is why international asset managers are closely watching how the commodities market is responding to expectations surrounding steel and aluminum tariffs, a potential U.S. recession, increased spending in Europe, possible sanctions on Russia, and shifts in energy demand—a long and complex list of factors.

According to Marcus Garvey, Head of Commodities Strategy at Macquarie, their economists have revised global GDP growth projections for 2025 down to 2.2% year-over-year, expecting expansion to slow to a quarterly low of 0.3% in Q3 2024.

He explains that the possibility of tariffs on commodity imports has driven up duty-free prices in the U.S.

“This has led to increased demand for materials that can be moved to the U.S. before potential tariffs are imposed, as seen in the growing gold reserves within the country. However, this merely brings forward demand, and once there is tariff clarity, these additional purchases should subside. Furthermore, once tariffs are confirmed, excess inventory in the U.S. is likely, and the resulting price hikes for consumers could lead to demand destruction,” Garvey adds.

He also notes that the reciprocal tariffs expected after April 1st may be lower than the market anticipates, which could provide some relief.

Garvey’s base-case scenario is that weakening global demand for goods and slower industrial production growth will negatively impact primary commodity consumption.

“We therefore expect most commodity prices to decline in the second half of the year, with most physical commodity trade balances posting global surpluses. However, gold is a notable exception—given the U.S. fiscal deficit shows no improvement, it could test its all-time high of around $3,500 per ounce,” he states.

Tariffs: The Impact on Steel and Aluminum

The 25% tariffs on steel and aluminum announced by the U.S. are now in effect, significantly impacting Australia, Canada, Argentina, and the European Union.

Garvey explains that these tariffs will be implemented through the reinstatement and extension of the Section 232 tariffs from 2018. “This means the same mechanism cannot be easily used to impose tariffs on other commodities in the short term, as it would first require an investigation by the Department of Commerce. As a result, recent volatility in copper spreads on the CME and LME, as well as in the exchange-for-physical (EFP) prices of precious metals, may have been excessive. Still, prices remain vulnerable to broad-based tariffs or country-specific tariffs affecting a large portion of U.S. imports,” he says.

According to Garvey, while some of these costs will be passed on to U.S. processors and consumers, a portion of the tariffs will be absorbed by exporters, as their best net-margin strategy remains delivering to the U.S. Given the greater availability of materials outside the U.S., this could put downward pressure on regional prices elsewhere.

“In steel, there is room for a supply response that could mitigate this situation. However, for aluminum, we do not expect any smelters to restart production. Ultimately, demand will be key in determining the extent of sustained cost pass-through, and we still see the overall backdrop of rising trade tensions as a bearish factor for industrial metal prices,” he adds.

Crude Oil Market and the Impact of Russian Sanctions

In the oil market, projections suggest that supply will continue to outpace demand in 2025 by approximately 1 million barrels per day. However, market perception varies—while sour crude buyers face supply shortages, light sweet crude buyers see a well-supplied market.

Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer, notes that with oil hovering around $70 per barrel, it appears to be stabilizing after its recent drop.

“Market sentiment is cooling, and uncertainties around economic outlooks and oil demand are keeping prices under pressure. Beyond geopolitical noise, structural shifts appear to be taking shape,” Rücker explains.

He argues that increased production from oil-producing nations is intensifying competition in the crude market, which is likely to limit U.S. shale oil’s market share.

“U.S. dominance is facing broader scrutiny. From a fundamental perspective, we believe the oil market is heading toward a surplus, with prices declining to around $65 per barrel by the end of the year,” he states.

Additionally, the impact of Russian sanctions remains a crucial factor.

Vikas Dwivedi, Global Energy Strategist at Macquarie, explains that if sanctions remain in place, reduced Russian exports to India, China, and Turkey could drive a significant price increase. Conversely, if sanctions are weakened or lifted, crude could drop by $5–$10 per barrel.

“While the public focus has been on the U.S. back-and-forth over tariff announcements and suspensions, we believe Russian sanctions could have a much greater impact on crude prices throughout at least the first half of the year. If sanctions on Russia are not eased, the ongoing decline in shipments—currently around 1 million barrels per day—could continue and become a catalyst for a major price surge,” he warns.

Gold’s Surge Amid Economic and Political Uncertainty

No commodities discussion is complete without mentioning gold, which has risen 50% in a year—and may not stop there.

Matthew Michael, Chief Investment Officer at Schroders, explains that a year ago, gold prices began to break out of their previous stagnation.

“At the time, the rally was fueled by major central banks increasing their gold purchases to reduce reliance on U.S. dollar reserves and Treasury holdings amid rising uncertainty. This partially broke gold’s historical correlation with real (inflation-adjusted) interest rates. Additionally, Trump’s trade war will further boost the precious metal,” he states.

Meanwhile, Charlotte Peuron, a precious metals fund manager at Crédit Mutuel AM, adds that gold continued its 2024 uptrend into January 2025, driven by economic and political risks (trade wars, U.S. inflation, political instability, etc.).

She notes that Western investor demand for gold is rising, both through ETFs and physical deliveries.

“China, in addition to central bank purchases, has just launched a pilot program allowing insurance companies to invest in gold for their medium- and long-term asset allocation strategies. All signals are green, which should support gold demand. Silver is also rallying, up 12.8% since the beginning of the year, reaching $32.60 per ounce,” she adds.

Agricultural Commodities: The Coffee Price Surge

One notable commodity trend is the relentless rise in coffee prices. Since early 2024, the price of high-quality Arabica beans—known for their smoother, less bitter taste—has risen by about 90%, while Robusta beans—typically used for instant coffee—have increased by over 90%.

Michaela Huber, Senior Cross-Asset Strategist at Vontobel, attributes this mainly to climate conditions.

“Brazil, which accounts for nearly 40% of global coffee production and is the top supplier of Arabica, has suffered from a devastating combination of frost and prolonged drought. In Vietnam, the world’s second-largest producer and the top supplier of Robusta, extreme weather fluctuations—droughts followed by heavy rains—have also wreaked havoc. As a result, crop yields have plummeted, reducing supply,” she explains.

Huber warns that unless harvests improve or consumers significantly cut back on consumption, the price rally could persist.

Assets in Tokenized Investment Products to Reach $317 Billion by 2028

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Innovation in investment products is essential for asset managers to adapt to new market opportunities and shifting investor preferences. In the past, financial engineering played a key role in the evolution of investment vehicles, but now, technology is emerging as the primary driver of innovation.

According to the 2024 Asset and Wealth Management Report by PwC, one of the most prominent trends is the growth of tokenized investment products.

“In our base-case scenario, we project that assets under management in tokenized investment funds—including mutual funds and alternative funds, but excluding mandates—will grow from $40 billion in 2023 to over $317 billion by 2028,” the report states.

PwC explains that while this still represents a small fraction of the total market, it is expanding at an impressive compound annual growth rate (CAGR) of over 50%. This surge is driven by the need for greater liquidity, enhanced transparency, and broader investment access, particularly within alternative funds, which may include private equity, real estate, commodities, and other non-traditional assets.

The PwC report highlights that tokenization is providing investors with greater opportunities to diversify their portfolios into digital asset classes, especially as regulatory restrictions gradually ease.

According to the report’s conclusions, this innovation allows asset and wealth management firms to diversify portfolios, access non-correlated asset classes, and attract a new generation of tech-savvy clients.

“Currently, 18% of surveyed asset and wealth managers offer digital assets within their product offerings. While these products are still in their early stages, investor interest is growing. Eight out of ten managers who offer digital assets have reported an increase in inflows,” the report states.

PwC identifies a second major advantage of tokenized investment products: the ability to develop applications and platforms that enable retail investors to purchase fractional shares in private markets or tokenized funds.

“Tokenized fractional ownership could expand market opportunities by lowering minimum investments and allowing traditionally illiquid assets to be traded on secondary markets,” PwC analysts explain.

In fact, the survey highlights strong interest in tokenized private market assets from both asset managers and institutional investors, with more than half of each group identifying private equity as the primary tokenized asset class.

Fixed Income: Navigating Between Tailwinds and Geopolitical and Commercial Uncertainty

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“The excess return of 2024 as a whole shows the highest performance in high beta segments, meaning the riskiest market segments that offer greater return potential, and in euro markets,” explains the Amundi Investment Institute in its latest report.

According to the asset manager’s outlook for this year, corporate fundamentals remain strong, as companies have taken advantage of the post-pandemic period of ultra-low interest rates and economic recovery to improve their credit profiles, while technical conditions remain favorable.

“Structurally higher interest rates should support demand for corporate credit from investors seeking yields before central banks cut rates further. Official rate cuts could help support bond flows from money markets into longer-duration interest rate products to secure higher income. Net supply remains limited, as issuance is largely allocated to refinancing. Lastly, the buoyant dynamics of CLOs are also indirectly fueling demand for high-yield bonds, contributing to overall demand support in this market segment,” the report states.

Factors Driving the Fixed Income Market

According to Marco Giordano, Investment Director at Wellington Management, fixed income markets continue to rebound, while concerns about the potential negative impact on economic growth from global tariffs, turmoil in the U.S. federal government, and growing uncertainty are affecting overall sentiment.

“Credit spreads widened, with most sectors showing lower returns compared to equivalent government bonds,” Giordano highlights.

According to his analysis, four factors are currently moving the market: the Trump Administration’s tariff policy, Germany’s new political landscape, and European fiscal stimulus.

For the Wellington Management expert, one of the most significant implications of this scenario is that Europe is experiencing a major boost.

“Germany’s commitment to increasing its debt-to-GDP ratio to 20% has shaken markets, with bond yields surging across the eurozone. The 10-year German bund yield recorded its largest single-day increase since March 1990, rising 25 basis points. The spread between 10-year Italian bonds and German bunds fell below 100 basis points. Outside the eurozone, bond yields rose slightly in Australia, New Zealand, and Japan,” notes Giordano.

Meanwhile, in the U.S. fixed income market, yields continue to trend downward.

“At the end of February, long-term U.S. Treasury bonds with 7-10 year maturities had risen 3.5%, while the S&P 500 index had gained only 1.4%. In fact, so far this year, U.S. bonds have outperformed U.S. equities. As surprising as it may seem, there could be a perfectly valid reason for this relative performance. Naturally, recent U.S. economic data has tended to disappoint, which may explain why the 10-year U.S. Treasury yield has fallen from 4.57% to 4.11% year to date,” explains Yves Bonzon, Chief Investment Officer (CIO) at Swiss private bank Julius Baer.

IG, CoCos, Frontier Bonds, and Corporate Credit: Asset Managers’ Investment Proposals

According to Benoit Anne, Managing Director of the Strategy and Insights Group at MFS Investment Management, euro credit valuations appear attractive from a long-term perspective.

“Given the current appealing level of euro-denominated investment-grade bond yields, the expected return outlook has improved considerably. Historically, there has been a strong relationship between initial yields like the current ones and solid future returns,” explains Anne.

He supports this with a clear example:

“With an initial **3.40% yield for euro IG bonds, the average annualized return for the following five years (using a range of ±30 basis points) is 4.40%—a hypothetically attractive return, with a range of 3.09% to 5.88%. In comparison, the 20-year annualized return for euro IG bonds stands at 2.72%, suggesting that, given current yields, this asset class is well-positioned to potentially offer above-average returns in the coming years.”

Crédit Mutuel AM, on the other hand, is focusing on the subordinated debt market.

According to their assessment, this type of asset posted positive returns of 0.6% to 1%, with a particularly dynamic primary market in AT1 CoCos.

“European banks took advantage of favorable conditions to prefinance upcoming issuances, with sustained demand. Additionally, bank earnings were solid, balance sheets became increasingly robust, and there was ongoing interest in mergers and acquisitions,” say Paul Gurzal, Co-Head of Fixed Income, and Jérémie Boudinet, Head of Financial and Subordinated Debt at Crédit Mutuel AM.

According to their analysis, the market maintained the trend of previous months, with positive inflows, strong primary market dynamics, and continued risk appetite, despite more mixed signals at the end of the month.

“The primary market was particularly dynamic for AT1 CoCos, with €11.6 billion issued during the month, which we estimate will account for 25%-30% of all 2025 issuances, as European banks took advantage of favorable market conditions to prefinance their upcoming 2025 calls,” add Gurzal and Boudinet.

The third fixed income investment idea comes from Kevin Daly, Chief Investment Officer and Emerging Markets Debt Expert at Aberdeen.

“After a strong 2024, we remain cautiously optimistic about the outlook for frontier bonds. Overall, fundamentals have improved, and there is still ample upside potential in terms of returns. Duration risk is low, which could help mitigate the impact of rising U.S. Treasury yields. Additionally, default risk—by all indicators—has also declined over the past year, driven by debt restructurings and improved maturity profiles. Risks related to the new Trump 2.0 administration are valid, but we believe the situation is more nuanced than generally discussed,” says Daly.

Lastly, Amundi believes that investment opportunities will remain linked to the pursuit of yields, which will continue to be a priority for most investors.

“We believe credit spread compression may have reached its peak in this cycle. After two consecutive strong years, credit spreads for both investment-grade and high-yield bonds are undeniably tight, but yields remain attractive compared to long-term trends. For this reason, we believe corporate bonds should continue to be an attractive income-generating option in 2025,” the asset manager states in its latest report.

Santander Hires Peter Huber as New Global Head of Insurance

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Banco Santander strengthens its insurance business with the appointment of Peter Huber as its new global head, replacing Armando Baquero, who has decided to leave the bank to pursue new professional projects. Huber, who has over 20 years of experience in the sector, joins from the insurtech Wefox, where he held the position of director of insurance.

In his new role at Santander, Huber will report to Javier García Carranza, global head of Wealth Management and Insurance. According to Bloomberg, he will also join Santander’s Board of Directors as vice chairman, while Jaime Rodríguez Andrade will be appointed CEO of the holding company.

According to the financial news agency, Santander has also announced that it will split its Insurance division into two: Life and Pensions, and Protection Insurance, with the former being led by Jaime Rodríguez Andrade, who will report to Huber.

DWS, BlackRock, and Amundi Lead the European ETF Market

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DWS, BlackRock, Amundi, JP Morgan AM, and State Street Global dominate the top spots in the second edition of the ETF Issuer Power Rankings, compiled by ETF Stream. This study, covering asset managers with a total of $2.23 trillion in assets under management, employs a proprietary methodology based on the analysis of four key parameters over 12 months: asset flows, revenue, activity (number of ETP launches and firsts in Europe), and thematic presence.

As shown in the final ranking, DWS retained the top position, adopting a more measured approach to new launches while benefiting from $39 billion in inflows, up from $22.5 billion in 2023. Much of this momentum came from higher-fee, non-core exposures, including the Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW).

BlackRock maintained second place after a prolific year of product launches, adding 76 new strategies. Meanwhile, Amundi, in third place, scored highest in “thematic presence,” ranking among the top three in several product categories and among the top five issuers with inflows across all categories except thematic, where it recorded $805 million in outflows. Notably, the study highlights that Amundi jumped from eighth to second place year-over-year in “activity” after launching 37 new products. It also improved its ranking in “asset flows”, with inflows more than doubling from $12.1 billion in 2023 to $30.4 billion in 2024.

The year 2024 was a turning point for active ETFs, with JP Morgan Asset Management taking center stage. By the end of the year, its market share in this $55.5 billion segment exceeded 56%. According to the study’s publisher, the emerging history of active ETFs in Europe has seen established asset managers such as Janus Henderson, Robeco, and American Century Investments enter the UCITS ETF space. With Jupiter Asset Management joining the market earlier this year—and Schroders, Nordea, and Dimensional Fund Advisors exploring distribution opportunities—the growth of active ETFs seems poised to drive further product innovation.

On the other end of the spectrum, Legal & General Investment Management and Ossiam dropped more than 10 places year-over-year, as both firms slowed their pace of new launches and experienced outflows exceeding $2 billion.

“Fund selectors tend to favor a few issuers with well-established brands that operate at a significant scale. The ETF Issuer Power Rankings is designed to highlight the dynamic nature of the European ETF market and the asset managers bringing timely product innovation,” said Jamie Gordon, editor of ETF Stream.

Meanwhile, Pawel Janus, co-founder and head of analysis at ETFbook, commented: “The European ETF market has grown significantly, with rising assets, new issuers entering the market, product launches, and increasing adoption from a diverse buy-side client base. In response to this expansion, ETF issuers must continuously evolve, specialize, and showcase their strongest capabilities. The ETF Issuer Power Rankings provides a valuable metric for the buy-side community in the ever-evolving European ETF market.”

Carlos Berastain Joins Allfunds as New Global Head of Investor Relations

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Allfunds has announced the appointment of Carlos Berastain as its new Global Head of Investor Relations, replacing Silvia Ríos, who is stepping down to pursue new opportunities.

Berastain, who brings over 25 years of experience in the industry, joins Allfunds from Santander, where he has served as Head of Investor Relations since 2017.

According to the company, Ríos will remain at Allfunds for a few months to ensure a smooth and orderly transition. During this period, she will work closely with Carlos Berastain, who will officially take on his new role at Allfunds on March 17, 2025.

“We are grateful for Silvia’s outstanding work, dedication, and contributions over the years, and we wish her success in her next career steps. We look forward to welcoming Carlos as he leads our investor relations initiatives and strengthens communication with our shareholders and the broader financial community,” said Álvaro Perera, CFO of Allfunds.

Allfunds highlighted Silvia Ríos’ pivotal role in the company, particularly in its IPO and strategic positioning within the financial community over the past four years. She was recently recognized as one of the top Investor Relations Directors at the Investor Relations Society Awards 2024.

IMpower FundForum 2025: The Premier Gathering for Asset and Wealth Management

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Once again, Monaco will become the meeting hub for asset and wealth management leaders during IMpower FundForum, taking place from June 23 to 25, 2025. As the only specialized event dedicated to investment managers across active, passive, and private markets—with a focus on private wealth management—it is a must-attend for senior executives in the industry.

Join 1,400+ senior leaders, including 500+ asset managers, 400+ fund selectors, and asset owners, for three dynamic days of networking and collaboration. Year after year, the event is the preferred choice for CEOs, CIOs, COOs, and partners from leading asset managers and GPs worldwide. With a 35-year track record, it delivers unparalleled industry insights.

With the highest concentration of fund buyers and LPs from private banking and wealth management, this is the only event where you can connect with over 500 influential professionals. According to the event organizers, “One-third of attendees are fund selectors and asset owners.” Stay ahead in the asset and wealth management community at IMpower FundForum, the ultimate event for meaningful connections and valuable industry insights.

Fund selectors attend for free, while asset and wealth managers benefit from discounted rates. Register now and save 10% with code: FKN3972FUNDSOC.

For more information, visit the website or contact us at gf-registrations@informa.com or +44 (0) 20 8052 2013.

Is Real Estate Illiquid? The Strategy that Turns it Into a Publicly Listed Security

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In today’s investment landscape, alternative assets have become a compelling portfolio and risk diversification strategy. Real estate has proven to be an attractive option within this category due to its ability to generate recurring income and preserve value over time. However, liquidity has historically been one of its limitations. This is where asset securitization plays a crucial role, allowing real estate to be converted into tradable securities accessible to a broader base of investors.

Real estate securitization generally involves creating a special purpose vehicle (SPV), a legal entity that isolates and manages properties. This SPV issues securities backed by the property’s income flows, such as bonds or notes, which institutional investors can acquire in capital markets. For asset managers, this mechanism improves portfolio liquidity, optimizes capital allocation, and enables structuring attractive financial products for different investor profiles.

Real estate securitization can take many forms; among the main ones are:

  • Residential Mortgage-Backed Securities (RMBS): These are securities backed by pools of residential mortgages. Banks or financial institutions typically originate mortgages and then sold to an SPV. The SPV bundles the mortgages and issues securities backed by the underlying loans.
  • Commercial Mortgage-Backed Securities (CMBS): These securities are backed by pools of commercial real estate mortgages. Commercial property owners, such as office buildings, shopping centers, or industrial properties, take out the loans. The SPV pools these loans and issues securities backed by the underlying mortgages.
  • Real Estate Investment Trusts (REITs): These investment vehicles own and operate income-generating real estate assets. REITs allow investors to gain exposure to real estate without directly owning the underlying properties. REITs must distribute at least 90% of their taxable income to shareholders as dividends, making them attractive for investors seeking regular income.

Securitized real estate assets offer multiple advantages for asset managers and their clients, including:

  • Diversification: Exposure to a broad spectrum of real estate assets across various regions and sectors.
  • Professional Management: Assets are managed by experienced real estate and finance specialists.
  • Optimized Returns: Securitized real estate can offer an attractive return profile compared to traditional investments.

However, securitized real estate assets also carry certain risks, including:

  • Market Risk: The value of securitized instruments may fluctuate based on real estate market conditions.
  • Credit Risk: The underlying assets may fail to meet payment obligations, affecting the instrument’s profitability.
  • Liquidity Risk: Changes in market conditions may impact the ease of buying or selling these securities at fair prices.

Success story: CIX Capital

CIX Capital is a firm specializing in real estate investments in Brazil and the U.S., focusing on structuring and managing tailored strategies for institutional investors, asset managers, and family offices. With over R$7.3 billion in transactions, CIX sought an efficient investment vehicle to access international private banking swiftly and cost-effectively.

In this context, FlexFunds‘ solutions enabled CIX Capital to structure a customized issuer for exchange-traded products (ETPs), transforming real estate assets into tradable securities with access to international markets. Thanks to this solution, CIX has securitized over $200 million, optimizing costs and timelines compared to traditional structures in jurisdictions such as the Cayman Islands, the British Virgin Islands, and Luxembourg.

Carlos Balthazar Summ, CEO of CIX Capital, highlights: “FlexFunds’ investment vehicles are ideal for real estate. In a record time, we set up and launched our Bond (ETP), quickly accessing private banking channels via Euroclear, broadening our international capital raising ability, and successfully acquiring 358 multifamily units in Florida, USA. The simplicity in the onboarding of investors and its accompanying savings in the back-o­ce make FlexFunds’ your ideal partner to create internationally accredited investment structures. It is also a state-of-the-art solution that was well perceived by the private and asset management industries in Brazil and abroad.”

Key benefits achieved by CIX Capital with FlexFunds:

  • Simplify the investor onboarding and underwriting process
  • Reduced the administrative costs of fund management.
  • Facilitate the raising of capital from international investors.
  • Enable access to international private banking channels.

Real estate securitization provides asset managers an efficient tool to optimize portfolios, enhance liquidity, and attract institutional investors. However, conducting a thorough risk analysis and structuring vehicles tailored to each investment strategy is crucial.

FlexFunds serves as a strategic partner in the repackaging of real estate assets, offering accessibility and management optimization through securitization and as a bridge to multiple private banking platforms. If you are interested in securitizing your real estate investment fund, contact the experts from FlexFunds at info@flexfunds.com.

Private Equity Investment in U.S. Solar Energy Declines While Global Inflows in the Sector Rebound

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Private equity and venture capital activity in the U.S. solar industry is on track to reach its lowest level in the past four years. This contrasts with significant global private equity inflows into the sector during 2024, according to a new global report by S&P.

According to the report, private equity investments in residential and utility-scale solar energy in the U.S. from January 1 to November 26 totaled $3.1 billion, approximately 24.6% lower than the total reached in 2023 and representing only 7.3% of the $42.54 billion accumulated in 2021. So far, only four private equity deals in U.S. solar energy have been announced in 2024.

Globally, the value of transactions in residential and utility-scale solar energy reached $25.04 billion, an increase of approximately 52% from the $16.46 billion recorded for the entire year of 2023, according to data from S&P Global Market Intelligence.

This rise in global investment comes amid China’s dominance in solar panel production, which has led to oversupply levels. According to a report by Wood Mackenzie, the Asian country will continue to hold more than 80% of global solar manufacturing capacity through 2026.

Europe, including the United Kingdom, attracted the majority of private equity investments in residential and utility-scale solar energy, with 23 deals exceeding $20 billion. The value of private equity transactions involving UK-based renewable energy companies has already surpassed private investments in the U.S. renewable energy sector this year.

Additionally, the U.S. and Canada ranked second in transaction value, with $3.25 billion across seven solar energy deals. The Asia-Pacific region, including China, followed closely with 20 deals worth over $795 million.

European Mega-Deals Drive Private Equity Financing Growth

Several multibillion-dollar transactions have contributed to the total value of solar sector deals so far this year. The largest private equity-backed solar energy deal announced in 2024 is Energy Capital Partners LLC’s planned $7.87 billion acquisition of Atlantica Sustainable Infrastructure PLC, a UK-based company. Its ECP V LP fund is set to purchase Atlantica from Algonquin Power & Utilities Corp., which decided to sell after conducting a strategic review of its renewable energy business.

The second-largest deal is Brookfield Asset Management Ltd. and Temasek Holdings (Pvt.) Ltd.’s proposal to acquire 53.32% of Neoen SA, a Paris-based company, for $7.57 billion. The buyers are expected to eventually acquire full ownership of the company and take it private.

Private investments in the industry can help pave the way for the development of new solar technologies. The shorter development timeline, lower capital costs, and compatibility with battery energy storage systems have kept solar energy more attractive than other alternative energy sources, such as wind or nuclear, according to Benedikt Unger, director at consulting firm Arthur D. Little.

“By financing next-generation solar technologies, such as bifacial modules and perovskite cells, private equity investments can accelerate innovation,” Unger wrote in an email to Market Intelligence.

The technical explanation is that bifacial modules capture light on both sides of the solar panel, while perovskite cells are high-performance, lower-cost materials compared to those currently used in solar technology. Unger also sees opportunities for private equity in emerging local solar technology supply chains and the growing solar panel recycling industry.

“Photovoltaic recycling is an emerging industry, but its development is crucial, especially in more mature markets like Europe or the United States. Localized supply chains will be needed in many regions, including Africa and Southeast Asia,” Unger concludes.