The Assets Invested in Actively Managed ETFs Listed Worldwide Reached a New Record of 974.29 Billion Dollars

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ETFGI, an independent research and consulting firm focused on global ETF industry trends, revealed that assets invested in actively managed ETFs worldwide reached a new record of $974.29 billion at the end of July. That month, these vehicles registered net inflows of $35.92 billion, bringing year-to-date flows to $189.96 billion, according to the firm.

ETFGI’s July report highlights the following key points:

1. The assets invested in actively managed ETFs worldwide reached a new record of $974.29 billion at the end of July, surpassing the previous all-time high of $923.22 billion set at the end of June 2024.

2. The value of assets has increased by 31.7% year-to-date, rising from $739.87 billion at the end of 2023 to $974.29 billion in July.

3. July saw net investment inflows of $35.92 billion.

4. Year-to-date net inflows have reached $189.96 billion, the highest ever recorded, followed by year-to-date inflows of $86.12 billion in 2023 and contributions of $85.25 billion in 2021.

5. With July’s inflows, the industry has now seen 52 consecutive months of net investment inflows.

“The S&P 500 rose by 1.22% in July and 16.70% throughout 2024. Developed markets, excluding the U.S., gained 3.37% in July and 8.12% in 2024. Ireland (+6.48%) and Belgium (+6.42%) saw the biggest declines among developed markets in July, while Greece (+6.93%) and the UAE (+6.18%) posted the highest gains among emerging markets,” said Deborah Fuhr, managing partner, founder, and owner of ETFGI.

Growth of Assets in Actively Managed ETFs (As of July)

At the end of July, 2,761 actively managed ETFs were listed worldwide, with 3,421 share classes and $974.29 billion in assets, from 461 providers across 37 exchanges in 29 countries.

Actively managed equity-focused ETFs received net investment inflows of $19.37 billion during July, bringing the year-to-date net inflows to $108.52 billion, significantly exceeding the $58.01 billion in flows during the same period in 2023.

Actively managed fixed-income ETFs worldwide attracted $14.57 billion in investment in July, bringing the year-to-date net inflows to $69.12 billion, far surpassing the $27.44 billion in subscriptions during the January-July 2023 period.

These substantial inflows can be attributed to the top 20 actively managed ETFs by new net assets, which collectively gathered $13.42 billion in July. The Magellan Global Fund/Open Class brought in $1.64 billion, marking the largest individual net inflow.

HarbourVest, Kohlberg & Company, Nautic, and PSG Equity Gain Access to Chilean Pension Funds

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AFPs (cedida)

The latest meeting of the Risk Classification Commission (CCR) introduced a series of new managers and funds into the investable universe of Chilean pension funds, including four alternative investment firms: HarbourVest Partners, Kohlberg & Company, Nautic Partners, and PSG Equity.

The approval includes investment vehicles and co-investment operations with these managers for specific asset classes, as detailed in a statement. HarbourVest, a private markets manager with a variety of strategies and more than $127 billion in assets, was approved for infrastructure investments.

The other three managers were approved for private equity investments. Kohlberg & Company is focused on private equity with an emphasis on the middle market segment, similar to Nautic, while PSG Equity specializes in investing in growth-stage software companies.

The CCR also approved two mutual funds domiciled in Ireland: Lazard Japanese Strategic Equity, from Lazard Global Active Funds, and Muzinich Global Market Duration Investment Grade, managed by Muzinich Funds.

In addition, five ETFs were given the green light to enter the pension fund portfolios. One of them is Fidelity UCITS’ Fidelity Global Quality Income, and the others are vehicles from Janus Henderson: the AAA CLO, B-BBB CLO, Mortgage-Backed Securities, and Short Duration Income strategies.

On the other hand, two alternative managers were removed from the list of approved instruments. AEA Investors, a private equity firm, was withdrawn at the manager’s request, while Energy Capital Partners did not renew its application.

Antonio Almirall Joins BlackRock in Miami

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BlackRock has hired Antonio Almirall from Morgan Stanley in Miami.

With over a decade of experience in the industry, Almirall has distinguished himself at various firms such as Santander, UBS, and abrdn, according to his LinkedIn profile.

In his previous roles, he has worked in business development, financial advising, and as a client service associate.

The new sales representative for Miami was officially registered at BlackRock on Tuesday, September 5, according to his BrokerCheck profile.

Alejandra Muguiro, New Director of Alternative Investments at Klarphos

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The alternative asset manager Klarphos has announced the appointment of Alejandra Muguiro Lirón de Robles as Director of Alternative Investments.

From the Madrid office, Alejandra will play a key role in defining strategies and selecting managers for Klarphos’ alternative investment solutions, according to the statement. Muguiro joins the firm from AltamarCAM Partners, bringing over six years of experience in private equity investments. She holds a Master’s in Finance from IE Business School in Madrid.

Donald Banks, member of the Board of Directors, commented: “We are thrilled to have Alejandra at Klarphos. Her extensive experience in managing private market investments for institutional investors makes her a valuable addition to our portfolio management team.”

“I am excited to join the Klarphos team and eager to contribute to the company’s growth. I look forward to providing new opportunities for our clients’ investment portfolios, enhancing their diversification and growth through alternative investments,” Muguiro added.

Klarphos is an asset manager specializing in customized portfolio solutions and advisory services for institutional clients, based in Luxembourg. It focuses its asset management on alternative investments and also offers advisory services for strategic asset allocation and ALM optimization.

The firm employs an international team of specialists and is regulated by Luxembourg’s CSSF as an alternative investment fund manager (AIFM).

Fee Income From Private Markets Are Expected to Double by 2032, Reaching $2 Trillion

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Many asset and wealth management firms have recently embraced private markets. Managers emphasizing the launch and distribution of alternative assets and products have been rewarded by investors with higher market capitalizations than most firms focusing on publicly traded assets (Chart 1). Although private markets are not the sole reason for the higher market capitalization, they play a significant role, according to a report by Bain & Company.

As highlighted by Preqin, one key aspect of Bain & Company’s report is that, following the surge in demand for these types of assets, the challenge now is not to “die from success.” “The stakes are high. The demand for alternatives is booming, and investors, particularly new entrants, are forming new brand and product preferences. But it’s not just about profit and growth. As Bain titled its report, it’s also about ‘avoiding collapse,’” states Grant Murgatroyd, Head of News at Preqin.

Chart 1: Asset managers focused on private markets have experienced strong growth in their market capitalization

Private markets have gained popularity as the business models that have dominated asset management for years are nearly exhausted: margins have compressed, and average profit per assets under management (AUM) has dropped from 15 basis points in 2007 to eight basis points in 2022 (Chart 2). “Many firms have reduced management fees, leading to a 4% decline in average income from 2021 to 2022,” according to consulting firm Casey Quirk.

Chart 2: Asset management profitability has halved

Differentiation has also diminished: Bain & Company points out that data provider eVestment estimates low dispersion in returns (1% to 2%) and fees (4 to 6 basis points) in public equity investments among top- and bottom-quartile management firms. This decline has driven managers to opt for low-cost beta followers, and the share of passive investments is expected to rise.

According to Preqin, Bain’s analysis shows how traditional firms focusing on public markets have either maintained their value (Amundi) or lost ground (T. Rowe Price, Franklin Templeton, DWS, Invesco). “Asset managers focused on private markets have seen significant growth. Blackstone, KKR, Ares, EQT, and Carlyle have more than doubled their value,” they note.

The appeal of private markets

In this context, a promising business model emphasizing alternative private markets is beginning to emerge, but asset management firms will need to develop a range of new capabilities to secure their position in this new landscape.

Private assets represent a much larger market than public assets, offering potentially higher returns, diversification, and, in cases like real estate, an inflation hedge. In recent years, fewer companies have gone public, and global initial public offerings (IPOs) will decrease by 45% between 2021 and 2023 due to increased regulation and costs.

In contrast, “we estimate that private market AUM will grow at a compound annual growth rate (CAGR) of between 9% and 10%, bringing the value of these assets to between $60 trillion and $65 trillion by 2032, more than double the AUM of public markets (Chart 3). “By 2032, we expect private market assets to represent 30% of total AUM,” the firm states.

Chart 3: Alternative assets should continue to show strong growth

At the same time, fee income from private market investments, which reached $900 billion in 2022, is expected to double to $2 trillion by 2032. “Private equity and venture capital will remain the most important categories, while private credit and infrastructure investments will expand to the point of becoming significant asset classes.

Alternative credit has already grown at a 7% CAGR between 2012 and 2022, “and we expect it to grow at a 10%-12% CAGR by 2032,” Bain’s report states, noting that this accelerated pace “largely reflects the reduction in bank lending.”

The strong growth of infrastructure, with an average annual rate of 16% over the last decade, is expected to continue at a pace of 13%-15% over the next decade due to the shortage of public funds as the fiscal deficit grows.

Investor demand has also picked up, with institutional allocations to alternative assets expected to grow by 10% annually from 2022 to 2032, “pushing AUM to at least $60 trillion (Chart 4).”

Sovereign wealth funds, endowments, and insurance company funds are seeking higher returns due to the volatility of public markets and declining yields. Similarly, the increase in contributions from retail investors will push the proportion of AUM from these investors from 16% in 2022 to 22% by 2032, according to Bain’s report. “Individuals are drawn to the alternative asset market due to the prospects of diversification and higher returns, and they are willing to tolerate lower liquidity,” the study notes.

Chart 4: Retail investor participation in private assets is increasing

In response to this retail demand, some firms have launched innovative offerings, such as intermittent liquidity products characterized by periodic redemptions. Blackstone and KKR, for example, have launched private market funds with monthly or quarterly buyback frequencies, as noted in the study.

Recent moves in the chessboard

The share of traditional managers in alternative assets increased from 16% in 2018 to 22% in 2022, as firms sought diversification and better risk-adjusted returns. Some have made acquisitions to expand their product range, while others have expanded organically, like Fidelity, which launched 18 alternative products in 12 months. These firms are also extending their position in the wealth management value chain, such as BlackRock’s joint venture with Jio Financial Services in India to offer direct digital investment solutions through Jio’s local distribution network, according to Bain’s report.

Private banks and wealth managers have expanded to capitalize on client demand and generate higher fee income. Some firms are entering the retail market with their own products, while others have hired experienced advisors and wealth managers to target high-net-worth individuals.

Meanwhile, alternative asset managers and private equity firms have also expanded their portfolios of alternative assets. Others have attracted retail investors by offering evergreen products (with no fixed expiration date) following difficulties in raising funds from institutional clients and ensuring reliable fee income streams.

“In retrospect, we observe a convergence of strategies between traditional and alternative asset managers, with many preparing to become full-service providers across all asset classes, investor types, and positions in the value chain,” the report states, adding that this situation “will intensify competition in the market,” and it is likely that dominant firms will resort to two strategies:

1. Offering niche products that generate alpha, such as environmentally sustainable infrastructure products for ultra-high-net-worth individuals.

2. Developing large-scale alternative products, including vehicle creation and testing, distribution—including reach and conversion—or operational efficiency—including risk management and regulatory compliance.

The study reveals that many companies of all types have already started to follow one of these approaches, and some are using both to maximize their results.

What it takes to adapt

The transition of managers to private markets “poses significant challenges,” Bain notes, given the differences between retail and institutional investors. Companies will need to add or develop new capabilities around their technology systems, sales and marketing approaches, and investor education.

To fill gaps, some firms may turn to acquisitions, but many of them do not deliver the expected benefits due to cultural differences or ineffective integrations. And with a shortage of talent in certain areas, such as data science, recruiting and hiring enough people with the necessary skills can be difficult.

As companies consider how to expand into alternative assets, Bain believes firms should anticipate changes in the following areas:

1. Define where to play and how to win. It may seem obvious, but before making any moves, firms must know their starting point and ultimate ambition in private markets.

2. Develop new front-to-back-office capabilities. This can be achieved by training sales staff, incorporating product specialists, and redesigning operations, technology, risk, and legal processes. These activities will help bridge the gaps between, for example, a system for valuing private assets and one for public assets. A global insurance asset manager, for example, wanted to improve the performance of its private equity portfolio, which had been outsourced. After conducting a detailed portfolio review and competitive strategy study, the company developed new capabilities, carefully limiting changes to team structure and size. The new internal fund selection capability resulted in a 400 basis point improvement in its internal rate of return.

3. Educate investors on the risks and liquidity of alternative assets. Management firms will need to communicate how investors can have sufficient liquidity and the ability to collateralize private assets, that minimum investments and onboarding are more accessible than commonly perceived, and that reporting and tax filing processes have become more streamlined.

4. Adapt sales and marketing. New digital platforms and other distribution channels will be needed to raise brand awareness, attract funds, and offer a broader range of assets. Companies will need to hire and train sales representatives skilled at building relationships with wealth managers and explaining complex products to retail clients. A financial services company was experiencing a decline in revenue, AUM, and client numbers due to stagnant sales team productivity. A new training program and performance metrics for advisors doubled client acquisition and increased new AUM per advisor by 70%.

5. Improve merger and acquisition integration skills to combine talent, culture, and operations. Private market activity has accelerated since 2020, with more than 40 transactions in each of the past three years. More recently, traditional investment firms have announced some notable acquisitions and partnerships, such as BlackRock’s purchase of Global Infrastructure Partners.

According to Bain’s report, during this period of transition in which demand for private market assets is rising, retail investors are still forming their preferences for brands and products. “Regardless of their current market position, companies have the opportunity to shift their focus and expand their offerings if they

can develop the right capabilities, systems, and talent mix to capture that demand,” the study concludes.

Alternative Fund Managers Estimate That Compliance-Related Risks Will Increase

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The level of compliance risk facing alternative fund managers is rising and is expected to grow further over the next two years, according to a survey conducted by Ocorian and Bovill Newgate, a firm specializing in regulatory and compliance services for funds, corporates, capital markets, and private clients. Based on the experience of both companies, more investment is urgently needed to address the issue.

Following an international survey among senior compliance and risk leaders from alternative fund investment firms, it was found that 88% believe compliance risks have increased and will continue to rise over the next two years. Specifically, one in ten respondents expects this increase in risks to be dramatic.

This trend is occurring in a context where compliance teams report insufficient resources and a high level of fines. In fact, 64% of respondents stated that their compliance management team is already under-resourced, with over half of these (34%) feeling their resources are severely lacking.

The number of firms facing fines and sanctions is already high, with 67% of respondents admitting that their organization has been subject to risk and compliance fines or sanctions in the past two years. An additional 9% acknowledged receiving a request for information or a visit from the regulator within the same period.

In response to these findings, Matthew Hazell, Co-Head of Funds for the UK, Guernsey, and Mauritius at Bovill Newgate, remarked: “Our survey reveals a concerning backdrop of fines, sanctions, and under-resourced compliance teams within alternative fund managers, against which nine out of ten respondents believe the level of compliance risk their firms face will only increase over the next two years. It is encouraging that leaders within these firms recognize these future challenges and understand the need to act now to stay ahead.”

The Ocorian study highlights the three key areas where alternative fund managers believe investment is required in the next 24 months to address the issue: technology (58%), systems for managing processes and procedures (57%), and hiring knowledgeable, relevant personnel (53%).

Matthew added: “Firms need to have a deep understanding of their own compliance and risk needs, and any potential changes due to growth or organizational shifts, in order to invest wisely in the right systems, processes, and people to protect against these future risks. We recommend following a three-lines-of-defense approach to safeguard their businesses: first, implementing robust procedures, policies, and training; second, thoroughly monitoring these aspects; and finally, reviewing and challenging them through independent audits.”

Ocorian’s three-lines-of-defense approach to addressing compliance and risk challenges consists of the following:

– Line One: Establish clear and robust processes and procedures on the front line, complemented by online and in-person training programs for staff.

– Line Two: Build and empower a comprehensive compliance oversight function that monitors and evaluates processes and procedures while advising and supporting staff and senior management in meeting the company’s obligations.

– Line Three: Seek the review and challenge of the company’s AML framework through annual independent audits.

Tokenization: The Next Step in the Evolution of ETFs?

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The global ETF market has reached a new record in assets under management, driven by strong market performance and a clear investor preference for these vehicles. According to EY’s latest report on this industry, two clear trends have emerged in the past decade: the development of active ETFs and the entry of ETFs into the crypto asset universe. Could tokenization be the next step in this evolution?

“Digital assets are starting to gain traction, particularly with the SEC’s approval of spot bitcoin ETFs, which could begin to pave the way for asset tokenization, though challenges in liquidity and settlement mismatches persist. Efforts to shorten settlement times could accelerate the trajectory of tokenization in ETFs,” the report notes. The approval of spot bitcoin ETFs was followed by the green light for vehicles investing in Ethereum this past May.

According to the EY report, investor interest in digital assets and tokenization is on the rise. In fact, the consulting firm believes that in recent years, significant progress has been made as financial markets move in this direction. “ETFs physically backed by digital assets have been present in European markets for several years, offered by providers like Shares and ETC Group, allowing market participants to trade this asset class on European exchanges, albeit with certain distribution restrictions. In January 2024, the SEC also recently approved applications for 11 spot bitcoin ETFs submitted by companies like Fidelity and Invesco, as well as the conversion of Grayscale Bitcoin Trust into an ETF. This approval fundamentally changed the shape of this industry segment, shifting from being mostly unregulated, operating out of Europe with less than $13 billion by the end of November 2023, to being primarily regulated, operating out of the U.S. with nearly $53 billion by the end of January 2024,” the report explains.

In Europe, the European Commission is conducting a comprehensive review of the directive on eligible assets for UCITS. According to EY, this review could potentially open the door to digital assets in the future, though UCITS diversification requirements would mean that single-exposure products (like the SEC-approved spot bitcoin ETFs) would remain as ETPs in Europe, similar to commodity products and single-stock exposure products.

“However, the SEC’s approval of these products is fundamental and will see wider adoption and greater familiarity with digital assets among conventional financial market participants,” the report adds.

In its assessment, hailed as the next revolution in financial markets, this movement will undoubtedly drive what comes next for the industry. “It remains to be seen whether this is the approval of another trendy product or a further step toward tokenization across the asset management industry. And with this, questions arise about the longevity of the ETF wrapper, given that real-time settlements will come into play,” they suggest.

According to EY’s analysis, while the transition of ETFs into a tokenized product will occur in the medium to long term, the industry is already working on efforts to accelerate settlement across the value chain. “In May 2024, the U.S. and Canada will move from T+2 to T+1 in securities settlement times. To shorten settlement cycles, providers have been working to enhance their trading systems and automate manual processes wherever possible, ultimately bringing operational efficiencies, cost savings, and reduced settlement risk,” the report indicates.

In their view, this will have a profound impact on the global ETF industry: “It will create liquidity mismatches between ETFs traded in Europe (with T+2 settlement) and their U.S. securities portfolios (with T+1 settlement), or ETFs traded in the U.S. (with T+1 settlement) and their European securities portfolios (with T+2 settlement). This adds additional financing costs to their commercialization, as authorized market participants for these ETFs will need to bridge the gap between the primary and secondary market settlement cycles. Once T+1 settlement becomes routine in the U.S., and market participants operate on a shorter cycle, we expect calls for Europe to follow suit, and the European Securities and Markets Authority (ESMA) is already consulting on this.”

In this sense, they recognize that Europe is a much more complex trading market than the U.S., with multiple stock exchanges, currencies, languages, and legal systems. Shortening settlement time will be much more difficult than in the U.S.,” they believe. However, once this is done, will investors demand the industry to shorten the cycle again? “Tokenization could be the next step if the industry seeks to further accelerate the cycle and offer a solution for real-time settlement. The broader asset management industry is looking at tokenization to increase efficiency and liquidity in trading alternative assets (such as private equity or fixed income) and unlock new sources of capital,” they argue.

In fact, EY points out that some providers have been exploring pilot projects to tokenize fund issuance and work on commercial, legal, and technological challenges before expanding this effort. “The FCA in the UK has announced that it is working with the industry, and the Investment Association in the UK recently published a roadmap for implementing tokenization in this area. Tokenization has the potential to fundamentally change the asset management ecosystem. It could enhance settlement speed and open new avenues for both investors and ETF managers,” they conclude in their report.

XP Expert, the Unmissable Conference, Witnesses the Duel Between Bernal and El Erian

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The largest investment conference in the world was held in São Paulo without much international attention, with Brazilians as the protagonists of their own achievement. More than 50,000 people and 250 exhibitors participated on August 30 and 31 in XP Expert, an event that showcases both quantity and quality, culminating in a showdown of experts: Alberto Bernal and Mohamed El-Erian.

The main peculiarity of XP Expert is that it should be unmissable, but the world doesn’t seem to know it, and even the Brazilians themselves don’t seem to care much. While XP’s domestic market is enough to amass a trillion reais in assets under management ($0.18 trillion), the scale of the proposal from both local and international asset managers is overwhelming, as is the event’s openness to global investment analysis and guest speakers.

The Inevitable Recession vs. A World with Five Years of Inflation

Alberto Bernal, Chief Strategist at XP Investments, strongly defends his position, kicking off his presentations with bold statements: “The pandemic didn’t change anything from the market’s perspective,” and we will return to low interest rates because the recession is already starting to show signs in the United States.

In the U.S., pandemic savings-driven consumption is depleting, job growth is slowing, and the statistics are lagging, hiding a disinflationary process that is greater than what is publicly reported.

For Bernal, a crisis or recession in the U.S. is inevitable. However, he argues that “it will be a different kind of recession, where families will still go out to eat but won’t order dessert to avoid spending too much.”

He also predicts that Donald Trump will win the next U.S. elections, favoring investment in small-cap companies. When asked if Trump would be inflationary, Bernal disagrees, saying that the Republican’s promise to reindustrialize the U.S. won’t be realized, nor will the retreat of globalization.

Just hours after Bernal’s talk, Mohamed El-Erian, Chief Economic Advisor at Allianz, presented a starkly different market vision. According to El-Erian, more inflation is expected over the next five years “because we live in a fragmented world.”

COVID-19 changed everything, creating a global consensus on the need for regulation and reindustrialization—both inherently inflationary processes.

El-Erian sees major transformations ahead in areas like life sciences, the environment, and technology: “The only way out for the world is to increase productivity and growth,” and improve wealth distribution.

“Everything is moving very quickly, and the proof is that when you ask tech leaders what the world will look like in the coming years, they admit they don’t know,” El-Erian added.

El-Erian didn’t comment on the upcoming elections but warned that if wealth isn’t properly distributed, frustration and anger will rise, undermining democracy through negative voting.

All Against the Fed, as If It Were So Simple…

Bernal and El-Erian shared one common point: both criticized the Federal Reserve, though for entirely different reasons.

Bernal believes the Fed is lagging in lowering interest rates, noting that there is too much liquidity in the market.

El-Erian, on the other hand, thinks the Fed’s biggest recent mistake was labeling inflation as “transitory.” He argues that we have inherited a market overly focused on monetary policy, a result of the 2008 crisis and massive central bank intervention.

Now, markets want governments to intervene less, which will only be possible through significant transformations. El-Erian doesn’t foresee a crisis or recession but warns of “damage” if growth fails to offset the enormous fiscal deficits of governments.

How to Invest?

Bernal, in his bold presentation, ventured to provide specific investment recommendations. He advised extending fixed-income durations, looking at low-coupon bonds—“the Microsofts or Googles”—and predicting they would yield rewards in a few years.

El-Erian took a more general approach to asset allocation, emphasizing that future liquidity will be more expensive. He posed two key questions for any investor: How resilient is my portfolio? And how is the world changing? Keeping an open mind will be crucial.

In the coming months and years, we’ll see whether these analysts’ predictions hold true. In one of the booths, a life-sized photo of someone who was always certain of his bets stood tall. That person had just turned 94 during XP Expert: Warren Buffet, with his famous quote, “Rule number 1: Never lose money. Rule number 2: Never forget rule number 1.”

BBVA Receives Green Light from UK Regulator to Take Indirect Control of a Banco Sabadell Subsidiary

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New advances have been made in the approvals for BBVA’s takeover bid (OPA) for Sabadell. The UK Prudential Regulation Authority (PRA) has given the green light for BBVA’s indirect acquisition of TSB Bank plc, Banco Sabadell’s UK banking subsidiary.

According to the bank, this authorization is one of the conditions tied to the purchase offer for Banco Sabadell’s shareholders and a necessary step to complete the deal, as TSB would become part of the BBVA Group.

BBVA submitted a purchase offer for Banco Sabadell shares to its shareholders on May 9th, and the process will begin once the necessary regulatory approvals are obtained. “Since then, BBVA has received approval for the operation from the competition authorities in several countries where Banco Sabadell operates (the United States, France, Portugal, and Morocco). The UK Prudential Regulation Authority, responsible for supervising around 1,500 entities, including banks and insurers, oversees TSB Bank, which is owned by Banco Sabadell,” BBVA explained.

Additionally, this authorization follows the Spanish regulator CNMV’s acceptance of the takeover bid for processing, “understanding that the prospectus and other documents submitted, following complementary documentation and modifications registered on 06/04/2024, comply with the provisions of the relevant article.” This does not mean the operation is final, but regulatory steps are being taken, as is customary in such cases. As Sabadell noted before the summer, the final decision will depend on the will of the shareholders.

Among the next steps before launching the purchase offer to Banco Sabadell’s shareholders is the approval of the offer by the European Central Bank (ECB) and the Spanish National Securities Market Commission (CNMV). Furthermore, the offer is conditioned on acceptance by the majority of Banco Sabadell’s share capital (a minimum of 50.01%) and approval by the Spanish competition authority (CNMC).

The Investment in Alternatives by AFOREs Is Growing in Amount, but the Percentage Remains Unchanged

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As the assets under management by AFOREs have increased, the resources allocated to alternative investments have also grown. However, the percentage these investments represent in the portfolio at market value remains low, not yet reaching double digits on average for all AFOREs, currently standing at just 7.8% of the $359 billion they manage (as of June 30). If commitments are considered, the percentage is higher, as only 58% of these commitments have been called.

To reach this 7.8%, in nearly six years, there has only been a 1.7% increase relative to assets under management (from 6.1% in 2018 to 7.8% in June 2024) when comparing in dollars. This equates to an average annual increase of 0.28% over six years. However, when looking at the growth in assets and alternative investments, the amounts are significant.

Over the past three years, the weighted percentage of AFOREs’ investment in alternatives has stabilized between 7.5% and 7.8%, with some individual cases sometimes approaching or exceeding 10%, while others are slightly above 4%.

Investments in alternatives rose from $10.3 billion at the end of 2018 to $27.8 billion by June 2024, representing a 2.7 times increase relative to the percentage growth during this period.

The assets under management by the 10 AFOREs ended June at $359 billion. The compound annual growth rate (CAGR) over five years (2018-2023) is 15.1% in dollars, while alternative investments had a five-year CAGR of 19.9%, a slightly higher percentage than the growth in assets under management.

Investments in private equity funds have been channeled both into Mexico (56% at market value as of June 2024) and internationally (44%). Regarding investments in Mexico, according to information published by Dario Celis (El Heraldo de México on July 31), the AFOREs invested $805 million in 12 combined cycle plants and a wind farm that the government purchased from the Spanish company Iberdrola. This investment is close to the average growth rate over the past six years (0.22% investment in Iberdrola vs. 0.28% average growth over six years), representing a significant amount invested in Mexico.

The market value of all alternative investments made in Mexico and internationally is $30.207 billion, according to public information from the 343 CKDs (133) and CERPIs (210) as of June 2024. Investments in Mexico made through CKDs represent 56%, while 44% is predominantly international since CERPIs invest at least 10% in Mexico.

The appetite for alternative investments by AFOREs is expected to increase as assets under management grow, and the percentage they represent is likely to approach the 9-10% range, which seems to be the level where AFOREs feel most comfortable.