Why Investors are Cautiously Optimistic for the Year-End

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Pixabay CC0 Public Domain

U.S. equities were higher in November, with stocks rallying on the last day of the month to help achieve back-to-back monthly gains for the first time since August 2021. While the Fed remained the key focus throughout the month, U.S. midterm election results and protests in China also captured numerous headlines. As we approach year-end, investors are cautiously optimistic that equities can march higher from improving economic data and robust consumer spending.

On November 2, the FOMC meeting announced another 75bps rate hike which was largely anticipated by the market. This hike now brings the targeted federal funds rate to 3.75-4.00% (the Fed hiked again other 50ps to 4,25- 4,5% in December), up from 0.00-0.25% prior to the initial increase in March 2022. Fed Chair Jerome Powell said that the central bank has more work to do before rolling back its restrictive monetary policy campaign. On November 30, Powell gave a speech at Brookings Institution in Washington, HC, where he reiterated his comments from earlier in the month and laid the groundwork for the central bank to slow its pace of rate hikes. Investors are hopeful that improving inflation data helps support the Fed’s decision to potentially slow its hiking pace in the future.

While the rest of the world has mostly removed mobility restrictions associated with COVID-19, China’s population is still being forced into harsh lockdowns ranging from individual stores to entire counties, often over a small number of positive cases. The Chinese government’s stringent zero-Covid policy has greatly frustrated many of its people and as a result, has sparked a wave of protests. Investors are hopeful that China’s economy will open back up soon, providing both a source of demand and supply for the world again.

Despite a setback for M&A with the news on Rogers Corp., positive developments in other investments drove performance in November.  Many other deals closed including the acquisition of Swedish Match by Philip Morris, Zendesk by Hellman & Friedman and Permira, Atlantia SpA by the Benetton family and Blackstone, and Tenneco by Apollo Global Management. Shares of Shaw Communications (SJR/B CN-C$36.71-Toronto) and PNM Resources (PNM-$49.00-NYSE) traded higher as prospects for completing their deals improved. In the case of Rogers, DuPont failed to secure timely approval from Chinese SAMR for the acquisition.  DuPont then elected to terminate the transaction rather than attempt to pursue remedies that may have satisfied the regulator.

The convertible security world saw continued issuance, but will likely finish the year with record low issuance overall. In a difficult year, convertibles have outperformed their underlying equities, but have not been spared as investors have shifted their focus from growth to cash flows and the macro environment. Management teams that are willing to trade a growth at all costs mentality to focus on positive cash flows as well as improving their capital structure are being rewarded with better stock and convertible performance. This is in line with what we have been saying will be the greatest opportunity in convertibles over the coming months.

 

Tribune by Michael Gabelli, managing director & president of Gabelli & Partners. 

Bruce Jackson Is Named CEO of Santander Consumer

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Santander Holdings USA announced that, effective March 2023, Bruce Jackson will assume the role of head of the Santander US Auto business and CEO of Santander Consumer USA Inc., reporting to Santander US CEO, Tim Wennes.

Jackson succeeds Mahesh Aditya who is taking on the role of Banco Santander’s Group Chief Risk officer in Madrid, subject to customary regulatory approvals.

In this capacity, Jackson will be responsible for the Santander US Auto business with a continued focus on enhancing the dealer and manufacturer experience, increasing the Santander US Auto market share, and executing on the Santander US growth strategy.

Most recently, Jackson served as President of Chrysler Capital and has previously held senior auto finance leadership roles at JP Morgan, Ally Financial and Bank of America, among others.

“This appointment underscores the depth of leadership across the Santander US region. With his combination of industry knowledge, dealer and manufacturer relationships and leadership experience, Bruce is well positioned to continue to build upon the strong position that the Santander US Auto business holds in the marketplace,” said Tim Wennes, Santander US CEO.

Santander US remains a strategically and financially important market for Banco Santander, continuing to deliver attractive, sustainable results through market cycles.

Millennial and Generation Z Financial Wealth Jumped 25% in 2021

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Millennial and Generation Z financial wealth jumped significantly in 2021, from $2.9 trillion to $3.6 trillion, the most of any generational cohort. Providers—long accustomed to serving Boomers and Generation X— will need to focus on these younger households as they age and their financial pictures grow more complex, according to The Cerulli Report—U.S. Retail Investor Advice Relationships 2022: Rethinking the Advice Continuum.

The second-largest generational cohort but the smallest in terms of assets, Millennials and Generation Z have been able to grow their wealth in line with, or even better than, their older peers. This is due in part to Millennials seriously investing in retirement accounts and Generation Z dipping its toes in the investing water through brokerage platforms.

As investors in this cohort make strides early on in their investment journey, they are eager for comprehensive financial advice and are willing to pay for it. Yet, while these “Advice Seekers” know they want more out of their financial advice relationship, they have trouble defining exactly what they want.

“Rather than strategically choosing from a logical menu of potential services from each provider, investors more often end up selecting providers on a just-in-time basis, resulting in ad hoc collection of relationships, each of which falls short of delivering comprehensive financial advice engagement,” remarks Scott Smith, director.

To overcome this pitfall, providers must make every effort to anticipate the evolving needs of each client. As these investors accumulate more wealth, they will likely enter a stage of increasing financial complexity, navigating newfound challenges such as home ownership or saving for college education. “To retain these investors long term, providers will need to provide timely input on these crucial subjects or face expected attrition as consumers seek more holistic wealth management advice,” adds Smith.

An increasing focus for financial providers looking to compete with one another is to expand services that were once the domain of the affluent to mass-market households.

This is achieved either by leveraging technology to bring services such as direct indexing to scale, or through mergers and acquisitions of retail brokerages or robo-advisors to create a pipeline for self-directed investors to receive more formal advice from the acquiring firm.

“While services are crucial, particularly as larger asset managers acquire smaller outfits to build out their capabilities, attention on the client-facing side, particularly on growing marketshare and mindshare among Millennials and Generation Z, can’t be ignored,” he concludes.

Cyndeo Wealth Partners Adds Veteran Advisors Thomas Havard and Michael Scott Crouch to Firm

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Cyndeo Wealth Partners announced that Richard Thomas Havard and Michael Scott Crouch will be joining the firm as Vice Presidents. They are accompanied by Arlene Alexander, Senior Client Relationship Manager. They will all operate remotely and report in to Cyndeo’s headquarters in St. Petersburg, Florida.

Previously, Mr. Havard and Mr. Crouch were both Senior Financial Advisors at Merrill Lynch, managing approximately $250 million in client assets.

“We are excited to be joining Cyndeo Wealth Partners because they align with our mission to act in the clients’ best interest and their experience in working with professional athletes will complement an area of focus we take to heart,” commented Mr. Havard.

Mr. Havard and Mr. Crouch have a combined total of over 25 years of experience in wealth management the majority of which was at Merrill Lynch. With over 50 NFL players, Havard and Crouch focus on financial planning, cash flow management and investment process for their players.

“We are pleased to add Tom and Scott to the team at Cyndeo and specifically to CW BOSS our sports and entertainment division. Their commitment and care for their clients aligns with the way we approach things at Cyndeo and we look forward to helping them continue to grow professionally and personally.” said Matt Kilgroe Cyndeo President and CEO.

Cyndeo Wealth Partners is an RIA based in St. Petersburg, FL with $1.4 billion in assets under management and clients in 40 states. Cyndeo is a member of the Dynasty Financial Partners’ Network of independent financial advisory firms.

“M&A continues to be a key driver of accelerating growth for our Network Firms, and Cyndeo Wealth Partners is no exception,” John Sullivan, Head of Network Development at Dynasty Financial Partners added. “We expect similar announcements across the Network in the weeks and months ahead.”

Richard Thomas Havard
Tom began his career in the financial industry in 1997, and most recently worked as a Senior Financial Advisor at Merrill Lynch for over 10 years. He works with affluent families and athletes to help them build strategies around estate planning, investments, tax minimization, wealth transfer and retirement income. Tom and his business partner Scott Crouch are part of Cyndeo’s athlete and entertainment division named CW BOSS.

Michael Scott Crouch
Scott joins Cyndeo Wealth Partners from Merrill Lynch where he enjoyed a 10-year stint as a financial advisor. A former Division 1 football quarterback, Scott works with professional athletes, executives and business owners in all aspects of their financial journey. Scott and his business partner, Tom Havard, are part of Cyndeo’s athlete and entertainment division named CW BOSS. As an advisor, he focuses on facilitating life-style management and retirement goals, education and strategic financial objectives.

Jacques Sudre (Amiral Gestion): “The current environment is very appropriate for a fixed-end fund”

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Pixabay CC0 Public Domain

Amiral Gestion has recently launched Sextant 2027, a fixed income fund with a buy & hold approach which offers a 7% yield to maturity. Funds Society talks to its fund manager, Jacques Sudre, about bond opportunities in the current macro environment.

 

Most of the experienced bond managers claim that 2022 has been the worst bond market ever, do you agree with that? What lessons (if any) have you learnt from this difficult backdrop? How has your own experienced helped you to navigate the complex macro environment of the past 12 months?

Indeed, the year ending has been the worst in terms of returns for investors. Over the last previous years, we experienced the biggest asset price inflation I have witnessed in Fixed Income markets in my career, due to monetary experiments conducted by central banks. As soon as the macroeconomic environment demanded monetary tightening from central banks, negative interest rates reversed and fixed income valuations experienced sharp drops to adjust to the new normal. Unfortunately, the aggressiveness of the correction was proportionate to the bubble and caught many investors completely unprepared. We avoided altogether being invested in government bonds and IG since it was the most overvalued segments of the markets. Nevertheless, we suffered too a decline in HY and non-rated issuers as spreads widened, although less severe than the market.

The biggest lesson, with no surprise to us, is that valuations are always a prerequisite, even though temporarily this may not seem to be the case. Comparing credit valuations with what happened on equity markets, the price we pay for a company matters and even the best company in the world may turn out to be a bad investment if we overpay. It took Microsoft 16 years to break all-time highs after the dotcom bubble peak. The same applies to bonds, as some investors have learned through pain with the 100-year Austrian government bond, which is down -70% since it peaked in 2021. A secondary lesson is that flexibility is key. Our disciplined approach indicated us that during this period we needed to maintain selectiveness, short duration, and an allocation to short term and cash, even though the market was rewarding aggressiveness.

 

Do you think the bond bear market is already ahead of us? Where are you finding opportunities?

As previously discussed, we have witnessed this year the fastest widening on record since the 80’s in all corners of FI markets. Although the bond market may continue to experience volatility, we think that investing conditions in credit are currently attractive in absolute terms and when considered relative to historical levels as well as the relative quality of issuers. It’s a futile exercise to try and market the bottom and many investors will lose money by trying to forecast this. We currently find compelling opportunities, mostly in quality HY issuers in Europe, as well as some non-rated bonds and in out-of-the-money convertible bonds. Yields are attractive, although the macro picture and the current extremely low default rated make us extremely selective. That is the reason why our portfolio offers lower yields than main indices, with lower durations, as we have integrated higher quality issuers.

 

Is it now a good time to build a well-balanced bond portfolio, given where valuations are in most credit markets?

We do think it’s a good opportunity to build a portfolio for the coming years. In retrospect, 2012-2013 were excellent years to build a portfolio of government bonds, with issuers like Spain or Portugal paying amazing yields in some cases above 8%. After spreads being at historical lows, under 200bps, the current spreads appear quite attractive. We feel more comfortable keeping a portion of the portfolio short term and cash in order to profit when a new window of opportunity will come to light.

 

Where do you see a better risk/reward environment: spreads, coupons, maturities, quality (liquidity), relative value…? Is it time again to make money with bonds in an easier way (compared with the past 5 years)?

We prefer spreads above the other alternatives you mention, and they are now made up of a +10% discount to par in EUR HY. We still prefer to have relatively low durations, around 3 years. It is definitely easier to make money in bonds today than any other moment of the last 8 years.

 

Amiral Gestion has released a buy & hold fund which matures in 2027. Can you please explain your investment process?

We basically think the current environment is very appropriate for a fixed-end fund, especially for 2027. The main differences we have versus peers is that we prefer a concentrated portfolio (60-65 lines), the flexibility to get inside the strategy for a long period of time (18 months) and to leave before the maturity without any penalties (although at bid prices in order to protect investors remaining in the fund). The rationale for higher concentration is to still benefit from diversification but to increase our probability of avoiding defaults by selecting real convictions skewed towards higher quality HY.  To achieve this goal, we benefit from the equities team coverage (comprised of more than 25 people) and share our common knowledge of any given issuer or sector. Flexibility in the investment universe is a feature many investors have demanded and we met this request devising our new strategy, Sextant 2027. In terms of market segments in which we like to invest, a diversified portfolio which includes some high-quality issuers in the HY category, some non-rated bonds with solid balance sheets and out of the money convertible bonds is a good combination in today’s markets.

 

Not sure if you make macro calls- if yes, can you please provide me some forecasts regarding inflation, interest rates and GDP growth?

We doubt that anybody can, at least with enough consistency, predict these elements with sufficient robustness to benefit from these forecasts. We therefore prefer to limit risks we do not control. That is the main reason why we focus on credit risk, which we do think we can validly assess and control. If investment rationale is for instance solely based upon the direction of inflation short or medium term, it may resemble punting, that is clearly not an advisable approach to investing. We favour having balanced and robust portfolios that will do relatively well under any macro scenario.

Sarah ten Siethoff Named Deputy Director of the Division of Investment Management

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Photo courtesySarah ten Siethoff, Deputy Director of the Division of Investment Management

The Securities and Exchange Commission announced that Sarah ten Siethoff has been named Deputy Director of the Division of Investment Management. In addition to serving as Deputy Director, Ms. ten Siethoff will continue serving as the Associate Director of the Division’s Rulemaking Office, a position she has held since 2018.

“I thank Sarah ten Siethoff for taking on the role of Deputy Director of the Division of Investment Management,” said SEC Chair Gary Gensler. “Sarah has provided invaluable counsel both as Acting Director of the Division and as head of its Rulemaking Office. She brings skill, judgment, and leadership to her service to the public, and I look forward to her many contributions in the new year.”

“Sarah ten Siethoff provides extraordinary expertise and public service to the Division of Investment Management,” said William Birdthistle, Director of the Division of Investment Management. “We rely deeply upon her leadership in her roles as both the Division’s Deputy Director and the head of our Rulemaking Office and are grateful for her willingness to serve in both roles.”

“I am honored to serve the Commission in this new additional role and continue working with the talented staff in the Division of Investment Management to advance the Commission’s important mission,” said Ms. ten Siethoff.

Ms. ten Siethoff served as Acting Director of the Division of Investment Management from January 2021 to December 2021. She joined the Division of Investment Management in 2008 and previously served in a variety of roles in its Rulemaking Office, including Deputy Associate Director and Assistant Director.

Ms. ten Siethoff has received the SEC’s Philip Loomis Award, the Excellence in Leadership Award, and the Manuel F. Cohen Award, among other honors. Prior to joining the agency, Ms. ten Siethoff was an associate with Cleary Gottlieb Steen & Hamilton LLP in their New York and Washington, DC offices.

She received a J.D. from Yale Law School, an M.A. in International Relations from Yale University, and a B.A. from the University of Virginia.

Dynasty Financial Partners Closes Minority Private Capital Raise to Fuel the Growth of Its Offering to Clients

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Dynasty Financial Partners (“Dynasty”) announced the company has closed a minority private capital raise, adding Abry Partners (“Abry”) and The Charles Schwab Corporation (“Schwab”) as new minority investors. Several of Dynasty’s existing investors and directors of the board have invested additional capital alongside Abry and Schwab in the round.

Additionally, several firms in the Dynasty Network have invested in Dynasty as part of an ‘equity swap’ program that has been launched concurrent with the round.

Dynasty’s Network of clients own and operate independent RIAs that leverage Dynasty’s integrated technology, services and business solutions, robust turnkey asset management program (TAMP), and capital solutions. This integrated platform model provides synthetic scale that allows Dynasty-powered RIAs to be independent but not alone.

Dynasty intends to use some of this capital to make meaningful investments in technology and technology integrations, the addition of services to its Core Services offering, the further buildout of its TAMP and investment solutions offering, and the addition of intellectual capital and key talent.

The company also plans to invest in the growth of Dynasty Capital Strategies, making further equity investments in its network of clients and making capital available for inorganic growth. The company will also explore select opportunities for corporate development and M&A that would accelerate growth, add capabilities, and increase margin in various areas of the business. A portion of the investment round will be used to fund secondary transactions to provide liquidity to long-time shareholders and founders of Dynasty.

As previously announced in September of this year, Dynasty closed a $50 million credit facility from RBC Capital Markets, UMB Bank, J.P. Morgan, Citibank, and Goldman Sachs Bank that provides access to additional growth capital.

Concurrent with this capital raise, Dynasty has executed minority equity investments in many of its RIA clients. Most of these clients received Dynasty equity in exchange for their equity in a ‘swap’ transaction.

As a result, the Dynasty Network stands stronger and more aligned than ever, with many members of the network having an equity interest in the success of Dynasty and the Network.

“After evaluating the state of the public markets, our board decided to have a handful of conversations with potential private investors. Having been afforded the luxuries of optionality and time, there were two requirements that were atop my list as we went through the process – partnership and alignment,” said Dynasty’s President and CEO, Shirl Penney.

Given the equity capital raise, Dynasty will file a request to withdraw its Registration Statement on Form S-1, initially filed with the SEC on January 19, 2022 and subsequently amended.

Abry Partners is a Boston-based private equity firm with an over 30-year track record of sector-focused investments, having completed more than $90 billion of leveraged transactions. Abry has deep experience within financial services and the wealth management sector, including recent successful investments in Beacon Pointe and Millennium Trust Company.

James Scola, Partner, and Michael Cummings, Principal, led the transaction for Abry. As part of the minority investment, James Scola will be joining Dynasty’s board.

“When looking at the RIA space and the growing ecosystem around it, Dynasty was one of the select brands we had been following for some time. We are thrilled to have the opportunity to invest in the leading wealth technology and integrated services platform in the RIA space and are looking forward to putting all of Abry’s resources behind the growth of the firm and its clients,” said James Scola, Partner at Abry.

Schwab serves as the custodian for over half of the $72 billion in assets under advisement in the Dynasty Network. Schwab and Dynasty have long brought complementary strengths to their joint clients with Schwab’s expertise in the independent advisor ecosystem and Dynasty’s leading technology and services platform for independent business-owner advisors.

“As advocates for independent advisors, we are thrilled to invest in a firm that shares our values of empowering advisors with the technology, tools, and resources they need to build even stronger businesses. We could not be more excited for the ongoing growth that is occurring in the RIA ecosystem and are proud to be leaders in the space,” said Bernie Clark, Head of Schwab Advisor Services.

Dynasty will continue to grow its relationships with other strategic partners in the space, including the other major custodians serving the RIA ecosystem.

“At a time when many businesses in the space are forced to hunker down and play defense, dragged down by leverage and rising interest rates, Dynasty is positioned to charge onto the offensive with fresh, friendly capital, a fortress balance sheet, and favorable margins. Despite market volatility, the ‘Era of Independence’ continues to experience tailwinds as Dynasty positions to invest and continue executing on behalf of its clients and investors,” added Justin Weinkle, Dynasty’s CFO.

Goldman Sachs & Co. LLC acted as exclusive financial advisor and Sullivan & Cromwell LLP acted as exclusive legal advisor to Dynasty on the transaction.

BCP Global launched the first ONE APP Solution for all Latin Americans

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Photo courtesyPedro Fernández de los Muros, Mauricio Armando and Santiago Maggi, Co-Founders of BCP Global

Miami-based fintech BCP Global launched their ONE APP Solution for Latin Americans. This launch opens up the range of U.S. financial services available to clients residing all across Latin America.

BCP Global is currently leading the digital transformation of Latin American financial institutions and independent advisors. Thanks to smart, easy-to-use technology, BCP Global helps increase efficiency and productivity, reduces costs and delivers an outstanding customer experience.

“We are so excited and our team has worked so hard to finally bring the ONE APP Solution to the market to serve the mass affluent segment in Latin America. Being able to do this under current market circumstances proves our commitment with the region. Thanks to all our partners, colleagues and clients who joined us in celebrating this great launch.” said Mauricio Armando CEO & Co-founder of BCP Global.

With BCP Global’s technology, now these institutions can offer their clients multiple financial services to save, invest, trade, borrow, pay and plan for the future in a simple, transparent and efficient way.

An expansion with key partnerships

On the investment side, BCP Global has an strategic alliance with BlackRock, the largest asset manager in the world, which designs investment portfolios using transparent, low-cost, liquid and tax-efficient instruments. This allows BCP Global to offer innovative and scalable investment solutions for the Latin American offshore wealth market.

Another important ally is Interactive Brokers, the largest electronic trading platform in the United States, which provides BCP Global with the opportunity to operate in different markets efficiently and at a very competitive cost.

“Innovation has been the driving force of our business from day one. Also, to achieve this launch, it was essential to count on our partners at Bradesco, who believe in this project and dedicated their time, resources and experience to it.” said Santiago Maggi, COO, and Co-founder of BCP Global. 

Now, with BCP Global’s ONE APP Solution, clients can find the solution to all their financial needs in the U.S. through a completely digital and remote process, from the comfort of their home. The latest updates of BCP Global’s ONE APP will be live next Friday, December 23rd.

Bumps in the Energy Transition

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The global disruptions in energy markets and the war in Ukraine have added impetus to the push for renewable energy and the drive toward net-zero carbon emissions, said Daniel Yergin in an article for the International Monetary Fund.

Yet, even as the global consensus around the energy transition becomes stronger, the challenges to that transition are also becoming clearer, the expert added.

In addition to the uncertain pace of technological development and deployment, four issues in particular stand out, the return of energy security as a prime requirement for countries, lack of consensus on how fast the transition should and can take place, in part because of its potential economic disruptions, a sharpening divide between advanced and developing countries on priorities in the transition

Obstacles to expanding mining and building supply chains for the minerals needed for the net-zero objective

The need for energy security was a concern that had largely faded over the past several years. The energy shock, the economic hardship that ensued, skyrocketing energy prices that could not have been imagined 18 months ago, and geopolitical conflicts—all these have combined to force many governments to reassess strategies. This reassessment recognizes that the energy transition needs to be grounded in energy security—that is, adequate and reasonably priced supplies—to ensure public support and avoid severe economic dislocations, with the dangerous political consequences that can follow.

The current global energy crisis did not start with the February 2022 invasion of Ukraine, Yergin said. Rather, it began in late summer of 2021.

The economic rebound that came with the ending of the global COVID-19 lockdowns fired up global energy consumption. Oil, natural gas, and coal markets all tightened in the latter part of 2021, sending prices up as demand pushed against what became apparent—insufficient supply. It was in November 2021, three months before the invasion, that the US government announced the first release from its strategic petroleum reserve. What has become clear is that “preemptive underinvestment” has constrained the development of adequate new oil and gas resources.

There are a number of reasons for this underinvestment—government policies and regulations; environmental, social, and governance (ESG) considerations by investors; poor returns caused by two price collapses in seven years; and uncertainty about future demand. The shortfall in investment was “preemptive” because of what was mistakenly assumed—that sufficient alternatives to oil and gas would already be in place at scale by now. Some have described what is currently unfolding as the “first energy crisis of the energy transition”—a mismatch between supply and demand. If it does prove to be only the first, future such crises will create uncertainty, cause major economic problems, and undermine public support for the energy transition.

Speed of the transition

If energy security is the first challenge of the transition, timing is the second. How fast should it—and can it—proceed? There is much pressure to accelerate a significant part of the 2050 carbon emission targets toward 2030. But it sometimes seems that the scale of what is being attempted is underestimated.

“In my book The New Map (2021), I looked at the previous energy transitions, and it is clear that this one is like no other. All previous transitions were driven largely by economic and technological advantages—not by policy, which is the primary driver this time”, he said.

Each of the preceding transitions unfolded over a century or more, and none were the type of transition currently envisioned. The objective of this transition is not just to bring on new energy sources, but to entirely change the energy foundations of what today is a $100 trillion global economy—and do so in little more than a quarter century. It is a very big ambition, and nothing on this scale has ever been attempted up to now.

Some have warned that because the scale of the transition is so large and far-reaching, the macroeconomic impact needs deeper analysis.

The economist Jean Pisani-Ferry, cofounder of Bruegel, Europe’s leading economic think tank, has observed that accelerating the targets for net carbon emission reductions too aggressively could create much larger economic disruptions than generally anticipated—what he called “an adverse supply shock—very much like the shocks of the 1970s.”

Such a transition, Pisani-Ferry presciently wrote in 2021, just before the current energy crisis began, is “unlikely to be benign and policymakers should get ready for tough choices.” He subsequently added, in 2022: “Climate action has become a major macroeconomic issue, but the macroeconomics of climate action are far from the level of rigor and precision that is now necessary to provide a sound basis for public discussions and to guide policymakers adequately. For understandable reasons, advocacy has too often taken precedence over analysis. But at this stage of the discussion, complacent scenarios have become counterproductive. The policy conversation now needs methodical, peer-examined assessments of the potential costs and benefits of alternative plans for action.”

Yergin added a lot of issues for the energy transition that you can find in the following link.

Hedge Fund CTA Strategies Shield Investors from Market Turmoil in 2022

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Preqin published its Preqin Global Report 2023: Hedge Funds where demonstrates that, at the end of Q3 2022, commodities trading advisors (CTAs) outperformed all top-level hedge fund strategies, emerging as the winning ticket in a stressed market and during this period, of all fund types, CTA returns climbed +8.2% to September.

2022 was a challenging year as market participants experienced major pullbacks in their portfolios, and investors struggled to find a safe place to protect their capital. Inflation figures spiked in many countries, and the war in Ukraine and geopolitical tensions added to the volatility, the report adds.

Hedge funds felt the pain but managed to absorb some of the shocks in the market. At the end of Q3 2022, Preqin’s all-hedge-funds benchmark declined by -9.3%. Although losing money should never be celebrated, the fact that hedge funds protected investors greatly compared to public investment options should be noted.

Certain hedge fund strategies guard investors, while others disappoint 

While CTAs performed exceptionally well, Preqin data also shows that at the end of Q3 2022, macro strategy returns climbed by +4.5%, and relative value rose +0.2%, with generated numbers for investors that helped reduce the damage in many portfolios.

Meanwhile, at the end of Q3 2022, both multi-strategy and credit strategy returns had dropped -3.3% and -5.2%, respectively. Equity and event-driven strategies disappointed many with a respective return decline of -13.9% and -8.7% by the end of Q3 2022.

In terms of asset flows, hedge funds endured a tough first half as net capital outflows totaled $24bn, and the outflows continued in Q3 (-$31bn). The negative performance, along with the outflows, pushed the industry’s total assets under management (AUM) down in 2022. Based on our last official estimate, AUM stands at $4.1tn as of end of Q3 2022, which represents a 4.8% reduction since the end of 2021.

North America funds claim top performance with five-year streak  

North America remained the best-performing region for the past five years as funds focused on the region climbed +7.9% on an annualized basis. Despite the good overall five-year annualized number, North America focused managers were not immune to the turbulence of the markets in 2022, with a return decline of -11.4% by end of Q3 2022.

Looking at other markets, Europe-focused funds declined -11.3% by end of Q3 2022, while Asia-Pacific-focused funds performed slightly better relatively speaking, with a decline of -10.0% during the same period.