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Market May Improve its Growth Outlook as Fed Cuts Rates

The cuts made by the Fed and announcements that this trend will continue will benefit investments in companies targeting long-term growth, Todd Morris, portfolio manager of Large Company Growth at Polen Capital, told Funds Society.

“Long-duration, high-growth companies benefit from a lower capital costs, lower interest rates and therefore lower discount rates, which drives their valuations up,” Morris commented, explaining that this effect allows for a more productive use of capital.

Regarding Polen’s case, Morris said the strategy features “resilient companies.”

“The companies we invest in are not dependent on the debt markets. They can fund their operations and growth initiatives with the cash they generate; they don’t need to go to the capital markets, which is really, I think, a sign of the quality of the companies we are investing in at Polen Capital,” he said.

On the other hand, according to Polen analyst said that both former President Donald Trump (2017-2021) and current Vice President Kamala Harris are interested in fiscal expansion but with different paths.

Trump is going to cut taxes, “which further increases the deficit,” said Morris who added that Harris talks about some tax incentives, but is actually more interested in expanding budget outlays, “which is also expansionary from a fiscal standpoint.”

“In recent years, expansionary fiscal policy has offset restrictive monetary policy, so I think we’ll probably see a continuation of what’s been happening in the U.S. in recent years from a fiscal standpoint,” he predicted.

On the other hand, Morris highlighted the importance that the regulatory stance of the two parties could have. While the Democrats have a more aggressive or progressive regulatory stance, the Republicans could go for a rollback of these types of policies, “which would be another shift on the margin for well-established large-cap companies and that I think would be a difference,” he explained.

Moreover, from a fiscal standpoint, the monetary aspect is independent of policy, Morris insists. According to the expert, year-on-year comparisons will be easier in a couple of months.

“We are curious to see how the inflation data evolves over the next couple of months, because the inflation trend has been downward, which favors rate cuts.

But if inflation comes back up, the Fed could find itself in a very difficult position. Because labor markets are softening and they have embarked on rate cuts. But they may have to stop if inflation starts to pick up,” he explained.

Inflation

Regarding the inflationary problem that the US has been facing, according to Morris it was caused “first by shortages in the supply chain and then by fiscal expansion.”

For this reason, the expert says he does not have a firm opinion on whether one of the candidates will be more inflationary than the other, but he does assure that both will have policies that can stimulate price increases.

However, he qualifies that the economic cycle is independent of politics. If you are looking at an inflationary outlook because of the way the economy is evolving, politics can do what it is going to do, but it may not really register in inflation readings.

Emerging Markets

Polen is also betting on companies in emerging economies and have found “very good businesses”, Morris said.

“We look around the world for great companies that fit our eye as investors. These are companies with competitive advantages and inherent profitability, which generate high returns on capital and have solid balance sheets,” he explained.

The portfolio manager said that at Polen they have found companies that fit that description in emerging markets.

In addition, he explained that with the Fed’s tapering season that has begun, we could see a weakening of the dollar that would increase the attractiveness of emerging market companies.

“We think it’s an interesting combination. So we like the opportunity set in emerging markets,” he asserted.

Finally, he commented that from the firm they are analyzing “all the time” companies, whether they are from Latin America, Asia or other parts of the world and they remain open to opportunities that arise, “as long as they are competitively advantageous companies that fit our criteria and that fit what we are looking for as investors in Polen.”

Klosters Capital and Capital Advisors Finalize an Agreement to Serve the Latin American Wealth Management Market

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Klosters Capital, a multi-family office based in Florida, United States, and Capital Advisors, an independent Chilean financial advisor, have entered into a collaboration agreement to jointly serve the Latin American wealth management market from Miami. Klosters Capital has been operating in Miami since 2016 under a Registered Investment Adviser (RIA) license, serving clients from the United States and Latin America. Since 2022, it also has an office in Madrid, Spain, where it operates as a financial advisory entity (EAF).

For Javier Rodríguez Amblés, Managing Partner of the company, “this agreement represents a strategic alliance that allows us to extend our services to several countries in the region where we had little presence, such as Chile, Peru, and Argentina, where Capital Advisors has established experience.”

With 25 years of experience, Capital Advisors is a recognized independent financial advisor that advises clients in Chile, Argentina, and the United States.

Pablo Solari, a partner at the firm, adds that “this agreement allows us to consolidate our presence in the United States by supporting our clients through Klosters Capital’s platform, with which we share a strategic business vision and the same values in the management and advisory of our clients.”

Capital Advisors is a member of the Global Association of Independent Advisors (GAIA), where all members must remain certified by CEFEX (Center for Fiduciary Excellence). This entity, headquartered in Pittsburgh, aims to “promote and verify excellence by evaluating and certifying compliance with high professional standards of conduct,” according to its website. In 2018, Capital Advisors Family Office became the first Latin American investment advisor to receive this recognition.

Both companies share a business model in which they are compensated exclusively by their clients, ensuring and guaranteeing their independence and rigor in management, always prioritizing the interests of their clients.

Société Générale and Bitpanda Close Agreement to Boost Digital Asset Adoption in Europe

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Bitpanda, a platform specializing in digital assets, has announced a collaboration with Societe Generale-FORGE (SG-FORGE), an integrated and regulated subsidiary of Société Générale Group. Through this partnership, Bitpanda will offer the EUR CoinVertible (EURCV) stablecoin, managed by SG-FORGE and compliant with MiCA1 regulations, to the entire European market. This agreement stems from the commitment of both companies to increase accessibility and adoption of digital assets across Europe.

Thanks to Bitpanda’s reputation and its extensive user base, European investors will have access to a stable, secure, and accessible digital currency. As a dedicated issuer of a reliable stablecoin, SG-FORGE focuses on delivering seamless financial experiences to its users.

Regulated stablecoins, such as EURCV, aim to bridge the gap between traditional finance and new digital economy products. They provide a stable and reliable store of value, particularly given the inherent volatility of cryptocurrencies.

With this collaboration, EURCV can expand across Europe and be used for cross-border payments, remittance transfers, or daily transactions, thanks to the ease and security offered by Bitpanda’s ecosystem.

Lukas Enzersdorfer-Konrad, Deputy CEO of Bitpanda, stated that euro-based stablecoins “are essential for the future of digital assets in Europe. The landscape is changing, the integration with traditional finance is increasing, and fully regulated stablecoins are the key to making this possible. We will work with Societe Generale-FORGE to bring that future closer.”

Jean-Marc Stenger, CEO of Societe Generale-FORGE, explained that this partnership “is a crucial step toward realizing our vision of making stablecoins a central component of the global financial system. Together with Bitpanda, we are confident in our ability to offer European users a stable, secure, and accessible digital currency.”

BTG Pactual Acquires Wealth Management Firm Greytown Advisors in Miami

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BTG Pactual announced on Wednesday (25) the acquisition of Greytown Advisors, a Miami-based wealth management firm, as part of its global expansion strategy. While the transaction value was not disclosed, the acquisition has already received regulatory approval.

With $1 billion in assets under management, Greytown Advisors specializes in serving high-net-worth families, particularly in Latin America, a market where BTG had less penetration. The acquisition strengthens BTG’s operations in the region and complements its multi-family office segment. The cultural alignment between the firms played a significant role in the agreement, as Marcello Correa, president of Greytown, is Brazilian and has extensive experience in the financial market.

Following the acquisition, Correa will join BTG’s team as a partner.

Rogério Pessoa, partner and head of Wealth Management at BTG Pactual, highlighted that negotiations with Greytown lasted two years and hinted that this might be the first of several future acquisitions. “This transaction reinforces our presence in the United States and allows us to serve a demanding and global audience,” Pessoa said.

The acquisition of Greytown Advisors is part of BTG Pactual’s strategic moves to expand its international presence. In June of this year, the bank also announced the acquisition of M.Y. Safra Bank, a private bank based in New York, following the previous year’s purchase of FIS Privatbank in Luxembourg.

Currently, BTG Pactual operates in several countries, including Argentina, Chile, Colombia, Spain, Mexico, Portugal, the United Kingdom, and Luxembourg. With these acquisitions, the bank reinforces its global growth strategy, managing around $45 billion in assets under management in the multi-family office sector.

Overall, BTG Pactual recorded significant growth, reaching R$ 799 billion in assets under management as of June 2024, representing a 27% increase compared to the previous year.

The SEC Accuses Merrill Lynch and Harvest Volatility Management of Ignoring Client Instructions

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The SEC announced charges against Harvest Volatility Management and Merrill Lynch, Pierce, Fenner & Smith for exceeding the investment limits designated by clients over a two-year period starting in March 2016, resulting in clients paying higher fees, being exposed to greater market risk, and incurring investment losses.

As part of separate settlements, Harvest and Merrill have agreed to pay a combined total of $9.3 million in fines and restitution to resolve the SEC’s claims, according to the regulator’s statement.

According to the SEC’s orders, Harvest was the primary investment advisor and portfolio manager of the Collateral Yield Enhancement Strategy (CYES), which traded options on a volatility index with the goal of generating incremental returns.

The SEC determined that, starting in 2016, Harvest allowed dozens of accounts to exceed the exposure levels designated by investors when they subscribed to the CYES strategy, including many accounts that exceeded the limit by 50% or more, as detailed in the statement.

Merrill and Harvest earned higher management fees when investors’ exposure levels rose above the pre-established thresholds, thereby subjecting investors to increased financial risks.

The SEC’s order regarding Merrill concludes that Merrill introduced its clients to Harvest and received a portion of Harvest’s management and incentive fees, as well as trading commissions. It also found that Merrill was aware that CYES investors were exceeding the pre-established exposure levels but did not adequately inform the affected CYES investors, most of whom had advisory relationships with Merrill, the statement added.

The SEC also found that Harvest and Merrill “failed to adopt or implement policies and procedures reasonably designed to ensure that they communicated all material facts to their clients and alerted them to excessive exposure.”

“In this case, two investment advisors allegedly sold their clients a complex options trading strategy but failed to follow basic client instructions or apply and adhere to proper policies and procedures,” said Mark Cave, Associate Director of the SEC’s Enforcement Division.

The SEC’s orders conclude that Harvest and Merrill violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

Without admitting or denying the findings, Harvest and Merrill agreed to be censured, receive cease-and-desist orders, and pay penalties of $2 million and $1 million, respectively. Harvest will also pay $3.5 million in disgorgement and prejudgment interest, while Merrill will pay $2.8 million in disgorgement and prejudgment interest.

Alternative Funds Continue to Reign in Chile

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The latest report from the Chilean Association of Investment Fund Managers (ACAFI) reveals that public investment funds reached $37.483 billion at the close of the first half of this year. Of the assets managed by new funds, 86% corresponds to alternative assets.

Despite the industry’s dynamism, the first half of the year saw a 1.9% decline compared to June 2023, mainly due to the evolution of the exchange rate, which posted an annual increase of 18.6% during this period.

However, when analyzing the total figures in Chilean pesos, the industry’s assets grew by 16.3% year-on-year, reaching CLP 35.647 trillion in June.

Focusing on just the second quarter of this year, the ACAFI report reveals that 31 funds were created between April and June. As a result, a total of 50 new funds were launched during the first half, representing $410 million in new assets under management.

During this period, alternative assets continued their upward trend. Of the assets managed by new funds, 86% were in this category, with private debt vehicles dominating preferences.

According to Luis Alberto Letelier, president of ACAFI, another key aspect is that half of these 50 new funds invest directly in assets in Chile, primarily in projects that promote development, such as renewable energy plants, loans for entrepreneurs and startups, and initiatives to facilitate access to housing.

Regarding private debt funds, Letelier asserts that the observed increase “demonstrates that they are consolidating as a source of financing for various productive sectors in our country, contributing to Chile’s growth.”

BlackRock and Santander Expand Their Alliance for Private Asset Financing

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BlackRock and Santander have announced the signing of a memorandum of understanding under which funds and accounts managed by BlackRock will invest up to $1 billion per year in specific financing projects, energy financing, and infrastructure debt investment opportunities with Santander through structured transaction formats.

The agreement continues a previous one in which funds and accounts managed by BlackRock agreed to provide financing for a diversified $600 million infrastructure credit portfolio of Santander.

“We are thrilled to extend our long-standing relationship with Santander through this agreement, which will provide long-term, flexible capital on a recurring basis to support the growth of their project finance franchise. At the same time, this collaboration will provide greater access to attractive and differentiated investment opportunities for our clients now and in the long term,” said Gary Shedlin, Vice Chairman of BlackRock.

“This framework agreement with BlackRock will allow us to continue proactively rotating our assets, further strengthening our financial position, and enabling us to generate capital for additional profitable growth. We look forward to working with BlackRock through this expanded partnership,” said José García Cantera, CFO of Santander.

BlackRock’s private debt franchise, valued at $86 billion, offers differentiated, flexible, and scalable financing solutions to a wide network of financial institutions and global corporate relationships. The company has developed one of the leading infrastructure debt franchises in the market, sourcing, structuring, and managing client assets with revenue-generating potential.

The Percentage of Companies Reporting Their Carbon Emissions Remains Stagnant at 80%

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To mark New York Climate Week, the global technology platform Clarity AI has presented its new study, “Carbon Reporting Trends: Has Global Progress Stalled?” The report shows that greenhouse gas (GHG) emissions disclosure by companies has reached a point of stagnation: 80% of companies in the MSCI ACWI index report their Scope 1 and 2 emissions, but only 60% disclose at least part of their Scope 3 emissions. The study also highlights significant regional disparities and ongoing challenges in the quality of Scope 3 data.

“Despite advancements in emissions disclosure in recent years, our results show a concerning stagnation,” said Nico Fettes, Director of Climate Research at Clarity AI. “With increasing disclosure requirements for financial institutions regarding financed emissions, the demand for detailed and accurate corporate emissions data continues to grow. However, many companies still do not provide the comprehensive information necessary for effective climate risk analysis. This lack of transparency not only hampers informed decision-making by investors and stakeholders but also limits the public’s ability to understand and respond to climate risks, thereby affecting efforts towards a more sustainable future.”

Only 60% of Companies Report Scope 3 Emissions

While nearly 80% of companies in the MSCI ACWI index have disclosed their Scope 1 and 2 data, only 60% report any of their Scope 3 emissions, leaving a significant gap. This result reflects a slowdown in the growth of Scope 3 disclosure, particularly in emerging Asian markets, where only 41% of companies report these emissions, compared to nearly 90% in Europe and Japan.

Scope 3 Data Quality Improves by 130%, but Gaps Persist

Since 2019, the quality of Scope 3 emissions data has improved by more than 130%, according to Clarity AI’s internal reliability models. This improvement is largely due to more companies reporting both a greater number of categories and more relevant Scope 3 categories. However, the overall quality of these data still falls short of what should be considered sufficiently high-quality disclosure, highlighting the need for more robust reporting practices.

U.S. Companies Are Closing the Gap in Scope 1 and 2 Disclosure

Companies in Europe and Japan lead in Scope 3 emissions disclosure, with nearly 90% reporting this data. In contrast, emerging markets in Asia are falling behind, with only 41% of companies disclosing Scope 3 emissions. However, the growth rate of disclosure has stabilized across all regions.

In the United States, significant progress has been made. Since 2019, when the disclosure rate was much lower, U.S. companies have reached a 90% disclosure rate for Scope 1 and 2 emissions, almost matching their European and Japanese counterparts. Nevertheless, like the global trend, only 60% of U.S. companies report any of their Scope 3 emissions, underscoring the ongoing challenge of achieving comprehensive emissions disclosure, even in regions where Scope 1 and 2 reporting has improved significantly.

BBVA Forms an Alliance with KKR and Invests 200 Million Dollars in Its Global Climate Strategy

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BBVA and global investment firm KKR have formed a strategic alliance to support the decarbonization of the economy. As part of this partnership, BBVA will invest $200 million (€187 million) in KKR’s global climate strategy, which focuses on large-scale investments in solutions that drive the transition to a low-carbon economy.

Both companies made this announcement during Climate Week held in New York this week. The agreement aims to identify new investment opportunities related to climate infrastructure, particularly those supporting the energy transition and electrification. It will also leverage the complementary strengths of both companies, facilitate knowledge exchange, and advance shared goals to accelerate the energy transition.

“We believe that in the second half of this decade, we will see strong growth in new low-carbon infrastructure. The opportunity is immense, and BBVA aims to become a leader in advising and financing to support our clients in the U.S. and Europe in building this future infrastructure across key transition sectors—Energy, Construction, and Mobility, among others. This ambitious alliance with KKR will be a key component of our sustainability strategy. Both teams will work together to seize this growth opportunity for our businesses,” said Javier Rodríguez Soler, BBVA’s Global Head of Sustainability and CIB.

“To tackle the major decarbonization projects the world needs, it’s essential to have top global investors and financial institutions. Large asset managers and international banks are needed to finance this transition and accompany all sectors on their respective decarbonization paths in an orderly manner. With KKR’s proven expertise in this field, we will share knowledge and combine teams, capabilities, and efforts in this strategic alliance to multiply investment in infrastructure and climate projects,” added Rodríguez Soler.

Emmanuel Lagarrigue and Charlie Gailliot, co-heads of KKR’s Global Climate Strategy, added, “We are still in the early stages of what will be a multi-decade transition to net-zero emissions, representing one of the greatest investment opportunities of our time and requiring the full participation of the financial sector. We are thrilled to collaborate with BBVA, given their leadership in the renewable energy sector and their deep commitment to mitigating climate change impacts.”

BBVA aims to support and help its clients transition to a more sustainable world. To this end, sustainability is at the core of its business and is one of its six strategic priorities. The bank has identified decarbonization and ‘green’ technologies as two of its priority investment areas. To support this, it has created a global financing unit specialized in clean technology or ‘cleantech’ innovation. The team, based in New York, London, Madrid, and Houston, offers financing and advisory services.

BBVA is actively investing in some of the most cutting-edge and innovative climate action funds, with the goals of achieving financial returns, participating in disruptive projects, and gaining knowledge of these technologies to better advise companies affected by these innovations and in need of financing.

On September 12, BBVA announced the creation of a sustainability hub in Houston, aimed at leading the financing of the energy transition in the United States.

BBVA Opens a Securitization Hub in New York for Global Clients

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The BBVA Corporate & Investment Banking (BBVA CIB) unit in the United States has strengthened its range of services to offer global capabilities to corporate and institutional clients with the creation of a specialized group focused on securitization solutions and bridge financing. This initiative responds to the growing demand for structured financing from global corporations seeking to optimize their capital efficiently, according to the company statement accessed by Funds Society.

Securitization is a key product that U.S. firms use as part of their financing tools, and it also has a strong connection with institutional clients. Additionally, it provides corporations with essential tools to improve balance sheet efficiency, while institutional investors can diversify their portfolios with high-quality assets, BBVA added.

Richard Burke has joined BBVA Corporate & Investment Banking in the United States as Head of the Securitization Business and will lead this specialized team, which is being established with an initial structure in New York and Madrid, providing services to clients globally. Burke brings valuable experience in creating and managing complex solutions for institutional clients.

Previously, Burke was Co-Head of the Securitization Unit for the Americas at Mizuho CIB, where he led the origination, execution, and management of transactions in ABS products, securitization, and lease finance. He also headed the Asset-Backed Finance Origination Unit at HSBC Americas.

Initially, BBVA will begin this activity by offering portfolio financing lines to corporate clients, and over time, will also develop the capabilities for ABS structuring and placement. This type of operation is closely coordinated with key BBVA CIB units, such as Investment Banking & Finance, Global Transaction Banking, and Global Markets.

“Our clients demand this product because it is a key tool to finance their operations more efficiently. This new offering will not only strengthen our current relationships but will also position us as long-term strategic partners for our clients in the United States,” commented Regina Gil Hernández, Head of BBVA CIB in the United States, who added that there is also growing demand from Financial Sponsors for this type of operation, due to the high demand for Capex for data centers related to AI and renewable project financing.

With this new hub, BBVA reinforces its commitment to offering solutions to its global clients, adapting to a constantly evolving financial environment, as explained by Javier Rodríguez Soler, Global Head of Sustainability and CIB at BBVA.