Chile and Argentina: Two Examples of How to Connect LatAm and Luxembourg

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ETF adoption relevance
Photo courtesyFelipe Díaz Toro (EDN Abogados), Beltran de Ramon Acevedo (Comisión para el Mercado Financiero (CMF)), Camila Guzman Novak, CFA (LarrainVial Asset Management), and Mauricio Larraín Errázuriz (Universidad de los Andes - Colombia, Chile)

The assets of Latin American pension funds are becoming increasingly large, but also more international. Some significant data reflecting the scale of this opportunity can be found, for example, in Mexico, where foreign securities represented approximately 15% of the total assets of Afores, which reached $488 billion at the end of 2025.

Even more relevant are the figures from Colombia, where approximately 49% of the assets of mandatory pension portfolios were invested abroad last year; and those from Chile, a country in which 51.7% of the assets of its pension funds are invested abroad; this implies approximately $123.7 billion overseas and $115.6 billion in the domestic market.

This growth translates into a business opportunity for Latin American firms, which clearly see the value in having strong access to UCITS products or even launching vehicles domiciled in Europe. But it is also an opportunity for European firms, which see a way to bring international investors closer to investing in the Latin American local market.

“We see greater demand from pension funds to invest abroad, with the Luxembourg jurisdiction attracting the most interest; and this is a trend that extends across the entire region. This type of institutional investor considers Luxembourg a solid hub, with stable, transparent legislation that is connected to the rest of the world,” recently highlighted Felipe Díaz Toro, Managing Partner at EDN Abogados, during an event organized by the Association of the Luxembourg Fund Industry (Alfi, by its English acronym).

Chile, a bet on modernization

For experts, Chile is a clear example of this trend. On the one hand, it is worth noting that its fund industry has undergone a very significant transformation which, in Díaz’s view, is driving capital markets toward clear modernization and internationalization. “We have a new government, a very professional business environment, and a highly ambitious agenda. The current pension reform will allow for an increase in assets and in the range of investable assets, with a particular focus on private markets. On the other hand, we see that Chilean firms are internationalizing their strategies, thinking not only about local players, but also about European and global players,” explained Díaz.

As a result, Chile already has a significant onshore fund industry, with alternative investments at its core: $37.9 billion in public investment funds (March 2025); and $7.2 billion in assets under management in private investment funds (June 2024), with 27% in private equity, 26% in real estate, and 17% in private debt.

According to Díaz, this new phase generates very interesting business opportunities between Chile and the Luxembourg fund ecosystem: “Opportunities for collaboration are opening up in the presence of Chilean capital in global markets; and also for capital from the rest of the world in the Chilean market. In the first case—when pension funds want to invest in global activities or vehicles—there is increasing use of platforms structured in Luxembourg and UCITS vehicles. In the second case, European structures can provide access to participate in the development of the Chilean market, alongside local agents with all the expertise that entails,” he argued.

The clearest example of this two-way trend is the business of LarrainVial Asset Management. As explained by Camila Guzmán, Portfolio Manager LatAm Equities at the firm, who also participated in the same Alfi event, the shift in the Chilean industry toward managing invested assets locally has built a strong sector with high standards; “now we need vehicles to invest abroad, and Luxembourg has them.”

Currently, its structure in Luxembourg is fairly standard among Latin American asset managers seeking international distribution, as it combines UCITS vehicles domiciled in Luxembourg with delegated functions and a global distribution platform. “We came to this hub because pension funds have very high standards, and here they matched their requirements. We had to ‘climb’ a great mountain at the beginning, but once you achieve it, you obtain this important structure that allows you to compete globally. It was very interesting, because when we had the opportunity to reach offshore institutional investors, that was when we left Chile and tried to diversify our client base. It was a major effort. We began coming to Luxembourg to meet foreign investors in 2016, and at first they were not very receptive to talking about Chile, but this has been changing. Now, the perception is that we are dealing with a relevant country within the global emerging markets universe,” she noted.

She added: “In recent years, we have seen more investments coming from global emerging market funds, and they have done so with more regional managers. That is where we come in as well. We are now one of the largest players in Latin American equities globally, thanks to pension funds, but also to the standards that are established.”

Argentina: potential to be developed

Within the region, Argentina’s fund industry also stands out. As explained by Valentin Galardi, president of the Argentine Chamber of Mutual Funds (CAFCI), the sector faces significant changes that, following Chile’s example, aim to modernize it and open it up to international capital and trust. “For us, it was unimaginable to be in Luxembourg presenting the possibility that 14 funds could be an option for Argentine investors, especially considering that our Mutual Fund Law was created in 1962. However, in 2024 the fund industry in Argentina (mutual funds, FCI) experienced relevant changes in three areas: asset growth, product transformation, and regulatory adjustments linked to the new macroeconomic context,” Galardi shared during his participation in the Alfi event.

In his view, one of the key indicators of where Argentina’s fund industry is heading is the creation of new categories, both of funds and investors. “On the one hand, a new category of funds has been introduced—FCIs for qualified investors—which have fewer investment limits and can invest in more complex assets, international markets, and less liquid structures. Secondly, a new category of funds with international exposure has been created through registered local FCIs, opening an international gateway,” Galardi highlighted as the main changes.

Galardi remains optimistic and confident in the steps the industry is taking, particularly the regulator, toward greater openness. “We have 22 million investors ahead of us; it is a great responsibility.”

“The Relevance of ETF Adoption Has Never Been as Strong as It Is Today”

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Yoni Meyer at Insight Partners
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The growth of ETFs seems to have no ceiling, but far from being a passing trend, it reflects structural transformations in the way investors, advisors, and managers build portfolios globally. For Deborah Draeger, co-head of the South Chapter US of Women in ETFs, the current moment combines the maturity of the vehicle, accelerated innovation, and an increasingly strategic role for the US Offshore market.

“ETFs have already demonstrated their resilience even during periods of high market turbulence,” she states. More than three decades after the launch of SPY, the first ETF in the United States, the initial debate between active and passive management, or between ETFs and mutual funds, has given way to a much more pragmatic adoption. “Today, the discussion is not whether to use ETFs, but how to use them better,” she summarizes in an interview with Funds Society.

One of the clearest drivers of this expansion has been the shift in the profile of the institutional investor. According to data cited by Draeger, 67% of institutional investors already use ETFs frequently or extensively, mainly for liquidity management and hedging. This is complemented by the evolution of the retail investor, where ETFs have ceased to be tools for small portfolios and have taken on a central role even in households with more than $10 million in assets.

Within this process, the US Offshore market plays an increasingly relevant role. “There is a clear tax benefit for foreign investors in using UCITS ETFs instead of US-listed ETFs, something that for a long time was not fully understood,” she explains. As awareness of these advantages grows and the UCITS universe expands—including accumulating structures—adoption accelerates, especially among advisors managing international wealth.

This dynamic is reinforced by regulatory and operational developments in Latin America. The expansion of cross-listing schemes, such as the SIC (International Quotation System) in Mexico, and similar advances in Chile, Colombia, and Peru, have facilitated access to ETFs and reduced operational friction. “With a greater selection of products and easier trading, more investors adopt ETFs,” notes Draeger.

From the asset managers’ perspective, the attractiveness of the offshore channel lies not only in its current growth, but also in its long-term potential. “The growth of the US offshore market to date and its potential for continued growth is what is attracting managers’ attention,” she says.

Factors such as political uncertainty in some countries, the search for greater security in asset custody, and the breadth of investment options available in the United States continue to drive flows toward offshore structures. At the same time, international managers are strengthening their presence both in hubs such as Miami and Houston and in Latin American markets.

Draeger offered this example: according to a conversation with a major brokerage firm, 80% of its US offshore business comes from Latin America. Within the region, ETF demand can vary and be affected by regulation.

In terms of products, innovation is constant. Draeger highlights the advance of active ETFs, whose year-over-year growth exceeds that of passive ETFs, as well as the development of derivatives-based ETFs, buffer ETFs, and more sophisticated fixed income strategies. “The industry is moving toward solutions that allow for greater customization and better risk management, something especially relevant for high-net-worth offshore clients,” she notes.

Looking ahead, she anticipates that the next wave of growth will come from innovation in fixed income, multifactor structures, and derivative products, always with a central challenge: education. “The key will be to explain these products clearly and accessibly, so that advisors can use them responsibly,” she indicates.

LEER LA REVISTA

Insight Partners Appoints Yoni Meyer to Lead Capital Raising in Latin America

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Networking, Capital, and Strategy: CAIA Brings Together Industry Leaders in Miami

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Miguel Zablah
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On April 15, CAIA held its annual networking event at Hutong, Miami. Karim Aryeh, Miguel Zablah, and Brian Heimowitz, members of the CAIA Florida Board of Directors, organized the Spring 2026 networking session, an event that once again brought together nearly one hundred professionals from the alternative investment sector in the U.S. city.

Sponsored by KKR and with Funds Society as a media partner, industry participants spent an afternoon at Hutong, the venue specializing in Northern Chinese cuisine, where they met and built networks.

KKR Team: Jaime Estevez, Jordie Olivella, Jose Nieto, and Lucia Paris

Karim Aryeh, executive of the CAIA Florida chapter and director at Deutsche Bank, was in charge of welcoming attendees. In a brief speech, he recalled that the Chartered Alternative Investment Analyst Association has 13,000 members around the world, more than 400 of whom are based in the state of Florida.

Karim Aryeh emphasized CAIA’s main mission: to promote education and transparency in the sector, and to create a community of professionals in the alternative investment industry.

Then, Jordie Olivella, Managing Director at KKR responsible for Americas ex-US Wealth, gave a brief introduction to KKR, highlighting the recent opening of its new offices on Brickell Avenue.

In that setting, among appetizers and good company, industry professionals made new connections within the South Florida investment community.

CAIA Florida, founded in 2016, aims to grow, strengthen, and promote education in alternative investments, as well as foster networking among local investment communities across the state.

J.P. Morgan Anticipates That Expansion Phase in ETFs Is in Early Stage

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expansión de ETFs
Photo courtesyJon Maier, Chief ETF Strategist, at J.P. Morgan Asset Management

The world of ETFs is experiencing a revolution that is possibly still in its early stages, despite the notable increase in the global trading of this type of instrument. Jon Maier, Chief ETF Strategist, and Carlos Brito, Head of ETFs LatAm, at J.P. Morgan Asset Management, spoke with Funds Society about the evolution of the market, its present, and its future.

Exponential Growth

Since these instruments were created, they have recorded exponential growth, but especially in the years of the present century, asset management in ETFs has multiplied in the United States, the most important market in the world, and in the rest of the markets.

The first ETF in history was launched in 1993, an instrument indexed to the S&P500, according to J.P. Morgan, and since then exceptional growth has been recorded.

“If we consider from 1993 to date, we observe that since the year 2000 there has not been a five-year period in which ETFs have not doubled their assets under management; the 13.6 trillion dollars in assets in the U.S. ETF market far exceed an economy as important as Mexico’s, which last year reported a GDP of around 1.85 trillion dollars,” says Jon Maier.

“Additionally, if we consider that globally assets under management amount to just over 20 trillion dollars, then we could say that if the ETF market were an economy, it would be the second most important in the world, only surpassed by that of the United States, which is worth around 25 trillion dollars, and above the Chinese economy, which is close to 18 trillion,” explains Carlos Brito.

“This speaks to the adoption that ETFs have recorded worldwide, with exponential growth. But we also consider that this is just the beginning because one of the major trends focuses on the entire area of active ETFs, which are ETFs that are no longer indexed, no longer replicate an index, but rather have a portfolio manager,” says Carlos Brito.

“We carry out a fundamental analysis of which companies we believe have the most value, and those companies are given overweight in the portfolio, while those we are not confident in will have an underweight or will not even enter the portfolio,” says Jon Maier.

We are facing the evolution of the market in another phase that could certainly further boost trading and drive other regions beyond the United States and Europe, the latter considered the second most important market.

Active ETFs, the Great Structural Change

The boost in the ETF market in recent years is not only the result of the need for diversification and the search for returns in investments; there were additional factors, and perhaps more important ones, that explain it.

“In 2019 there was a structural change in the ETF market; what happened was that the SEC in the United States greatly relaxed the rules for launching active ETFs (ETF Rule 2019); for example, in the use of derivatives, it also made it possible for certain participants, such as brokers, who as liquidity providers can create new ETF shares,” explained Jon Maier.

“So those brokers, instead of delivering a specific basket of stocks, can deliver a basket that may include some stocks along with some cash, and if the portfolio manager agrees, they accept that basket. That gave it a lot of flexibility and triggered the active ETF market,” said Carlos Brito.

The Future Is the Present

Transparency, liquidity, and cost efficiency are just some of the characteristics that have driven ETFs to perhaps become the most attractive investment vehicle in global portfolios today. And it is likely what will maintain interest for a long time.

For J.P. Morgan’s strategists, the exponential growth of the ETF market is still in its early stages, despite all the progress made and the figures showing increasing flows.

“The vast majority of active ETFs, for example, are 100% transparent. We know exactly what the ETF is invested in in real time; that does not happen with mutual funds. For us, the ETF is today a much better technology than the mutual fund.”

Flows into the market are growing exponentially in the ETF market, and in the segment of active instruments this is growing more every day; today, out of every dollar that enters the market, 42 cents go to active ETFs—almost half of the new money in the United States is going into this type of option.

Likewise, J.P. Morgan’s strategists believe that the adoption of active ETFs in fixed income still has room to grow.

“We believe that many benchmarks are constructed in such a way that what happens now is that the largest companies have the largest percentages of the portfolio, but it is very likely that given the high levels of debt, there is a lot of opportunity to select which companies we want and which we do not in the portfolio; that still remains,” explains Carlos Brito.

“And then, we believe there is another very powerful force, which is this transition toward changes with the financial advisor; previously these advisors operated opaquely, today in the United States there is a transition toward a model of much greater transparency, which will benefit the market because it creates the incentive for the banker or advisor to have the most efficient investment models.”

Thus, while it is true that the ETF market has already experienced explosive growth, we are only seeing the first phases, conclude J.P. Morgan’s ETF strategists.

Fiscal Policy, Public Debt, and Yield: The Pending Debates in the Fixed Income Market

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Principal Latin America institutional clients
Photo courtesyMarco Giordano, Investment Director at Wellington Management

In the view of Marco Giordano, Investment Director at Wellington Management, much has been said about monetary policy and little about fiscal policy. In his opinion, the shift in focus is key: “We are at a moment when, unless we experience an oil shock, major central banks are more focused on narrative than on action. By contrast, fiscal policy is going to be much more active. We will enter a phase in which we must understand the fiscal policies of different countries in order to understand the fixed income market and monetary policy.”

In the current context marked by geopolitics and the conflict between the U.S. and Iran—with rising oil and gas prices as the main consequence in markets—for Giordano, the real inflation risk lies in the potential reaction of governments to an inflationary shock. “Right now, it is the price of oil that could lead us into an inflationary shock, but for me what matters is the impact of the measures countries take in response to such a shock. That is, a repeat of what we saw in 2022, with governments approving large-scale measures without specific targets and increased public debt issuance, in the face of inflation above 2%,” he explains. In this regard, the Investment Director at Wellington Management believes that investors are not taking this interpretation of inflation into account and are not preparing their portfolios.

Public Debt: Where to Issue on the Curve

According to his analysis, this increase in public deficit has coincided with significant deleveraging by households and companies, which has greatly changed opportunities in the fixed income market. “In terms of public debt, it is true that there is potential differentiation between countries. And this is happening at a time when, as long as inflation remains around 2%, it will be difficult for central banks to intervene and absorb that debt. However, the most interesting question is the next step: at what point will markets demand an adjustment in public spending, and how will they do so? For me, this is the elephant in the room for the fixed income market,” says Giordano.

In this regard, the Investment Director at Wellington Management points directly to the U.S. In his view, the country has a structurally very high deficit—consistent with a period of negative growth—at the end of the current economic cycle, which has been very long. “I would say this is possible for several reasons, but the main one is that the United States always plays by different rules because its currency is the global reserve, so there is always persistent demand for dollar-denominated assets. Proof of this is that, for now, markets continue to absorb U.S. Treasury issuance,” he notes.

One trend observed by Giordano is that governments are becoming aware of investor demand for issuance at different points along the yield curve and are adjusting their issuance accordingly. “Although we are seeing structurally higher issuance by governments, the reality is that they are adapting their issuance so that its impact is lower, and they are also seeking other pools of capital to absorb that issuance. This trend represents an opportunity for investors because it implies significant potential differentiation between countries. Until recently, there was not as much polarity or differentiation between issuers, whether in public debt or credit debt; but now, with higher interest rates, there is increasing differentiation between issuances,” he explains.

Credit: Sustained Demand for Yield

In his view, as a result of rising sovereign yields, credit market spreads have tightened; however, demand for credit—both high yield and investment grade—has been considerable. In his opinion, this is not complacency but rather persistent demand for yield. “Many portfolios globally have been underweight fixed income, so they have seen credit as a good entry point given its attractive valuations, across all types of investors, whether institutional, retail, domestic, or international,” he explains.

Although he acknowledges that in the current environment there is some “vulnerability to potential exogenous shocks,” he believes that possible corrections in the credit market are more related to a process of “adjustment” toward more normalized levels. At the same time, he argues that we are beginning to see greater dispersion across sectors: “If we look at the MOVE index (Merrill Lynch Option Volatility Estimate) in 2025, we see that there has been less and less volatility in fixed income markets, which is somewhat counterintuitive. With more geopolitical and macro noise and volatility, there should be more market volatility, yet in 2025 it has been somewhat the opposite. However, from January, and more strongly in February, we began to see greater dispersion across sectors and issuers, generating new opportunities for investors.”

In his review of fixed income, Giordano offers a final message: “Fixed income has returned to portfolios, but in a completely different environment, where the 60/40 portfolio no longer works and where we are seeing greater presence of other assets, such as digital assets or private markets.” Despite this new context, Giordano believes that fixed income remains a key asset for navigating uncertainty. “It is clear to everyone that portfolios must be diversified, but what matters here is that the wide range of assets offered by fixed income allows for income generation while also protecting capital,” he concludes.

Principal Strengthens Its Latin American Arm to Boost Its Focus on Institutional Clients

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Franklin Templeton offshore market
Photo courtesyFrom left to right: Jorge Díaz, Rodrigo Pace, and Jesús Martin del Burgo

Times of change are being experienced in the Latin American operations of Principal Financial Group. In line with its global guidelines, the financial group is carrying out a regional plan to strengthen its institutional business, including reinforcing its team across the continent with high-level professionals in key positions.

The most recent moves have been the recruitment of two heavyweights for sales in two hubs in South America. Jorge Díaz took on the role of Institutional Sales Director for the Andean region, bringing a decade of experience at Vinci Compass, while Rodrigo Pace assumed the same role for Brazil after spending four years in institutional sales at Franklin Templeton.

These hires add to that of a new Managing Director and Head of Institutional Coverage for Latin America, Jesús Martin del Burgo, who joined the company at the beginning of the year following roles at Santander and DWS Group.

“These appointments respond to a strategic decision focused on strengthening the institutional business as one of the main growth drivers of Principal Asset Management in Latin America, leveraging talent with relevant global experience and deep knowledge of local markets,” explains Fernando Torres, Executive Managing Director of Asset Management for the region, to Funds Society.

Within this framework, the company is moving toward building a regional structure with an integrated approach by business segments, rather than one organized by countries.

Torres took over regional leadership of the asset management business in October last year, when Principal established a model with two leadership roles. Horacio Morandé was placed in charge of Wealth and Corporate Solutions and, later, Del Burgo joined, relocating to Mexico and assuming a role created at that time: regional head of the institutional business.

It is under the leadership of this executive, Torres explains, that a network of leaders in key Latin American markets was structured. Ana Lorrabaquio remained in her position as Head of the institutional business in Mexico, Pace took charge in Brazil, and Díaz in the Andean region. “This structure reflects our focus on attracting and consolidating top-tier talent as part of our growth strategy, combining regional strategic direction with local execution in each market,” Torres emphasizes.

Focusing on Institutional Clients

These organizational changes they have been driving are aimed at supporting their commitment to the institutional segment, which the executive describes as “one of the main growth drivers for Principal Asset Management in Latin America.”

The appeal, Torres explains, lies in the segment’s large scale and the deep, long-term relationships between the asset manager and investors. “It is a segment that demands sophisticated investment solutions, tailored mandates, and access to a wide range of assets, including private markets,” he explains.

In addition, the firm sees a structural trend in the region: pension funds, insurers, and other institutional players are increasing their exposure to more diversified, long-term-oriented strategies. “This is raising the level of market sophistication and opens up a significant opportunity for managers with global capabilities and local execution,” says the Executive Managing Director of Asset Management.

Overall, the financial group’s objective is to consolidate a stronger offering in the Latin American market, increasing assets under management and strengthening its positioning in key segments, where the institutional business is “a priority.”

“We are focusing our efforts on strengthening this segment, both in capabilities and talent, with the goal of establishing ourselves as a long-term strategic partner for our institutional clients in the region.”

Platform Design

This is what has inspired the international financial group to pursue a design that leverages its global capabilities—with an investment platform across fixed income, equities, and alternatives—alongside its regional structure and local presence. The goal, according to Torres, is to evolve into a more integrated asset management platform with greater growth capacity. The focus, he explains, is on “strengthening key capabilities in distribution, product, and private assets, and continuing to bring in specialized talent that allows us to scale the business more deeply.”

For this reason, the firm’s recent high-level hires are aimed at strengthening expertise in the institutional segment, with seasoned professionals.

Looking ahead, the team could continue to grow, according to the regional Head of Asset Management. “We will continue to strengthen the team selectively, based on the strategic priorities of the business and the capabilities needed to sustain its growth,” he notes.

Key areas to consolidate include institutional distribution, product development, and private assets, among others.

“Rather than growing in volume, we seek to build a team with the right profile for this new stage, aligned with a long-term vision and the evolution of the business in the region,” Torres concludes.

Franklin Templeton Strengthens Its Capabilities for the Offshore Market

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Photo courtesyJoseph Arrieta, Senior Sales Executive, and Angelita Fuentes, Internal Wholesaler at Franklin Templeton

Franklin Templeton has announced the appointment of Joseph Arrieta as Senior Sales Executive (External Wholesaler) for the Northeastern territory, and Angelita Fuentes as Internal Wholesaler in Miami, with immediate effect. Both will report to Marcus Vinicius, Head of US Offshore, as part of the firm’s strategic reinforcement in this segment.

These additions underscore the firm’s commitment to expanding its presence in the U.S. offshore business, one of its main drivers of global growth. This segment has become a key strategic pillar, serving an increasingly diverse and sophisticated international client base through a cross-border model that connects investors with global opportunities.

In his new role, Arrieta, based in New York, will be responsible for leading offshore coverage of the Northeastern United States territory, including key financial centers such as New York, Boston, Chicago, and Toronto. He will work closely with Jack Leung, Internal Wholesaler, based in Florida. The professional has more than eight years of experience in wholesaling, with a track record across domestic, intermediary, and offshore channels.

For her part, Fuentes joins as Internal Wholesaler in Miami, where she will collaborate with Dolores Ayarra, Senior Sales Executive, and Rafael Galíndez, VP, Sales Executive. From this position, she will support the coverage of banks, wire houses, and independent advisors in key markets such as Florida, Texas, San Diego, and Arizona.

“The U.S. offshore market is a strategic priority for Franklin Templeton and a key driver of our future growth. As clients seek to consolidate relationships with a smaller number of partners capable of offering comprehensive solutions across all asset classes, we continue to invest in talent and capabilities,” said Marcus Vinicius.

Prior to joining, Arrieta developed much of his career in the offshore segment, including his time at Voya Investment Management following the alliance with Allianz Global Investors, where he covered private banks and independent channels in the U.S. and Puerto Rico. Previously, he worked at Allianz Global Investors, expanding his coverage from the United States to Latin America, and at firms such as Oaktree Capital and Hudson Edge Investment Partners.

Fuentes brings more than 20 years of experience in wealth management, banking, and international markets. She joins from Voya Investment Management, where she focused on the offshore business. Previously, she held roles as VP and financial advisor at Investment Placement Group and built a long career at Truist Bank, where she worked with high-net-worth Latin American clients. She also has international experience in the real estate sector in Belize.

For Javier Villegas, Head of Iberia and Latin America at Franklin Templeton, “the addition of Joseph and Angelita significantly strengthens our team. Their experience and deep understanding of the offshore environment will be key to strengthening client relationships and continuing to drive growth in the region.”

With these appointments, Franklin Templeton continues to advance its global strategy of strengthening its Global Client Group, aligning resources and capabilities to provide a more integrated, efficient, and client-focused service across public and private markets.

Three Forces, One Destination: The Complexity of Today’s Fixed Income

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Pilar Gómez-Bravo, co-CIO de Renta Fija de MFS Investment Management
Photo courtesy

Global fixed income is going through an extraordinary period due to the simultaneity of reinforcing factors: an energy shock that has yet to stabilize, stickier-than-expected inflation, and private credit that has grown faster than the system can absorb. That is the diagnosis presented by Pilar Gómez-Bravo, Co-CIO of Fixed Income at MFS Investment Management, at a meeting with investors in Miami.

The executive shared a document titled “The Three Body Problem: A Pragmatic Approach to Investing in 2026,” which describes an environment of persistent volatility and rising risks. “Central banks, which were expected to diverge, are no longer going to do so. Basically, they are not going to do anything. And hopefully they won’t, because if they do, they could break the balance,” she explained.

The market environment, then, is marked by a common denominator: three forces colliding at the same time, generating a pattern of instability that is difficult to anticipate.

Energy: the shock that moves faster than monetary policy

The energy component is the most immediate and the most political. Gómez-Bravo reviewed the historical record: shocks of 139% during the invasion of Kuwait, 58% after the war in Ukraine, 28% in Syria, and a recent 79% linked to the escalation with Iran. While these episodes “tend to be short-lived,” their effects on inflation are immediate.

The sensitivity of the global market, she explained, is concentrated in a few geographies: Asia receives nearly 90% of the crude that flows through the Strait of Hormuz, and Europe remains highly dependent on gas. A prolonged shutdown would have uneven but profound consequences. “Trump may control the narrative, but Iran controls the physical supply of oil. If there is no physical supply, every day counts and it is difficult to control prices,” she emphasized.

The risk, she said, is that a supply shock derived from the conflict ends up turning into a growth shock. “If this lasts beyond four weeks, markets will begin to price in growth problems, not just inflation,” she warned.

Inflation: a much less linear slowdown

The second vertex is inflation persistence. Although some data show improvement, the pace of adjustment remains slow. In the United States, the short end of the curve is the only segment anticipating a stronger impact from the conflict, while the long end remains anchored.

The MFS expert’s presentation highlights that fiscal policy continues to be expansionary, with high deficits across all major developed economies. This is compounded by an unprecedented wave of corporate capex, driven by the artificial intelligence ecosystem and major digital infrastructure providers.

This massive investment push also has financial implications. Gómez-Bravo put it bluntly: “The problem arises the day they fail to meet earnings expectations and have to refinance all that debt.” She added a reflection that summarizes her view: “Why should I finance AI companies? Let shareholders do it—they are the ones who receive the upside.”

Today, she explained, the market is still absorbing record issuance without difficulty: hyperscalers could reach $400 billion in new debt this year, approximately half of net investment-grade supply. But the challenge lies not in the present, but in sustainability: “Today there is no problem—there is capacity to absorb all AI supply—but in two or three years there could be a financing problem.”

Private credit: rapid growth and early signs of stress

The third body in collision is private credit, whose growth has been so rapid that it is beginning to generate its own side effects. Global banks have increasing exposure to non-depository financial institutions, and several markets are showing patterns previously seen ahead of periods of stress.

Gómez-Bravo was clear in quantifying the risk: “If the default rate in private credit rises from 4% to 8%, and you only recover 50%, all illiquidity premiums disappear.” This potential deterioration coexists with other concerning factors:

  • Easing of underwriting standards.
  • Growth in PIK toggle structures, which capitalize interest instead of paying it.
  • Increasing risk among private brokers financing hedge funds with leverage.
  • 5% redemption limits in retail funds, which can amplify mass outflows.

Three lenses to analyze the cycle

The MFS presentation emphasized that current analysis must rely on three simultaneous pillars—fundamentals, valuations, and technicals—because none on its own provides a complete picture.

  • Fundamentals: it is not just about inflation—it is fiscal policy, energy, and a credit constraint that “is already tightening financial conditions.” As Gómez-Bravo summarized: “It is the market that is doing the Fed’s job.”
  • Valuations: spreads remain extremely tight relative to history, even after recent widening. For the firm, discipline is therefore key: defining clear thresholds. In Gómez-Bravo’s words: “Remember those thresholds to think about when to start adding risk… and thus maintain discipline.”
  • Technicals: positioning is cautious, albeit heterogeneous. Dispersion remains contained, making security selection more relevant.

Where to look? The pragmatic approach of MFS

MFS’s strategy for the coming months combines flexibility with prudence:

  • Neutral to slightly long duration in some markets.
  • Tactical exposure in Brazil, Uruguay, Peru, Korea, and South Africa.
  • Hedging of Latin American currencies “because they are the first to suffer.”
  • Underweight in technology, except for specific names.
  • Ongoing evaluation of opportunities in BDCs and industrial sectors with strong fundamentals.

“The advantage and disadvantage of fixed income is that it is mathematics: in the long term, if there are no defaults, yield is what you get,” the asset manager stated during her remarks. And a warning for investors seeking simplification: “This is a market for active managers, not for passive strategies that depend on stable trends.”

The three-body problem

The metaphor that gives the report its name is no coincidence. The system described by Gómez-Bravo—energy, inflation, private credit—functions like a three-body system: each movement affects the others, and the equilibrium is inherently unstable. The MFS manager summarizes it this way: “We are not facing independent shocks, but rather a dynamic system where moving one piece disrupts the rest.”

Nothing happening today appears definitive. Inflation is not yet defeated, private credit has not fully revealed its true risk profile, and the energy shock has not reached its floor. The underlying message—implicit throughout the Miami event—is to combine rigorous analysis with the ability to react: to understand that apparent stability is just that—apparent. And that as long as these three bodies continue to move, the investor’s task will be to navigate their dynamics without losing sight of the whole.

Thornburg Appoints Albert Maruri as Offshore Sales Director in the U.S.

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Photo courtesyAlbert Maruri, Offshore Sales Director in the U.S. at Thornburg

Thornburg Investment Management (Thornburg) has announced the expansion of its international distribution team after the assets of its UCITS platform doubled over the past 12 months, increasing from $316 million to more than $645 million as of March 31, 2026.

According to the firm, this growth reflects rising global demand for active management strategies offered through the UCITS structure, which remains a preferred vehicle for international investors seeking “differentiated, high-quality investment solutions.”

To support this momentum, Thornburg has appointed Albert Maruri as Offshore Sales Director in the U.S., further strengthening the firm’s distribution capabilities in international wealth markets. Based in Miami, Maruri will work closely with financial advisors and intermediaries serving non-U.S. investors, expanding access to Thornburg’s investment strategies in key offshore markets.

In addition, for the United Kingdom, Europe, and certain international markets, the asset manager has appointed Andrew Paterson as Director of Business Development for the UK/EMEA. Based in the firm’s London office, he reports to Jon Dawson, head of the UK office, and will focus on deepening relationships with institutional clients and intermediaries in the region.

Following these two appointments, Jonathan Schuman, Head of International at Thornburg, stated: “Building long-term relationships is fundamental to how we grow internationally. By expanding our local presence in key markets, we are better positioned to work closely with our clients, understand the evolution of their needs, and connect them with Thornburg’s high-conviction investment strategies.”

UCITS platform

According to the firm, these appointments come at a time when Thornburg’s UCITS platform continues to gain traction among investors. The firm’s five UCITS strategies have recorded sustained inflows and strong investment performance, with the Equity Income Builder fund being one of the main drivers of recent growth, reflecting strong demand for global income-oriented solutions.

For the firm, this momentum follows a series of enhancements to Thornburg’s UCITS range, including the launch of new share classes, fee reductions, and the reclassification of certain strategies under Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR). Taken together, these initiatives have improved accessibility for European investors while reinforcing Thornburg’s commitment to active management, an investment philosophy independent of benchmarks and focused on long-term results.

“The UCITS platform represents a key pillar in Thornburg’s long-term international growth strategy, as the firm continues to expand its global presence and serve clients across an increasingly diverse set of markets,” they noted.