Pictet Asset Management: Caution Prevails

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Photo courtesyLuca Paolini, Chief Strategist of Pictet Asset Management

In the face of economic uncertainty and stubborn inflation, we continue to favour bonds over equities.

Asset allocation: looming economic slowdown casts shadow over stocks

The outlook for most major developed economies remains uncertain.

Economic growth in the US is likely to turn anaemic and stay below its long-term trend, while Europe is not expected to recover anytime soon.

We expect earnings growth of US companies to contract more than 2 per cent next year, in stark contrast to the estimates of analysts who forecast growth of as much as 10 per cent.

Also concerning is that developed central banks are poised to withdraw more liquidity from the financial system at a time when inflationary pressure is building once more.

With economic conditions unfavourable in much of the developed world, we retain a neutral stance on equities and an overweight on bonds; we are also underweight cash.

Fig 1. Monthly asset allocation grid
October 2023

Source: Pictet Asset Management

Our business cycle analysis indicates the US economy is in a delicate state.

Industry surveys point to a drop in services consumption, which represents 70 per cent of economic activity in the country, while non-residential investment is also likely to fall because of high interest rates and a tight labour market.

All of this should weigh on the world economy, which we expect to grow just 0.5 per cent year on year next year, well below its pre-pandemic trend. Europe also remains weak as the economy feels the chill from tightening monetary policy and our leading indicator and consumer confidence are weakening.

In contrast, Japan is going from strength to strength.

We expect the world’s third largest economy to grow at 1.5 per cent next year, above potential and driven by strong exports. We expect higher private consumption in the coming months, and a sustained pick up in wage growth should prompt the Bank of Japan (BoJ) to end its negative interest rate policy.

China is showing early signs of an economic recovery. Consumption appears to have stabilised in the short term, leaving plenty of scope for improvement given retail sales remain 16 per cent below trend at a time when household deposits are 20 per cent above trend.

A recovery in the property sector is a missing piece of puzzle that would bolster consumer confidence.

Growth in the rest of the emerging world is likely to accelerate into next year, comfortably outpacing that of developed peers.

Our liquidity indicators support our neutral stance on equities.

Developed market central banks, apart from Japan, continue to withdraw liquidity from the financial system, even as they approach the end of their interest rate hike campaigns.

Liquidity conditions are likely to remain tight as inflation could well prove stickier than previously thought – not least because of a spike in oil and food prices.

In the US, a pick-up in government bond issuance expected in the coming months should also add to the liquidity squeeze.

Liquidity remains ample in Japan, however, as monetary policy there is accommodative, underpinning the flow of money and credit.

The beginning of an interest rate cut cycle in some parts of emerging markets should be positive for liquidity conditions there. Our valuation score supports our preference for bonds over equities.

The US equity risk premium – or extra return investors get over risk-free rate — has fallen to 3.4 per cent, the lowest in more than 20 years (see Fig. 2).

Fig. 2 – US stocks still too risky
12-month earnings yield minus 10-year local government bond yield in percentage points

Source: Refinitiv, data covering period 26.09.2003 – 26.09.2023

On comparison, offering a 10-year yield of more than 4.5 per cent, US bonds look particularly attractive.

Our technical indicators support our neutral stance on equities.

Investor sentiment and positioning indicators show that equities are falling out of favour, but they are not quite depressed enough to give us a contrarian buy signal.

Piece of opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist.

Discover Pictet Asset Management’s macro and asset allocation views here.

Why an active approach matters in fixed income?

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While passive investments have seen rapid growth in recent years, we believe there are several crucial advantages for choosing active management when investing in fixed income. This is especially true in the current climate, as uncertainty over the future path of interest rates and inflation continues to drive heightened volatility across the asset class. How active bond managers can add value?

We believe that fundamental credit analysis is a key driver of relative performance, as it is only through this process that investors are able to gain a thorough understanding of a company’s financial situation and business model. With one of the largest teams of credit analysts in Europe, we believe M&G is particularly well placed to identify the companies and sectors that should be in the strongest position to perform in a variety of economic scenarios, including a prolonged economic downturn.

As part of their assessment, our credit analysts consider all factors that could have an impact on a company’s financial performance, covering areas such as business risk (management, market position and product strategy, for example), financial risk (such as cashflow, debt and profit margins) and bond structure and covenants. In addition, our analysts carry out a detailed assessment of environmental, social and governance (ESG) factors.

Active managers also typically benefit from greater flexibility, giving them the freedom to adjust portfolio positioning in accordance with the economic environment. The ability to adjust sector and company exposure, benefit from careful bottom-up security selection and position portfolios to seek to minimise the impact of rising interest rates provides active managers with crucial levers to take advantage of the investment opportunities – something not afforded to passively manged funds.

Active managers have the flexibility to capture a broad range of relative value opportunities that can often exist across fixed income markets. One of the ways in which we seek to do this is by comparing different bonds from the same issuer (such as those issued in different currencies or maturities) in order to take advantage of pricing mismatches, which can often occur during periods of market volatility. We may also be able to identify instances when similar companies (those in the same sector and with similar credit metrics) trade at different valuations. Another example is where the spreads offered by physical corporate bonds can sometimes differ from what is available through the credit default swap (“CDS”) market.

Active managers are also well-placed to capitalise on the additional yield pick-up that issuers typically offer when pricing new issues versus their existing debt. We believe this is a key area where active managers can add value versus their passive counterparts.

Passive bond funds have seen steady growth in recent years, but we believe there are a number of reasons why fixed income may not always be suitable for a passive approach. We explain below some of the shortcomings of passive fixed income.

While an equity index tracker will typically be weighted towards a market’s biggest and arguably most profitable corporations, a bond index by contrast gives exposure to the most indebted governments or companies – so-called ‘sinners, not winners’. For example, the largest constituents of a typical corporate bond index will usually be those with the largest outstanding amounts of debt – far from the type of issuer to which investors may choose to have a sizeable exposure.

It is also a common misconception that credit indices are, by definition, well diversified. They actually have a poor diversification. The ICE BofAML Global High Yield Index, for example, has an exposure of around 80% to US dollar denominated assets, making it very reliant on the US economy and highly exposed to oil prices. In another example, the ICE BofAML European Investment Grade Credit Index has some 40% exposure to financials. This highlights why investors must be careful to look through to the underlying assets to make sure that they are gaining an exposure that corresponds with their appetite for risk – as well as providing them with sufficient diversification.

Recent market volatility has again highlighted the dislocations that can occur between fixed income ETF prices and their underlying net asset values (NAVs). During sharp market sell-offs, there have been instances where ETFs have lagged their underlying benchmarks as the market is unable to absorb large amounts of selling. During severe sell-offs, there have even been cases when ETF prices have fallen below their NAVs. Furthermore, unlike active managers, index funds are fully invested and therefore cannot hold cash and other liquid instruments to act as a buffer against market falls.

To varying degrees, active bond managers have the ability to adjust portfolio positioning depending on their macro outlook and their assessment of valuations. For instance, they may choose to reduce interest rate risk to mitigate the risk of rising interest rates, or to move into higher quality credits where they have concerns over the economic backdrop. Passive bond strategies do not have the ability adjust exposure in this way; instead, they will seek to match the interest rate and credit risk of a specific bond index.

As noted above, market volatility has created significant spread dispersion across credit markets. This type of environment can create an abundance of opportunities for active managers to capture value, but this is not something passive bond vehicles are able to exploit. Similarly, passive managers would not usually have the flexibility to sell a position, whether due to a deterioration in its credit profile or simply on valuations grounds.

 

Opinion tribune by Jim Leaviss, CIO of M&G Investments’ Public Fixed Income.

Top Ten Broker/Dealers Control 58% of Retail Assets

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The 10-largest broker/dealer (B/D) firms by assets under management (AUM) have 123,000 financial advisors and account for 58% of the total retail financial advisor industry. Fueled by a steady stream of mergers and acquisitions over the last decade, this top-heavy skew in the marketshare of AUM toward the largest firms underscores the need for scale to remain competitive in the marketplace, according to Cerulli’s latest Report, U.S. Broker/Dealer Marketplace 2023: The Challenging Pursuit of Organic Growth.

According to the research, over the last decade, one-fifth of the top-25 B/D firms by AUM as of 2012 have either been acquired or merged, reflecting the consolidation that has been characteristic of the B/D marketplace as firms are pressured to increase scale to remain competitive and maximize profit margins.

Very large B/Ds have leveraged their scale and their capital positions to outgrow their smaller counterparts with a five-year AUM compound annual growth rate of 8.4%, compared to large and medium-sized B/Ds with annualized growth rates of 6.6% and 6.9%, respectively.

The size and scale these firms offer make them attractive to financial advisors and to asset managers seeking shelf space.

“The advantages of scale for B/Ds include the ability to spread fixed investments in areas such as infrastructure, technology, and regulatory compliance across a larger advisorforce, which increases the return on those investments,” says Michael Rose, director.

It also provides B/Ds with leverage to maximize revenue from asset managers for distribution in its various forms, including revenue sharing, strategic marketing costs, and data packages. “Scale provides B/Ds with stronger negotiating power over asset managers that rely on B/Ds and their financial advisors to distribute their products, to include their offerings in B/D home-office models, or to select them within portfolios that advisors directly manage,” he adds.

Scale, however, is not a panacea for the many challenges that face B/D firms. “A growing number of advisors are demonstrating dissatisfaction with the bureaucracy associated with working for a large financial institution and are choosing alternative affiliation options, particularly hybrid RIA and independent RIA affiliation,” says Rose.

Cerulli recommends that B/D firms growing inorganically through M&A stay laser-focused on their firm cultures to ensure that their growth doesn’t have negative ramifications for advisor retention.

Is Cash Really King? Why Bonds Should Reign

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In the world of investing, fixed income has traditionally been associated with stability and income generation. This role has been uniquely challenged since the spring of 2022, when the Federal Reserve embarked on a series of massive rate hikes – at one point, four 75 basis points hikes in a row – which the markets have not experienced in a generation. Not surprisingly, many fixed income strategies and indices posted the worst total returns in their history, but the silver lining to rate hikes has been the return of higher yields in short-dated instruments such as Treasury bills. Naturally, many investors flocked to the front-end of the curve, taking advantage of these elevated yields, but now is an opportune time to reallocate some of this cash into the fixed income space.

  

Let’s begin by discussing the current interest rate environment, specifically the implications of the Fed’s hiking cycle. The Fed and other central banks have used their policy rates as tools to bring exceedingly elevated levels of inflation back towards what they deem to be “normal” or within their respective target ranges. While this has caused some anxiety among investors, particularly in risky asset markets, it has also led to attractive yield generation in short-term instruments like Treasury bills, money market funds, and certificates of deposit (CDs). As of July 31, 2023, the 6-month Treasury bill yielded 5.46%, the highest level in 23 years. As yields have risen, the money has followed, with prime and taxable money market funds taking in a combined $744 billion in flows for the 1-year period ending July 31, 2023, per Morningstar. Contrast this to the taxable bond space, which has experienced a net outflow of $85 billion over the same period.

Rising rates also have the effect of increasing the coupons paid on new fixed income securities, which should support forward looking returns. But perhaps more importantly, the rate sell-off has decreased the dollar price of bonds already in existence, many of which are government or investment-grade corporate bonds with low credit risk. As a result, the bond market is priced at a discount even though fixed income securities, with the exception of a default event, mature at “par” or $100. It is this “pull to par” that should drive attractive returns and ultimately better economic outcomes than even the seemingly attractive yields provided by cash instruments today.

The term “pull-to-par” refers to the tendency of fixed income securities to move towards their face value (par value, or $100) as they approach maturity. Bonds priced at a discount will see their prices rise as they get closer to maturity, while bonds trading at a premium (that is, above $100) will see their values fall to par over time. In today’s environment, with the Fed near or at the end of the tightening cycle (as of this writing), fixed income securities with prices below their par value have potential for meaningful price appreciation. That appreciation, in addition to regular coupon payments, leads to larger total returns for investors. We believe this total return likely eclipses the yields that may be earned on short-end instruments.

To illustrate how unique the current fixed income environment is, let’s examine historical price data for various fixed income indices over the last 10 years. In the chart below, we show average price for the Bloomberg U.S. Universal Index. For the vast majority of the 10-year period, average price for the index was either near or above par, with the mean dollar price at about $102. Rising rates have driven the average dollar prices of the index, and active portfolios as well, down to near unprecedented levels, currently below $90. Given the quality of the constituents of the index, it is reasonable for an investor to believe that these bonds will pull back to par as they get closer to maturity, thereby providing investors with an additional boost to performance over and above just clipping coupon payments.

Another lens to look at the relative value of owning fixed income versus cash instruments can be seen in historical data on how both have performed in an environment similar to the present one, that is, with the Fed near or at the end of its hiking cycle. We looked at data for the last four Fed tightening cycles going back to the mid-1990s to see how both cash and fixed income performed as the cycles ended. We used the ICE BofA U.S. Treasury Bill Index as a proxy for short-term instruments and selected four Bloomberg indices representing both above and below investment-grade securities for fixed income. As the table shows, the subsequent one- and two-year returns produced, in most cases, better economic outcomes when owning fixed income as opposed to staying invested in Treasury bills. In the current environment where the Fed is at or near the end of its tightening cycle, and with an elevated chance of economic weakness going into 2024, fixed income has a similar potential to outperform cash instruments this time around.

By combining both the return generators of coupon and the “pull-to-par” effect, investors may outperform Treasury bills, CDs, and money market funds in the months and years ahead. We believe active management remains a valuable tool to capture these excess returns and potentially add alpha over benchmark indices. Many fixed income securities with attractive risk and reward characteristics, such as short-dated, investment-grade rated bonds within the asset-backed securities and residential mortgage space, sit outside of benchmarks and represent some of today’s most compelling opportunities.

The concept of earning coupon plus the pull-to-par represents a valuable opportunity for fixed income investors moving forward. By understanding how this phenomenon impacts fixed income securities’ total return, investors can capitalize on the current opportunity it presents. When combined with effective active management strategies, the pull-to-par effect may serve as a powerful tool to achieve outperformance and enhance overall returns. But timing is of the essence. The economy will eventually weaken, and perhaps tip into recession. Yields today look to be interesting even in a high-quality portfolio. So now is the time to make those moves, not to wait until yields fall.

 

 

Opinion article by Rob Costello, client portfolio manager in Thornburg Investment Management. 

Investing Opportunities Arising from the Inverted Yield Curve Environment

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U.S. equities dipped lower in September, as the S&P 500 suffered its biggest monthly decline since last December and its first back-to-back monthly decline in 2023. Historically, September has proven to be a challenging month for equities, with the S&P 500 averaging a 0.7% decline in September since 1945, the worst of any month. In addition, performance has declined in September in each of the last four years.

During the month, treasury yields rose as investors are expecting that the Federal Reserve’s high-altitude interest rates may last longer than originally anticipated. The recent move in rates was driven by resilient macro data, rising energy prices and underwhelming disinflation momentum. Investors find themselves in an unusual situation where they can secure higher yields on short-term debt without the need to commit their funds to longer-term investments to achieve higher interest income. This is known as an “inverted yield curve”.

Small-cap stocks remained under pressure throughout the month, continuing their trend of underperformance relative to the broader equity market in the year 2023. We continue to see abundant opportunities in small to mid-cap stocks, given the compelling valuation of the Russell 2000 Value, which currently trades at only 10-12x earnings.

Market weakness continued in September for the convertibles market although convertibles continue to outperform underlying equities in weak markets. However, with over 40% of the market now fixed income alternatives, the moves in interest rates have weighed on valuations. We believe this environment presents an opportunity, and over the coming two years, we anticipate that many fixed income equivalents will accrete towards par, while new issuance will offer a more traditional asymmetrical return profile for convertible investors.

New convertible issuance has picked up over the past two months, and we saw a mix of issuance that included companies that are new to convertibles, along with some that are returning to refinance existing debt. This mix of issuance is good for the convertibles market, and it has generally been at attractive terms with higher coupons and lower premiums than many existing issues.  We have continued to see companies buying back convertibles in a transaction that is accretive to earnings and positive for the credit and we expect this bid to continue.

M&A results were mixed in September, as deals like Activision and Horizon Therapeutics progressed towards closing in October, while interest rate and market volatility in the market weighed on other deals. In September, the U.K. CMA said that Microsoft’s revised deal structure for its $70 billion acquisition of Activision (ATVI-$93.63-NASDAQ), that includes selling cloud gaming rights to Ubisoft, likely addresses its concerns and could clear the way for the deal’s final remaining regulatory approval.

M&A activity in the third quarter increased 16% from second quarter levels, reaching $2 billion for the year, a decrease of 27% compared to 2022 levels but it is positive to see activity trending higher in recent quarters. New deal activity in September included Hostess Brands being acquired by J.M. Smucker for $5 billion, Splunk being acquired by Cisco for $26 billion, WestRock being acquired by Smurfit Kappa for $21 billion and NextGen Healthcare being acquired by Thoma Bravo for $2 billion. These deals are providing new opportunities for arbitrageurs to deploy capital that has been harvested in recently closed deals.

 

Opinion article by Michael Gabelli, Managing Director and President of Gabelli & Partners. 

Fidelity Introduces New Resources to Support Advisors’ Transition to Independence

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To help advisors navigate the decision-making process and learn about the associated benefits, as well as address concerns of moving to an independent model, Fidelity created an Independence Hub, a central location for insights, tools, and practical steps to support advisors on their path to independence, including actionable guides for each phase of their journey—consideration, transition, and growth.

New research from Fidelity Investments shows that about 1 in 6 advisors have proactively switched firms in the past five years, with independent business models as the top destination.

In fact, 94% of advisors are happy with their decision to move, with 85% noting an increased control over their future. Despite this popularity, only half of advisors consider themselves knowledgeable about firm types (54%) and independent models (49%), and only 25% know the various intermediaries (e.g., 3rd party recruiters, consultants, clearing or custody providers) that can help with finding a firm. Advisors may prefer independence and the benefits associated, but the lack of knowledge and fear of the unknown may be preventing them from taking that leap.

“Arming advisors with the resources needed to help expand their breadth of knowledge has always been a priority,” said Rohit Mahna, Head of Client Growth at Fidelity Institutional Wealth Management Services. “Fidelity is committed to leveraging its deep expertise to not only help educate advisors and provide the tools needed to facilitate better outcomes, but be a true collaborator as advisors look to build their businesses.”

Fidelity recently welcomed Concurrent Advisors to its platform after their move to independence, transitioning 60+ advisor teams with more than 20,000 accounts in just three months, and continuing to grow at a compelling pace.

“Meeting advisors where they are and helping them achieve their vision is key to what we do, and in many ways, Fidelity did that for us,” said Nate Lenz, CEO and Co-Founder at Concurrent Advisors. “From operating on a broker-dealer platform and wanting to take the next step to becoming fiduciaries for our clients, Fidelity opened the menu of possibility in terms of solutions, technology, and growth opportunities.”

New Independence Hub

Fidelity drew from its deep experience of business development, practice management, technology, and investment consulting to develop a suite of resources to help guide advisors through the various stages of independence, inform their decision, and be better prepared, no matter the phase of their journey. All accessible through the new Independence Hub:

  • RIA Valuation Tool, a new on-demand format, which helps advisors of all sizes understand their potential economics as they go independent, including increases in earnings and/or revenue compared to their current model. This online tool is a self-serve option for advisors who want a quick analysis, although those interested in deeper discussion can meet with Fidelity for a more thorough review of their business analytics.
  • New thought leadership, Build Your Own Tech Stack One Step at a Time, which outlines a simplified approach for newly independent advisors to get the tech they need, when they need it, and evolve as they grow. As technology becomes more imperative to advisors’ businesses, help in navigating the process of building a new tech stack enables advisors to find their best fit from a position of strength.

Increased Growth and Job Satisfaction Among Independent Advisors

Eighty percent of movers reported asset under management (AUM) growth since switching, with a median increase of 42%. In fact, Cerulli projects that independent and hybrid RIA channels will have a higher AUM growth rate over 5- and 10-year periods. Contrary to popular belief, nearly all advisors (99%) said their clients were ultimately supportive of their decision to move, with over half (54%) noting they were immediately supportive.

GenTrust made their move to independence more than 10 years ago, leveraging Fidelity’s diverse capabilities to help expand and grow their business.

“GenTrust was founded with the goal of providing holistic, conflict-free advice for its clients and attracting other advisors who value the same,” said George Perez, Founding Principal at GenTrust. “With its focus on being a destination for other firms to pursue independence, Fidelity provides us the resources and platform to support our business’s changing needs, allowing us to deliver a high level of service to our clients. Clients are at the core of who we are, and Fidelity’s experienced professionals understand and appreciate the importance of delivering the service our clients deserve, always striving to put their interests first.”

Among the many factors influencing an advisor’s decision to move, the top considerations include: compensation (51%), better firm culture (50%), and the ability to provide a higher level of client service (39%). The most notable concerns are: fear of the unknown (60%), client attrition (48%), and time spent transitioning vs. managing the practice (35%). However, 39% reported that none of their initial concerns ended up being a significant issue, and 68% agree they should have made the move sooner.

The Wealth Alliance was founded in 2019, and chose Fidelity as a destination to help support their clients’ needs and growth journey.

“We pride ourselves in supplying customized approaches and solutions for our advisors to accommodate their unique needs, and Fidelity helps us achieve that,” said Robert Conzo, CEO and Managing Director at The Wealth Alliance. “We wanted more, our clients wanted more, and Fidelity’s agility and custom-made strategy empowers us to build a destination that allows like-minded advisors to do the same for their clients.”

Dominion Capital Strategies Announces Promotion of Rodrigo Raffo to Latam Sales Director

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Photo courtesyRodrigo Raffo

Dominion Capital Strategies announces the promotion of  Rodrigo Raffo to the position of Latin America Sales Director.

In this role, Raffo will oversee sales and business  development efforts in Latin America, leveraging his deep knowledge of the region’s financial markets and his extensive  experience in the industry. 

He has been an integral part of Dominion Capital Strategies since the company’s inception in 2017, where he has  consistently demonstrated his dedication, expertise, and leadership, the firm said.

With over a decade of experience in the financial  services sector, including more than 10 years at an Independent Financial Advisor (IFA) firm, Raffo brings a wealth of  industry knowledge to his new role. 

“Rodrigo’s deep understanding of the Latin American market and his proven track record in the financial industry  make him the perfect candidate to lead our efforts in this strategically important region,”  said Pablo Paladino, Global Sales  Director at Dominion Capital Strategies. 

This promotion underscores Dominion Capital Strategies’ commitment to aligning its strategy and culture with the unique dynamics of the Latin American market. As Latam Sales Director, Rodrigo will work closely with his team to  provide the highest level of support to Independent Financial Advisors (IFAs) across Latin America, the press release added. 

“Latin America offers tremendous opportunities for growth and innovation in the financial services sector, and I look  forward to leading our team in delivering exceptional value to our clients and partners in the region,” Raffo said.

Patria Investments Announces Agreement to Acquire Private Equity Solutions Business from abrdn

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Wikimedia CommonsSao Paulo Centre

Patria Investments Limited (“Patria”) announced an agreement for the carve-out acquisition of a private equity solutions business from abrdn Inc. (“abrdn”).

Upon closing, the acquired platform together with this existing business will form a new vertical – Global Private Markets Solutions (“GPMS”). On a pro forma basis, GPMS is positioned to launch with an aggregate FEAUM of over $9 billion and will be led by Marco D’Ippolito. This vertical will further develop a complementary pillar of growth to serve as a gateway for Latin American investors to access private markets on a global scale, the firm said in a press release.

“We’re very excited to announce this new addition to Patria’s investment platform, which advances an important aspect of our growth strategy,” said Alex Saigh, Patria’s Chief Executive Officer. “As we continue to see a financial deepening unfold in the region, local investor allocations to alternatives are evolving from local products to more sophisticated global exposure to the asset class. The transaction will bring Patria in-house expertise in high-demand strategies that offer diversified exposure and an attractive performance track record. This business will increase Patria’s permanent capital AUM, further diversify our product menu, and should deliver an accretive earnings stream for our shareholders.”

Tailored client solutions and drawdown funds consisting of primaries, secondaries and co-investment strategies have grown into a major component of the private markets ecosystem. Primaries offer diversified exposure for investors and provide underlying general partners with an important source of anchor capital, while secondaries and co-investment strategies can provide investors with enhanced return profiles and improved portfolio management. Secondaries and co-investment strategies in particular have shown impressive growth in recent years, with global AUM growing at a CAGR of 16% and 21% respectively from 2019 to 2022, according Patria information.

The abrdn Private Equity solutions business operates from offices in London, Edinburgh and Boston, with a team of more than 50 employees. As of June 30, 2023, the platform manages $7.8 billion of Fee Earning AUM across the aforementioned strategies through drawdown funds, a listed private equity trust and separately managed accounts, with investment exposure primarily to the European and US middle market. With an impressive performance track record over 15 years, the business has built a loyal global client base, and has current investment relationships with more than 150 general partners.

Marco D’Ippolito, Patria’s Chief Corporate Development Officer said: “We are joining forces with a talented team that reflects Patria’s entrepreneurial investment culture, and acquiring an established solutions platform that brings differentiated investment capabilities to serve our clients. I am excited to work with Merrick and his team to fully leverage Patria’s platform as we grow together.”

Merrick McKay, the Head of abrdn Private Equity, said: “We are delighted to be the cornerstone platform in Patria’s new Global Private Markets Solutions strategy vertical, recognizing that this is Patria’s first acquisition outside Latin America. We believe that Patria is an excellent partner for our business and clients, as the combination will support and enhance our continued development as a leading European and US private equity solutions provider for institutional investors. This includes the ability to offer our private equity solutions to the fast-growing Latin American market where Patria has such a leading presence and strong reputation. We also look forward to working with Patria’s global distribution team, which manages Patria’s long-lasting relationships with many of the world’s most sophisticated private markets investors.”

Transaction Details 
Transaction includes total consideration of up to £100 million (or currently ~$122 million) payable to the seller in cash, with £80 million as base value and £20 million contingent on certain performance factors. Timing of payments includes £60 million payable at closing, £20 million payable at 24 months from closing, and up to £20 million payable at 36 months from closing pending certain performance factors. The initial payment of £60 million will be financed through a bank credit facility maturing 36 months after closing. The transaction is expected to close in the first half of 2024 pending regulatory approvals, and is expected to be accretive to Patria shareholders in 2024. Rothschild & Co served as financial advisor and Macfarlanes LLP served as legal advisor to abrdn. Latham & Watkins LLP served as legal advisor to Patria.

Vontobel Appoints New Wealth Management Head for Miami Office

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Photo courtesyVictor Cuenca Barrero

As part of its continued growth in the US, Vontobel Swiss Financial Advisors (SFA) has appointed Victor Cuenca as Head of Wealth Management Miami Branch to build  on its offering for Latin American clients.

Victor Cuenca brings more than 20 years of business development experience with institutional and private banking clients in  Latin America, Spain and Portugal.

He will be responsible for strengthening wealth management client relationships in Miami and implementing Vontobel SFA’s business strategy with Latin American clients, including US and non-US residents in the  Americas. Victor joins Vontobel SFA from Santander Private Banking in Miami, where he held various senior roles in financial  advisory and business development.

Prior to that, he worked for Allfunds Bank, where he had the position of Head of Sales Spain and previously Regional Manager Latin America. He holds a Bachelor’s degree in Economics from the University of Alcala in Madrid and an Executive MBA from the IE Business School in Madrid.

“We are pleased to welcome Victor, whose client-focused track record is well aligned with our priority to delivering quality  solutions to investors,” said Peter Romanzina, CEO of Vontobel SFA. “This appointment further demonstrates our commitment  to maintaining strong growth in the US with an expanded footprint, while helping our clients diversify their wealth globally.”

“I am excited to join Vontobel SFA and bring this new offering from our Miami office to Latin American investors,” commented  Cuenca on his appointment. “Vontobel’s personalized and added value services offer a great opportunity to high-net-worth  individuals. Miami is closely connected to Latin America and is viewed as the financial capital for the region, so our presence  here is key to developing this market.”

 

 

Nearly 30% of Americans Prioritize Buying the Latest Tech, Like iPhone 15, Over Paying Bills

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LendingTree, the online financial services marketplace, released survey results on how Americans prioritize technology in relation to their financial decisions.

The survey showed that 77% of Americans find it essential to have the latest technology and gadgets. This sentiment is particularly strong among younger consumers, with 88% of Gen Zers and 86% of millennials stating that having the latest technology is important to them.

Further data indicates that 28% of Americans would prioritize purchasing the latest technology over fulfilling basic financial obligations such as paying rent or bills.

Among Millennials and Gen Zers, the numbers rise to 45% and 38%, respectively. Additionally, of those who prioritize technology over financial commitments, 78% admitted they would choose to buy a new phone, such as the iPhone 15, over paying rent or bills.

Adding another layer to the financial aspect, the survey found that 26% of Americans have taken on an average debt of $1,492 to acquire the latest technology products. The items causing this debt are primarily phones at 69%, followed by computers at 41% and smartwatches at 27%.

Brand loyalty also surfaced as a point of interest in the survey. Specifically, iPhone users are more than twice as likely as Samsung users to upgrade to a new phone model when it is released, with percentages at 9% for iPhone users versus 4% for Samsung users. In contrast, 35% of Samsung users wait until their current phone breaks before purchasing a new one, compared to 24% of iPhone users.

Matt Schulz, LendingTree’s Chief Credit Analyst, provided a tip for consumers, stating that if they can afford to buy the latest technology and pay it off within a month or two, then they could proceed with the purchase. However, if they cannot afford it, Schulz advised consumers to start saving money to better afford the technology in the future.

“As cool as that new iPhone might be, avoiding unnecessary debt is a whole lot cooler. If you can afford to buy it and pay it off in a month or two, have at it. If not, make a plan and take it slow. Instead of rushing to buy, start putting some money aside to help you better afford it in a few months. Even if you can’t save enough to pay for all of it, what you are able to put away will help lower the interest you’ll pay in the future. Remember, this isn’t a one-time thing like a Taylor Swift or Beyonce concert coming to your town. These phones are going to be available for a long time, so there’s no rush,” Schulz said.