Gold: What Could Trigger the Strongest Bull Market Since 1971?

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The price of gold has performed remarkably so far this year. To date, the value of the precious metal has increased by 12.58%, rising from $1,970 per ounce at the beginning of the year to $2,219 per ounce this week.

According to Bank of America’s latest report, gold could reach $3,000 in the next 12-18 months. Expectations of changes in the monetary policies of major central banks, the slow decline and control of inflation, and the ongoing demand as a safe-haven asset amid current geopolitical uncertainty are some of the reasons for its rise.

“We believe gold can reach $3,000 an ounce in the next 12-18 months, although current flows do not justify that price level for now. Achieving this would require non-commercial demand to increase from current levels, which in turn would need a reduction in the Fed’s rate. A flow into physically-backed ETFs and an increase in LBMA clearing volumes would be an encouraging first sign. Continued central bank purchases are also important, and a push to reduce the proportion of dollars in currency portfolios is likely to trigger more gold purchases by central banks,” states Bank of America in its latest report.

According to James Luke, a fund manager specializing in commodities at Schroders, gold has easily surpassed previous all-time highs and is currently trading above $2,300 an ounce, despite nearly uninterrupted sales by Western investors during 2023 and 2024. “Western liquidations have been offset by central bank, investor, and household purchases in the East. This shifting dynamic has been led by China but has not been limited to that country; demand increases have also occurred in the Middle East and elsewhere,” he notes.

Gold Equities

In his view, geopolitical and fiscal fragility today combine to forge a path toward a sustained and multi-faceted global push for gold supplies. “In our opinion, this could trigger one of the strongest bull markets since President Nixon closed the gold window in November 1971, ending the convertibility of the US dollar into gold,” adds Luke.

One nuance the Schroders manager adds is that, although gold prices have risen, gold equities have lagged behind the price of bullion. Luke explains that despite solid financial fundamentals driven by this gold bull market led by the East, valuations are nearing 40-year lows due to the poor Western view of gold and the poor operational results of some sector “leaders.” What could change this situation?

“It is no exaggeration to say that the gold mining sector could rise by 50% and still seem cheap. With a total market capitalization of $300 billion, the gold equity sector has been largely ignored, but we believe that is about to change. If there has ever been a time to include gold equities in a multi-year precious metals allocation, we believe it is now,” he explains.

Central Banks, Demand, and Gold

A relevant factor in the evolution of the gold price is the demand from central banks. According to BofA in its report, “encouragingly,” the latest World Gold Council Central Bank Survey confirmed that monetary authorities are looking to increase their gold purchases. “Long-term store of value/inflation hedge, performance during times of crisis, effective portfolio diversifier, and default risk absence make gold attractive. Although central banks’ motivations for holding gold may vary, they tend to have something in common: the proportion of dollars in their portfolios has been decreasing,” the entity notes.

In this regard, it adds that central banks have had various reasons for reducing their proportion of dollars, “including the realignment of currency denominations in reserves with the currencies with which countries actually trade and moving towards a multipolar world.”

Specifically, central banks—China, Singapore, and Poland, the largest in 2023—have been listening, although record purchases have only increased gold reserves from representing 12.9% of total reserves at the end of 2021 to 15.3% at the end of 2023.

When discussing gold demand, Luke notes that it is increasing among Chinese investors as the luster of the real estate sector fades. “Chinese households, who added trillions to a record excess savings in 2022 and 2023, are one of those players. The end of the thirty-year real estate bull market has been key to triggering a massive shift in attitude towards gold. The increase in investor preference for gold has mirrored the decline in the real estate sector. We doubt that the increased gold demand from households is a temporary phenomenon,” he argues.

Polarization and Gold

Finally, the Schroders manager highlights that the strength of gold reflects the shift towards a more polarized world, making it stronger as a safe-haven asset. Undoubtedly, the tightening tension between the United States and China, and the sanctions imposed on Russia following the invasion of Ukraine in 2022, have driven record central bank gold purchases as a monetary reserve asset.

“From a long-term perspective, central bank purchases well reflect the evolution of global geopolitical and monetary/fiscal dynamics. Between 1989 and 2007, Western central banks sold all the gold they practically could, as they were limited by the gold agreements reached by central banks to maintain order in sales after 1999. In that post-Berlin Wall and Soviet Union world, where US-led liberal democracy was booming, globalization was accelerating, and US debt indicators were frankly quaint compared to today’s, the demonetization of gold as a reserve asset seemed entirely logical,” argues Luke.

In his opinion, the more than 1,000 tons of gold (20% of global demand) bought by central banks in 2022 and 2023, a pace that continued in the first quarter of 2024, is potentially seismic. It seems entirely plausible that the current tense dynamic of established power/emerging power, combined with fiscal fragility looming not only over the US-issued reserve currency but over the entire developed economic bloc, could trigger a sustained move towards gold. “Bluntly put, the gold market is not large enough to absorb such a sustained move without prices rising significantly, especially if other global players also try to enter more or less at the same time,” concludes the Schroders manager.

Chilean Pension Funds (AFP) Purchase Over 3 Billion Dollars in Foreign Equities

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In 2024, Chilean pension funds have been increasing their positions in international equity funds. According to figures compiled by HMC Capital, they have acquired approximately 3.172 billion dollars net in the first five months of 2024, with a significant bias towards the U.S. and Asia, particularly South Korea and Japan.

Among purchases and sales, the fund managers have allocated 1.824 billion dollars to strategies focused on the U.S. stock market. Within this category, the preferred asset class is Large Cap Blend strategies, where they have allocated 1.729 billion dollars net. This is followed by Large Cap Growth with a net investment of 630 million dollars, and sector strategies with 168 million dollars.

Another area of interest for Chilean pension funds this year is Asia. The net investment in the region (excluding Japan) reached 838 million dollars as of May, with South Korea being the main destination. Investment funds injected 1.004 billion dollars into South Korean equity funds, in addition to allocating 420 million dollars to Indian strategies and 196 million dollars to Taiwanese equity.

Japanese equity strategies received a net inflow of 603 million dollars, mainly in the Large Cap segment (650 million dollars), according to the HMC report.

On the opposite side, net divestments have been concentrated in Latin America. Among the sales of Latin American and Small Cap strategies, investment funds recorded a net divestment of 408 million dollars in the region between January and May. In Brazilian equities, in particular, 229 million dollars were sold during this period.

The only exception is Mexico, where penson funds have allocated about 248 million dollars in 2024.

Debt Portfolio

The flows recorded during the first five months of the year in debt portfolios have been more moderate. Considering all types of fixed-income vehicles, pension funds have sold 61 million dollars net.

The largest sales have been concentrated in investment-grade strategies, with a net divestment of 589 million dollars, driven by sales in U.S. and global bond vehicles.

Convertible debt funds also saw outflows of 52 million dollars, according to HMC figures.

In contrast, the largest net investments were focused on emerging market debt, with 421 million dollars—particularly in local currency strategies, where they allocated 239 million dollars; financial bonds, with 96 million dollars; and high yield, with 49 million dollars.

Additionally, pension funds slightly increased their positions in money market funds, investing 188 million dollars net between January and May.

Preferred Investment Managers

Regarding the fund managers that received the most flows from Chilean pension funds in the first five months of the year, passive management firms have shone, receiving a total of 2.482 billion dollars net.

The main recipients have been iShares and Vanguard, capturing 1.545 billion dollars and 1.215 billion dollars, respectively. This brought the total AUM in iShares strategies to 11.5 billion dollars and Vanguard’s to 8.447 billion dollars.

In the case of active managers, Man Group has taken the crown, managing equity, credit, multi-asset, and real asset funds. As of May, HMC data shows that the seven pension funds in the Chilean system have allocated 1.047 billion dollars to the firm’s funds.

Other active managers that have seen significant flows in 2024 include Goldman Sachs, with a net investment of 875 million dollars; Baillie Gifford, with 633 million dollars; and Janus Hnderson, with 438 million dollars.

Assets Invested in the U.S. ETF Industry Reach 9 Trillion Dollars

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The global ETF industry continues to consolidate, especially in the world’s largest market, the United States.

That is why it is no coincidence that the largest ETFs in the world belong to the market of the leading global power; according to data from MarketScreener based on Bloomberg figures, the three largest ETFs in the world replicate the performance of the S&P 500.

The first is the SPDR S&P 500 ETF Trust, which was the first ETF listed in the U.S. in 1993. Its managed assets recently exceeded 500 billion dollars. Among its top holdings are Microsoft (7%), Apple (5.6%), Nvidia (5%), Amazon (3.7%), Alphabet (2%), Meta Platforms (2.4%), Berkshire Hathaway (1.7%), Eli Lilly (1.4%), and Broadcom (1.3%). Its fees are 0.09%.

The other two giants are the iShares Core S&P 500 ETF and the Vanguard S&P 500 ETF. The former has managed assets of 421 billion dollars, and the latter 404 billion dollars.

In this context, ETFGI, a leading independent research and consulting firm covering trends in the global ETF ecosystem, reported that at the end of May, assets invested in the U.S. ETF industry reached a new record of 9 trillion dollars.

The growth rate of the industry is another highlighted factor in the report; ETFGI notes that the most recent record was 8.87 trillion dollars, recorded just in March of this year. The evolution of assets in 2024 is very positive, as figures show that assets increased by 10.9% so far in 2024, rising from 8.11 trillion at the end of 2023 to the recent 9 trillion.

In May alone, the U.S. ETF industry recorded net inflows of 90.57 billion dollars, bringing the year-to-date total to 358.17 billion dollars, according to ETFGI’s U.S. ETF and ETP industry outlook report.

The net inflows mentioned above, totaling 358.17 billion dollars, are the second highest on record after the 399.1 billion dollars reported in the same period of 2021. Additionally, the report notes that the U.S. industry has reported 25 consecutive months, over two years, of positive net inflows.

This boom in the U.S. ETF market partly explains the surge in equity markets; at the end of May, the S&P 500 index rose 4.96% in May and 11.30% year-to-date in 2024. Excluding the U.S. index, developed markets reported a gain of 3.62% in May and 6.09% year-to-date.

At the end of May, the U.S. ETF industry had 3,531 products from 330 providers listed on three exchanges. ETFGI explains that the substantial inflows into the U.S. market can be attributed to the top 20 ETFs by new net assets, which collectively raised 49.62 billion dollars during May. SPDR S&P 500 ETF Trust (SPY US) raised 8.99 billion dollars, the largest individual net inflow.

Principal Puts Chile at the Heart of Its Wealth Management Strategy in Latam

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(cedida) Rocío Silva, gerente de Desarrollo de Negocios y Servicios Digitales de Asset Management de Principal Chile
Photo courtesy

Although gaining more prominence now, the existence of independent investment advisors is not new in Chile. At Principal AGF, the local asset management branch of the financial group of the same name, they have been working with this market segment for over 20 years. Moreover, after a structural change that left the Wealth Management business in Latin America operating as a unit, the Chilean branch is leading the regional wealth management strategy.

“We have always sought to continue positioning this type of advisors,” says Rocío Silva, Manager of Business Development and Digital Services for Asset Management at Principal Chile, in an interview with Funds Society. In addition to their network of proprietary advisors, the firm has a network of independent advisors.

This unit, explains Silva, is part of Principal AGF, which encompasses the asset management business in the Andean country. This firm includes a commercial team dedicated to investment advisors, led by Ariel Teplizky, Commercial Manager for Santiago, and Felipe Prieto, Commercial Manager in charge of other regions of the country.

Four years ago, they named the network of independent advisors Principal Global Advisors, but this month saw significant changes. A few weeks ago, the company revamped the platform, adding commercial standard and ethics pillars aligned with regulatory requirements. This comes at a time when the Financial Market Commission (CMF) is beginning to oversee the industry, establishing new rules to operate as a financial services provider.

But the change goes beyond that, according to Silva. They also consolidated it with the entire Latin American platform of the U.S.-based firm.

“Principal changed its operating structure,” narrates Silva. Although the firm remains a global platform, it formalized that the unit would operate at a Latin American level. “Not as Brazil, Mexico, and Chile, but as a regional unit with a local presence in different countries,” she explains.

Although Brazil is more advanced in this business than the Andean country, its way of interacting with advisors is different, mediated through a platform. For this reason, Silva points out that the firm decided to lead the entire Wealth Management strategy and the “wealth management concept through our investment advisors, with local market knowledge” from Santiago.

The Firm’s Strategy

“Of these countries, Chile is the one with the most knowledge of the Wealth Management segment and the independent advisor industry,” notes the professional.

Principal AGF’s strategy in this market is to provide a variety of tools to their advisors and a support team dedicated exclusively to serving this segment.

“For us, independent advisors or service providers are crucial for the growth of our market share and capturing clients,” explains Silva, adding that this is part of the firm’s “diversified business strategy” for asset management.

It’s a market that “will grow,” according to Silva, and they already have a share of around 25%, based on the 1,200 accredited advisors registered at the time of this interview.

A significant part of the firm’s value proposition in this segment is technology. The digital platform Averta is aimed exclusively at advisors and concentrates the technological tools offered to independent advisors.

This need, adds Silva, became even more prevalent in the post-pandemic world, which boosted the use of digital solutions.

Additionally, the firm is also using technology for the strategic support aspect of advisors. Together with its specialized team focused on the segment, Principal AGF is preparing to launch its first AI-powered chatbot next month. This tool—exclusive for advisors—will be able to resolve queries about the platform and certain product topics.

Regulatory Burden

One of the leading topics in the independent advisor industry in Chile currently is the new regulation governing the industry, which imposes new requirements to operate as financial service providers under CMF supervision.

In this context, the Manager of Business Development and Digital Services for Asset Management at Principal Chile highlights the importance of providing resources to independent advisors to navigate regulatory demands.

“Service providers working with us have found it quite easy to gather the information,” notes Silva, thanks to the tools grouped in Averta. These include all the advisory services they have provided, legal notices for end clients—for example, warnings about investments outside their risk profile—cybersecurity, compliance, data handling, and accreditation education, among others.

“The support they have with us will enable them to comply with the regulation,” says Silva, adding that “this facilitates their connection with the regulator” for independent advisors.

In any case, Principal has a positive view of the industry’s formalization. “It’s a very good thing for the industry,” Silva comments, as it raises standards on the requirements to be a financial service provider and allows them to form a group capable of participating more formally in the industry.

An example of this, she adds, is the formation of the first trade association of advisors, the Chilean Association of Investment Advisors (ACHAI), recently established.

“For them, formalizing is very powerful because they will have a voice in the financial asset industry. Previously, they didn’t have it because they were ungrouped,” she indicates.

Special Purpose Vehicle (SPV): An Advantage or a Disadvantage When Investing in Private Markets?

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According to a survey conducted by CSC among professionals working in private markets, 29% believe that the necessary conditions are in place for an increase in investments and deals. Additionally, 46% think that the market context will improve in the next two to five years, which will lead to an increase in special purpose vehicles (SPVs), also known as special purpose entities.

The study, whose authors assert that SPVs play a fundamental role in optimizing investments in private markets, provides a geographical perspective. For instance, respondents in the Asia-Pacific region are the most cautious, with only 16% believing that market conditions will improve within a year or are already improving. This contrasts with North America and Europe, where 37% and 33%, respectively, already see improvements or expect improvements within a year.

Among other key findings of this survey is the significant role that SPVs and private debt are playing in increasing investment in private markets. Specifically, 67% of debt professionals believe that market conditions will improve in the next two to five years.

“Our study has found a much more optimistic sentiment among senior professionals in private markets after years of significant market volatility, which bodes well for the broader investment sector and the global economy. Private debt professionals were much more optimistic than their colleagues in other sectors. This supports the trend we are seeing more generally in the market, which is leaning towards private debt,” says Thijs van Ingen, Global Market Head of CSC Corporate and Legal Solutions.

CSC’s study comes at a time when private markets have begun to recover after significant volatility and headwinds in recent years. The firm notes that the use of SPVs, critical structures at the heart of the global investment system, has also grown, but so has the complexity faced by managers due to increased multi-jurisdictional regulation, stricter reporting requirements, and the need for richer levels of data granularity.

According to Delphine Jones, Managing Director of CSC Client Solutions, SPVs have become increasingly complex and involve more management work. “The SPV ecosystem has also become relatively inefficient, with a lot of unnecessary complexity. It is in this environment that outsourcing to specialized SPV administrators is also growing,” Jones comments.

This complexity has led many firms investing in private markets to opt for outsourcing part of the management of these special vehicles. In this regard, the CSC survey shows that the main criterion for outsourcing is “finding a good administrator,” according to 66% of respondents. Other criteria mentioned, in order of relevance, include finding a reputable administrator, technology and data and reporting capabilities, and access to a sophisticated technology platform. Additionally, respondents involved in real assets like private equity and debt indicated that they would like technology to provide a centralized portal for a single view of all SPVs (57% and 59% respectively).

“Many cited technology as an important factor when selecting their SPV administrator, highlighting the importance of technology in SPV management. This includes optimizing deal sourcing, investment, helping portfolio performance, and many other areas. Regardless of the strategy, fund managers aim to have a technology-enabled approach and seek to achieve an all-in-one administrative solution as much as possible. While it may seem advantageous to use multiple outsourcing partners, having too many partners can actually make processes even more complex. Consolidating their SPV administration to a single global outsourcing partner helps to optimize their processes,” concludes Thijs van Ingen.

Invesco Launches a New ETF Focused on China’s Most Innovative Companies

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Invesco has announced the launch of Europe’s first ETF providing investors with specific access to the ChiNext 50 Index, composed of the largest and most liquid companies in China’s technology and other innovative sectors. According to the asset manager, the Invesco ChiNext 50 UCITS ETF will replicate a capped version of the index to reduce concentration risk and ensure sufficient diversification.

Following this announcement, Gary Buxton, Head of EMEA ETFs at Invesco, highlighted one of the advantages of their global business model is having a strong local presence in the world’s major financial centers. “In collaboration with Invesco Great Wall, our joint venture investment management company in mainland China and a leading specialist in the Chinese market, we are pleased to announce, together with the Shenzhen Stock Exchange, the launch of a UCITS ETF linked to the ChiNext 50 Index. Our new ETF provides investors with unique access to China’s long-term growth potential, particularly given its focus on the innovation-driven transition to a new economy. As the ChiNext 50 Index celebrates its tenth anniversary in June, this ETF also marks a milestone in the index’s overseas expansion, accelerating the internationalization of Chinese A-shares,” Buxton added.

The asset manager believes that China is one of the fastest-growing markets in the world, with steady progress in key areas of economic growth, including technology. The country’s current five-year plan includes a goal to increase research and development (R&D) spending by at least 7% per year from 2021 to 2025, focusing on areas expected to yield high-value patents. For equity investors, increased R&D spending can be a significant driver of corporate earnings growth.

The ChiNext 50 Index reflects the performance of 50 of the largest and most liquid companies listed on the ChiNext market of the Shenzhen Stock Exchange. The capped index replicated by Invesco’s ETF comprises the same securities as the parent index but applies limits such that, at each quarterly rebalance, no individual security can have a weighting greater than 8%, and the aggregate weighting of securities with weightings above 4.5% cannot exceed 38%.

“While the index is not subject to explicit sector restrictions or requirements, investors can logically expect an overweight in technology, industry, and healthcare. The fund will invest in companies from rapidly growing innovative segments such as artificial intelligence, electric vehicles, renewable energy, robotics, automation, and biotechnology. Compared to broader Chinese indices, the average company in the ChiNext 50 Index has used more than double its operating income over the past six years for R&D financing to drive innovation,” highlighted Laure Peyranne, Head of ETFs Iberia, LatAm & US Offshore at Invesco.

The ETF will employ a replication method that aims to hold, as far as possible and feasible, all the securities in the index in their respective weightings but will use sampling techniques in circumstances where this is not reasonably possible.

Amicorp Capital Market hires Luis Gustavo Vernet as Commercial Director for Latam

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Amicorp Capital Markets Latin America announced via LinkedIn through its Managing Director, Martín Improta, the hiring of Luis Gustavo Vernet as Commercial Director for Latin America.

“I have the pleasure and joy of sharing with you that the Capital Markets LATAM team of Grupo Amicorp is growing!! Welcome Luis Gustavo Vernet as Commercial Director of Capital Markets for LATAM,” wrote Improta on the social network.

As a subsidiary of Grupo Amicorp, Capital Markets offers a wide range of corporate management, fund, and capital market services to clients around the world.

The company highlights that its clients include intermediaries, corporations, small and medium-sized enterprises, and startups, to whom it offers local knowledge of the constantly changing rules and regulations, enabling them to carry out their activities without legal setbacks.

The group offers services in capital markets, funds, as well as global management and financial services in the markets where it operates.

Before taking on the challenge of leading the commercial direction for Latin America at Capital Markets, Luis Gustavo Vernet served as Coordinator for Latin America of capital market services at TMF Group, where he worked for nearly 13 years.

His experience extends to other companies related to financial services, and he is a graduate of the Pontificia Universidad Católica Argentina.

Ignacio Gutiérrez-Orrantia, New CEO of Citibank Europe

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Citi has appointed Ignacio Gutiérrez-Orrantia as Chief Executive Officer of Citibank Europe Plc. (CEP). Based in Dublin, Ireland, Citibank Europe Plc. is one of Citi’s largest legal entities and its primary banking subsidiary in Europe. As explained by the entity, Gutiérrez-Orrantia assumes this role in addition to his current position as Head of Cluster and Banking in Europe, a role he has held since November 2023.

As Head of Cluster and Banking in Europe, Gutiérrez-Orrantia is responsible for managing Citi’s client relationships across Europe, overseeing all businesses, and maintaining a strong risk and control environment. As CEO of CEP, a vital part of his role will be to lead Citi’s European banking subsidiary and foster strong relationships with European regulators.

Gutiérrez-Orrantia has also been appointed Vice Chairman and member of the Supervisory Board of Bank Handlowy w Warszawie S.A. (Citi Handlowy) (MC: 3.43 billion USD). Additionally, Natalia Bozek, CFO of CEP and Europe, and Fabio Lisanti, Head of Markets in Europe, have been appointed to the Supervisory Board of Citi Handlowy. Citi Handlowy, a subsidiary of CEP, is one of Poland’s largest financial institutions.

Gutiérrez-Orrantia has over 30 years of experience in financial services. He has been with Citi for 20 years and was recently co-head of Citi’s Banking, Capital Markets, and Advisory business in Europe, the Middle East, and Africa (EMEA), where he led a team of more than 2,000 bankers across 54 markets. During this time, he has led some of Citi’s largest investment banking transactions in the UK and EMEA.

Following this announcement, Ernesto Torres Cantú, Head of International at Citi, stated: “The appointment of Nacho as CEO of Citibank Europe plc, in addition to his responsibility as Head of Cluster and Banking in Europe, combines the growth of our client business in Europe with the responsibility of having industry-leading risk and control, and managing our European legal entities. Nacho’s leadership in these critical areas of our business will support our simplification plans and ensure his accountability for all our activities in Europe. He is an exceptional banker, highly respected for the advice and insights he provides to clients. His experience, combined with the strength of Citi’s global network and services, ensures that we are well-positioned to build on the positive momentum we are achieving in Europe.”

For his part, Nacho Gutiérrez-Orrantia added: “I am delighted to be appointed CEO of Citibank Europe plc. We have exceptional talent here and employ nearly 18,000 people. Citi has a great opportunity to deliver our unparalleled global network to our European and global clients. I am confident that we will be the leading international bank in Europe.” Citi has had a presence in Europe for over 100 years and operates in 24 countries in Europe, serving clients in 18 more.

BBVA AM Puts the Affluent Client at the Center of Its Strategy in Peru

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(cedida) Antonio Cevallos, CEO de BBVA Asset Management Perú

After months of rate cuts and positive inflows, the Peruvian mutual fund industry anticipates a strong 2024, and BBVA Asset Management is no exception. Leading the increase in AUM, according to the firm’s CEO in the country, Antonio Cevallos, the company is focusing on expanding the affluent segment through a comprehensive advisory model they call “prime banking.”

“We are the leaders in YTD growth, with over 25% growth in total AUM. For five months, that is a quite significant number,” the executive stated in an interview with Funds Society. One of the differentiating factors, he added, is that they reinforced their offering for the affluent segment, which they had previously only promoted “timidly.”

“We are putting a lot of focus on our affluent banking, prime banking,” he explained, adding that this involved a relaunch of the segment and a new internal structure. Rather than increasing their commercial or financial advisor workforce, the top executive described it as “creating not-so-large teams of advisors with more of an investment bias to support these prime bankers.”

Thus, with a mix of technology—anchored in the BBVA app—and advisors who incorporated more investment products into their portfolio, the firm redefined its offering for clients with a “more holistic focus.” The firm’s strategy is to offer financial and non-financial products, “with an advisory nuance,” through a team of specialized bankers and advisors.

The Conquest of the Affluent

For BBVA, this client segment includes those who fall below the traditional private banking range, which they designate at over $500,000. On average, Cevallos described, they handle between $100,000 and $150,000. The asset class bias, meanwhile, leans towards cash and fixed income.

And the results justify the effort. Of the net flows accumulated this year, around two-thirds come from prime banking. “It is a segment that has captured a significant portion of the AUM and is bearing fruit,” stated the CEO of the asset manager, adding that clients are valuing this “more holistic” proposal.

Moreover, it is a category with growth potential, according to BBVA AM. “In all mutual funds, our total number of clients is over 100,000,” he explained, while for the prime segment, they have “mapped” 35,000 clients.

This aligns with the historic strategy of the Spanish parent company, which has previously ventured into attracting retail investors. “We have been strong there and have gradually climbed up the pyramid,” the professional commented.

Other Focus Areas

Another segment they are looking at with interest is corporate clients, which involves managing companies’ cash.

“At other points in the cycle, they have been quite significant,” Cevallos described. During 2021 and 2022, the spread between funds and time deposits led companies to banks. Today, however, “we have started to see a return at the system level,” he said.

Currently, the segment values that mutual funds offer more diversified products with different terms. “That allows us to stay above what a traditional deposit offers,” at a time when mining companies, for example, which are significant in the Peruvian market, have “significant surpluses” due to a positive cycle.

At the product level, they are focused on defined-term products, mainly in dollars, taking advantage of the interest rate situation; and on complementing their product portfolio in currencies, terms, and global strategies, particularly in fixed income in dollars.

Morningstar Data Shows Renewed Interest in Risk: Record Inflows Into Equities and Notable Outflows From Money Market Funds

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According to the latest data collected by Morningstar, in May, investors showed a positive sentiment, possibly driven by hopes of interest rate cuts and positive macroeconomic data on economic growth, investing 54 billion euros in funds domiciled in Europe. In terms of flows, this figure makes May the best month so far in 2024.

Among the trends observed in May, global equities strongly recovered from the previous month’s losses, with developed markets outperforming emerging markets overall. “Investors continued to anticipate interest rate cuts, despite the US Federal Reserve keeping interest rates unchanged once again in May, with Chairman Jerome Powell indicating that easing was postponed but not canceled. In fact, the decline in US inflation has stalled in recent months, highlighting that the final stretch towards 2% inflation will be difficult for the Fed. Conversely, in Europe, a more moderate narrative emerged, with the market anticipating the European Central Bank meeting in June where a rate cut was widely expected, though the path beyond this remains less clear,” Morningstar explains in its report.

Notably, long-term index funds recorded inflows of 33.1 billion euros in May, compared to the 20.8 billion euros gained by actively managed funds. According to Morningstar, last month, none of the broad global category groups experienced outflows from either passive or active strategies. “The market share of long-term index funds increased to 28.25% in May 2024 from 24.93% in May 2023. Including money market funds, which are dominated by active managers, the market share of index funds stood at 24.57%, compared to 21.78% 12 months earlier,” they indicate.

Regarding the major players, the data shows that global large-cap blend equity funds were by far the best-selling in May, with Mercer Passive Global Equity CCF raising 1.4 billion euros in new net funds during the month. “Global large-cap growth equity funds and US large-cap blend equity funds followed at some distance,” they add.

In the case of passive management, BlackRock’s ETF provider, iShares, topped the list of asset gatherers last month, with net inflows of 8.4 billion euros in May. The iShares Core S&P 500 ETF was the best-seller, attracting 1 billion euros. Capital Group and J.P. Morgan secured the second and third largest inflows in May, with 6 billion euros and 4.6 billion euros, respectively.

Analysis of Flows

In this context, it is noted that investors showed a very positive sentiment towards equities in May, with equity funds receiving 30 billion euros, the best monthly result in terms of flows since January 2022. “Passive strategies took the majority, with 20.3 billion euros in net inflows during the month. Nonetheless, active equity funds managed to capture 9.7 billion euros, ending a 14-month period of net monthly outflows. Global large-cap equity funds were by far the most sought-after products last month,” they highlight.

Regarding bond funds, they received 30.2 billion euros in May, the eighteenth month of positive flows in the last 19 months. It is noteworthy that both passive and active strategies shared the benefits, with net inflows of 12 billion euros and 18.3 billion euros, respectively. In this regard, the Morningstar report clarifies: the fixed-term bond category was the best-seller in May, followed by very short-term euro bond funds.

In contrast, May data shows that allocation and alternative strategies continued losing assets with net outflows of 4.1 billion euros and 1.2 billion euros, respectively, in May. “Allocation strategies have had only one positive month in terms of flows since December 2022. Meanwhile, alternative funds have experienced net outflows every month since June 2022,” they explain. On the other hand, commodity funds had net inflows of 515 million euros and, finally, money market funds lost 3.7 billion euros last month, “confirming a renewed appetite for risk,” they highlight.

Sustainable Investment

Lastly, the report notes that funds within the scope of Article 8 of the Sustainable Finance Disclosure Regulation had net inflows of 18.7 billion euros in May, the best monthly result since December 2022. “Global large-cap blend equity funds were the main driver, as well as global small- and mid-cap equity products,” it points out. At the same time, funds falling under Article 9 lost 617 million euros in the month.

As Morningstar explains, from an organic growth perspective, Article 8 funds showed an organic growth rate of 0.73% so far this year. On the other hand, products in the Article 9 group had a negative organic growth rate of 2.40% in the same period. Between January and May, funds not considered Article 8 or Article 9 under the SFDR had average organic growth rates ranging from 0.13% to 2.69%.