Yale’s Contingency Maneuver That Cost 6 Billion Dollars in the Private Market

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At the beginning of April, President Trump’s administration initiated a review of 9 billion dollars in federal support to Harvard University, amid an offensive against alleged antisemitism on campus. The government also temporarily froze dozens of research grants at Princeton. In response, these institutions quickly began to strengthen their finances.

Harvard announced plans to secure a 750 million dollar loan through a bond issuance as a financial cushion and is also in talks to sell 1 billion dollars in private equity stakes. Princeton also indicated that it could raise around 320 million dollars through a taxable bond issuance.

Yale University, which holds one of the largest endowments in the world, is also taking action. Yale revealed that it is exploring the sale of a large portion of its private investments on the secondary market. The transaction could amount to around 6 billion dollars, representing approximately 15% of Yale’s endowment. By converting part of its illiquid assets into cash, Yale would be better positioned to face potential funding cuts, especially considering it receives nearly 900 million dollars in federal funds.

Yale’s Endowment and the “Yale Model”


Yale’s endowment, valued at 41.4 billion dollars, supports the university’s operations in perpetuity. Each year, the institution typically allocates around 5% of the endowment’s value to fund its budget, meaning the portfolio must generate returns covering this spending plus inflation, approximately 7% annually over time.

To achieve this goal, Yale follows an investment approach developed by David Swensen, known as the “Yale Model.” This approach prioritizes diversification and allocates a large portion of capital to illiquid assets such as private equity, venture capital, and hedge funds. The strategy aims to achieve higher long-term returns through illiquidity and complexity premiums available in private markets. While this approach has generated strong results over the past two decades, it also requires careful liquidity management, especially during periods of stress, when much of the portfolio cannot be easily sold.

The portion of Yale’s operating expenses covered by its endowment is considerable (representing nearly 35% of the university’s total budget) and has remained stable over the years. However, this could change if federal grants are reduced.

Why Yale Is Considering a 6 Billion Dollar Sale


Several factors contributed to Yale’s consideration of selling around 6 billion dollars of its private investments in 2025, with political uncertainty as the main driver. Funding cut threats from Washington are more than mere rhetoric, as federal agencies have already delayed or imposed new conditions on research grants for some Ivy League universities.

Universities like Yale are preparing for a scenario where government support could be reduced, at least temporarily. Having additional cash on hand is a prudent measure to ensure that teaching and research can continue without interruptions, even if federal funds are withheld. Yale’s endowment assets are largely illiquid, so selling some investments on the secondary market is a way to quickly obtain liquidity.

Beyond politics, market conditions have made managing Yale’s illiquid portfolio more challenging. In recent years, stock markets have fluctuated dramatically, and interest rates have risen from near zero to multi-year highs, which has unbalanced Yale’s portfolio.

As stock markets surged, Yale’s significant private investments lagged behind, as many private equity positions did not register immediate gains or exits (profitable sales of companies) during that period. In fact, Yale’s investment return for fiscal year 2024 was only 5.7%, significantly below its 10-year average of 9.5%.

The university openly acknowledged that its significant allocation to private assets would cause a lag during periods of strong performance in public markets, especially when exit markets for such private assets are weak. This situation naturally calls for a rebalancing, trimming some private investments to free up cash and possibly reallocating it to areas that maintain the desired asset mix and risk level.

Another key factor is the slowdown in cash distributions from private equity funds. University endowments depend on private equity managers to eventually return cash from their investments; when a private equity fund sells a portfolio company or takes it public, profits are distributed to investors like Yale. Lately, these distributions have slowed to a trickle.

Since 2022, the pipeline of initial public offerings (IPOs) and large acquisitions has been weak, meaning private equity funds are holding onto companies longer and sending less cash back to investors. According to one estimate, private equity firms’ payout rates have dropped to about a third of their previous levels.

Consultants from Bain & Company report that annual distributions to investors have fallen from about 29% of private assets a decade ago to just 11% today. This “liquidity squeeze” poses a challenge for endowments: while their portfolios may seem solid on paper, the actual cash flow available to fund operations has diminished significantly.

Yale’s high exposure to private equity (around 45% of its portfolio, the highest among top universities) makes it particularly vulnerable to these cash flow delays. As one analyst put it, it’s a “perfect storm,” pressuring large endowments with lower short-term returns, reduced investment liquidity, and now, political threats to income streams. Selling some private assets now, even at a slight discount, would provide Yale with a liquidity cushion and reduce the risk of falling short if multiple challenges persist. Yale’s leadership has also hinted at budgetary prudence: the university warned that its next fiscal budget for 2026 will be “much more limited” due to the recent underperformance of its endowment funds.

How a Secondary Sale of Private Assets Works


Private equity investments are designed to be long-term and illiquid. Investors commit capital to a fund, which is deployed gradually over several years, and cash returns (or distributions) typically occur only after the underlying companies are sold. However, investors like Yale can exit early by selling their fund stakes on the secondary market, where buyers assume both the remaining capital commitments and the right to future distributions.

To make this transaction attractive, sellers usually offer a discount on the Net Asset Value (NAV), the most recent valuation reported by fund managers. In the current market, these discounts typically range between 10% and 20%, depending on factors such as the fund’s age, strategy, manager quality, and market sentiment. For example, if Yale sells a stake with a NAV of 100 million dollars, it might receive only between 80 and 90 million dollars in cash. The larger the discount, the higher the implicit cost of liquidity.

For Yale, a 6 billion dollar sale could generate actual proceeds of around 5 to 5.4 billion dollars after discounts. This means accepting some value erosion compared to paper valuations, which affects short-term performance metrics. However, it also reduces the risk of overexposure to illiquid assets in a complex exit environment while improving Yale’s ability to meet potential cash needs, from covering operating costs to managing future capital calls from other private funds.

“We Are Not Abandoning Private Markets”: Yale’s Assurances


Yale has made it clear that the planned sale is a tactical adjustment, not a strategic shift. In a statement to Reuters, the university emphasized: “We remain committed to private equity investments as a core part of our investment program and continue to make new commitments to funds raised by our current investment managers.” Yale is also “actively seeking new relationships with private equity firms.”

Private markets remain essential to the university’s investment model, not only because of their historical returns but because Yale must maintain a high-risk profile to meet its long-term return target, which usually hovers around 7% annually to cover both its spending rate and inflation. Even after the sale, the endowment will maintain significant exposure to illiquid assets.

Private Equity: Retreat or Pause?


Yale’s secondary sale plans are part of a broader moment of adjustment in the private equity market, driven by macroeconomic shifts. After years of rapid growth, 2024 marked the first decline in decades of private equity assets under management, with a 2% drop to 4.7 trillion dollars, according to Bain & Co., putting Yale’s 6 billion dollar sale into perspective.

This reflects slower exits from deals, lower fundraising, and reduced cash distributions to investors. Some institutional investors are cutting back their exposure or delaying commitments—not necessarily as a long-term rejection but as a temporary response to reduced liquidity, market volatility, and political uncertainty. At the same time, global changes, such as the withdrawal of Chinese sovereign funds from U.S. private equity, indicate that geopolitics is influencing capital flows.

Yale’s plan to sell part of its private equity portfolio illustrates the balance that large endowments must strike in turbulent times. It is a response to short-term pressures, political shifts, and market illiquidity, implemented in a way that does not compromise the long-term investment strategy that has served Yale well. By converting part of its illiquid investments into cash, Yale would gain flexibility to face funding challenges and rebalance its finances, while maintaining a high allocation to private market investments aligned with its long-term return objectives.

In an era where both politics and markets are unpredictable, Yale and its Ivy League peers are demonstrating that even the most astute long-term investors sometimes need to adapt on the fly to safeguard their institution’s stability.

This article was published on page 47 of issue 43 of Funds Society Americas magazine. To access the full magazine, click here.

U.S. Employment Data, Reliability of Statistics: The New Concerns of Analysts

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Data and More Data: The U.S. economy is the global benchmark for the financial industry because it is capable of producing a large amount of detailed and verifiable information. And four months after President Donald Trump launched the tariff war, analysts are beginning to have information that allows them to move out of uncertainty.

Trade negotiations, corporate earnings, employment data, GDP, inflation, and interest rates: the market is starting to find anchors, but shadows and doubts are also emerging regarding the reliability of official figures.

A Reliability Problem


Paul Donovan, Chief Economist at UBS, points to a new concern among investors in these turbulent months: “The revisions of last Friday’s (August 1) U.S. employment report coincided with the fragile narrative of the labor market. The situation remains ‘no hiring, no firing.’ The drop in manufacturing employment aligns with political uncertainty. The most concerning event on Friday was not the data, but President Trump’s dismissal of the Commissioner of the Bureau of Labor Statistics.”

Donovan believes that, globally, economic data has become less reliable in recent years. The drop in survey response rates, political polarization leading to biased responses, rapid structural economic changes that statisticians cannot keep up with, and the underfunding of statistical agencies have conspired to make revisions more extensive and frequent.

“Any suspicion of political interference in data means that investors will assume positive figures are manipulated, as in countries where GDP miraculously exceeds the official growth target year after year. The risks of policy errors increase. A gap between economic reports and reality complicates business planning. In the case of the U.S., the mere perception of political bias would further damage the dollar’s reserve status,” warns Donovan.

The Latest U.S. Employment Data


Seema Shah, Global Head of Strategy at Principal Asset Management, is beginning to see in the employment data the first repercussions of the tariff war: “It was not just a much weaker-than-expected employment figure, but the sharp downward revisions of the previous two months represent a significant blow to the perception of labor market strength. The most concerning aspect is that the negative impact of tariffs is just beginning to be felt, so it is likely that in the coming months we will see even clearer signs of a slowdown.”

David Kohl, Chief Economist at Julius Baer, analyzes the U.S. labor market, which confirms the weakness of the world’s largest economy. The June employment report suggests that the U.S. economy is cooling. The revisions of previous payroll growth figures were also significantly reduced, indicating lower job growth in April/May. Unemployment slightly increased to 4.2%, due to the slowdown in labor supply.

Jeffrey Cleveland, Chief Economist at Payden & Rygel, points out that the latest data on the U.S. labor market shows an unemployment rate still relatively low (4.2%), but job growth is weakening, and they believe the trend will continue.

“The drop in two-year Treasury yields indicates that investors have probably paid too much attention to inflation and too little to signs of a labor market slowdown, so now they have realized they need to rebalance their portfolios and extend duration,” says Cleveland.

Are We in the Early Stages of a Major Stock Market Rotation?

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The S&P 500, the most representative index of the U.S. economy, has accumulated a return of around 7.5% so far this year (data as of July 23, 2025). In the same period, the MSCI Emerging Markets has gained nearly 18%, the EuroStoxx 55 has advanced 8.5%, and the Topix has added more than 6%. This is a somewhat novel situation after the strong dominance of the U.S. stock market in recent years. These returns are accompanied by positive flows, particularly towards Europe, raising the question: Are we at the beginning of a major rotation?

Small Changes, Big Changes


“It is too early to talk about a major rotation, but smaller ones should occur,” says Benjamin Melman, Chief Investment Officer at Edmond de Rothschild AM. The expert cites several reasons that are holding back this major rotation, starting with the fact that “international diversification from the U.S. investor’s perspective has not been rewarded, as foreign assets have shown lower Sharpe ratios from a historical standpoint.” Melman also points out that “there is no recession in sight in the U.S.” and that the monetization of AI is not yet a market topic, “so U.S. investors are not in a hurry to invest abroad.”

That said, the expert does believe that U.S. investors “could slightly reduce their underexposure to some international assets” towards markets like Japan, Europe, or emerging markets. “Likewise, international investors overweighted in U.S. assets could also reduce their exposure to the U.S., as the American giant’s supremacy that prevailed at the beginning of the year has lost significant momentum,” he concludes.

The Moment for European Equities


Other experts consulted for this report are more categorical. For example, Sabrina Denis, Senior Portfolio Strategist at Janus Henderson, highlights that one of the “most notable surprises” of 2025 has been the strong rebound of non-U.S. stocks, evidenced by the 16% rise of the MSCI All Country World Index (ACWI) ex-USA (as of June 2025), compared to just over a 2% increase of the S&P 500 in that time, which for the expert “clearly indicates that a significant rotation towards developed markets outside the U.S. is already underway.” “This performance is not just a short-term anomaly but is supported by deeper structural changes and attractive valuations in non-U.S. markets,” she adds.

Víctor de la Morena, Chief Investment Officer at Amundi Iberia, summarizes the sentiment of many investors these days: “There is no doubt that the American economy remains the most important in the world; however, the European economy has gained relevance or ‘momentum’ recently thanks to economic recovery and European stimulus plans that are being increased and will serve as a major catalyst for the coming years, especially in infrastructure and defense.”

From Jupiter AM, European equity managers Niall Gallagher, Chris Legg, and Chris Sellers state that they see the possibility of “a shift in the economic order that could benefit European equities.” Specifically, the trio of experts believes that “structural changes in trade, capital allocation, and government policies are contributing to a long-awaited shift towards Europe.”

In particular, the managers point to the attractiveness of Southern European countries, a region they consider “is approaching the end of nearly two decades of deleveraging.” This implies that “consumer debt is low, the banking sector is healthy and capable of supporting expansion, and even immigration patterns are positive.” Additionally, as they indicate: “These countries have abundant and cheap energy, such as Spain, which has significant solar and onshore wind resources.”

This positive outlook on European equities is also shared by Andrew Heiskell, Equity Strategist at Wellington Management, and Nicolas Wylenzek, Macroeconomic Strategist at the firm: “European equities have entered a regime change that has recently accelerated, which could lead to the largest rotation since the global financial crisis.”

While the strategists warn that “this transition is not without challenges,” they also highlight Value segment stocks as the main beneficiaries, such as banks, telecoms, defense companies, or European small caps. They also believe that companies key to the energy transition with high entry barriers, such as network operators, as well as companies they refer to as “quality stable compounders”—that is, “resilient companies with consistent growth and strong balance sheets, whether Growth or Value style”—will benefit.

Conversely, they state that “the main losers could be those that benefited from globalization and a low-interest-rate environment.”

New Arguments


Mario González, Head of Capital Group’s business in Spain, Portugal, and US Offshore, points out that since “Liberation Day” on April 2, U.S. equities have shown a strong correlation with non-U.S. equities—something expected in a period of high volatility—but adds that “once things settle, the situation for non-U.S. stocks looks favorable.”

The expert indicates that the starting valuations of non-U.S. markets remain “much lower than in the United States.” He provides some data: on one hand, the MSCI ACWI ex-USA trades at 13 times forward 12-month earnings, while the MSCI EAFE (international developed) trades at 14 times, both near their 10-year averages and at a significant discount compared to the S&P 500, which trades at 20 times earnings.

Non-U.S. stocks are trading near their lowest level in 20 years relative to U.S. stocks.

That said, the expert from Capital Group recalls that the argument of low valuations has been brought up in recent years without any impact on the market, as those valuations have often been justified by the anemic earnings growth compared to the U.S. For González, what is different this time is the presence of new catalysts that “are changing the narrative for the first time in years”: fiscal stimuli in Germany, corporate reforms in Japan and South Korea, weakness of the U.S. dollar, signs of stabilization in China, and an improved political environment in Europe. “Additionally, in an environment of increased infrastructure spending, non-U.S. markets display greater diversity and have a higher weighting in heavy industry, energy, materials, and chemicals compared to the S&P 500,” he concludes.

HSBC Uruguay: The Acquisition Through Which BTG Pactual Will Enter the Country

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Completing the Southern Cone triad, BTG Pactual is preparing to plant its flag in one of South America’s main financial capitals: Montevideo. The company announced its entry into the Uruguayan market through the acquisition of HSBC‘s operations in the country, including retail, corporate, and investment banking businesses.

The Brazilian investment bank announced the deal—subject to customary regulatory approvals—via a press release, valuing the transaction at $175 million, including both capital and additional capital instruments. With this move, the firm aims to consolidate its regional presence.

HSBC Uruguay closed 2024 with five branches, $144 million in capital, and $47 million in additional capital instruments held by the HSBC Group, bringing total capital to $191 million, as detailed in the announcement.

On its institutional website, HSBC describes itself as the largest international bank operating in the Latin American country and the fifth-largest private bank in Uruguay by assets. It offers services in retail banking, corporate and SME banking, investment banking, and wealth management, as well as treasury and agricultural business services.

HSBC began its operations in Uruguay in 2000 with 60 employees, growing the operation to the 260 people it currently employs. In 2023, they inaugurated a new headquarters in the country, located in the World Trade Center Montevideo.

The arrival of BTG in Uruguay marks another step in the international expansion the Brazilian financial group has been pursuing in recent years.

International Reach


“The acquisition of HSBC in Uruguay is an important step in our internationalization strategy and strengthens our presence in the region. We want to be the bank for Latin Americans, offering the comprehensive range of services and renowned quality of BTG Pactual. We continue to grow solidly and consistently, and we will bring to the Uruguayan market solutions that combine security, technology, and excellence,” said Roberto Sallouti, CEO of the firm, in the press release.

The Brazilian firm has been expanding across the continent. Most recently, last year, they initiated the acquisition of the U.S. bank M.Y. Safra—which has offices in New York and Miami—with the goal of enhancing services for Latin American clients in the U.S.

Additionally, the firm recently founded BTG Pactual Europe, following the acquisition of FIS Privatbank, a bank based in Luxembourg. Thus, the firm strengthens its position in Europe, where it also maintains a physical presence in Portugal, Spain, and the United Kingdom.

The new Uruguayan operation will fall under the umbrella of BTG’s Latin American operations (excluding Brazil, naturally), led by partner Rodrigo Goes. This includes branches in Mexico, Colombia, Peru, Chile, and Argentina.

“We know this clientele well and are confident there is an opportunity to provide excellent services that meet the expectations of Latin Americans, now a global community. We believe there is synergy among the countries that will help strengthen the business environment across the continent, and we will also pay close attention to the particularities of the Uruguayan market, offering personalized services tailored to the needs of each client,” Goes stated in the release.

Semiannual Balance and Forecast Review: Focus on Active ETFs, Crypto ETFs, and ETFs With Private Assets as Underlying

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Exchange-traded funds (ETFs) are not slowing down. Zachary Evens, manager research analyst at Morningstar, is clear about this. And for good reason, as firms are launching new ETFs every day; investment flows continue to pour into these vehicles, and both investors and providers “are beginning to venture into previously unexplored territories.”

ETFs attracted $540 billion in new investment during the first six months of 2025, surpassing the total subscriptions of the first half of 2024, as the expert recalls.

Regarding products, by June of this year, 464 new ETFs had already been launched, quickly approaching the annual record of 726 launches. Among the most notable are the first public-private credit ETF, countless new buffer ETFs, covered call and active options ETFs, cryptocurrency ETFs, and even money market ETFs.

Faced with this dizzying array of figures in the industry, Evens takes stock: reviewing some of these developments and revisiting his predictions about ETFs made earlier this year. “So far, so good, but there’s surely much more to come in what has already been a hectic 2025 for ETFs,” he asserts.

Prediction 1: Active ETFs Outnumber Passive ETFs


This was inevitable. And it didn’t take long to happen. By the end of June, there were 2,226 active ETFs and 2,157 passive ETFs available to U.S. investors. Asset managers have fully embraced this tax-efficient instrument, meeting the demand of investors who continue to pour money into this sector.

However, there are nuances in the active ETF story: some of the most popular active ETFs are not so popular, Evens points out. Most of those that have taken off so far follow a quantitative or rules-based strategy. They are labeled “active” because they do not track an index. Examples include options-based strategies, such as defined outcome or covered call ETFs, or diversified quantitative strategies.

“Active ETFs are booming, but for now, most of the growth and interest have been centered on these types of strategies. It is likely that rules-based ETFs will continue to lead the charge in active ETFs,” the expert states.

Story 1: Private Assets ETFs


A significant trend in ETFs, according to the expert, is investment in private markets. Apollo has partnered with State Street to bring private credit to the retail market, and Vanguard is working with Wellington and Blackstone on the same—though Vanguard currently lacks a widely available public-private offering.

State Street‘s ETF, SPDR SSGA IG Public & Private Credit ETF (PRIV), was the first to hit the market in February this year. The launch was not entirely smooth, and doubts remain about the viability of illiquid assets in a liquid wrapper. But according to industry opinions, “more public-private products are clearly on the horizon.”

Investment inflows into the SPDR SSGA IG Public & Private Credit ETF have been moderate so far, but picked up in early July, “so it will be interesting to see how quickly competitors enter the market and how investors respond to this nascent segment.”

Prediction 2: Vanguard’s VOO Surpasses State Street’s SPY as the World’s Largest ETF


In 2025, the Vanguard S&P 500 (VOO) took only seven weeks to surpass SPDR S&P 500 Trust (SPY) as the world’s largest ETF. Vanguard’s fund started the year $40 billion behind SPDR’s, but now holds a $46 billion lead.

The expert believes the next question is whether the iShares Core S&P 500 (IVV) will surpass the SPDR S&P 500 Trust by the end of the year: it’s a very low-cost fund that isn’t structured as a trust. “After starting 2025 with a $38 billion gap compared to SPDR S&P 500 ETF Trust, the iShares Core S&P 500 ETF narrowed the gap to $14 billion by mid-year. This could be the tight race to watch,” he argues.

Story 2: Cryptocurrency ETFs


The fastest-growing ETF in history is the iShares Bitcoin Trust ETF (IBIT). Its assets have grown to over $75 billion after just a year and a half on the market. Its strong performance, crypto-friendly regulation, and adoption in model portfolios have helped this ETF reach its current level, the expert explains. But other cryptocurrency ETFs are also making headlines.

The Morningstar digital assets category has grown from $28 billion and 43 ETFs just two years ago to over $150 billion in 106 ETFs by the end of June 2025. However, this rapid growth “comes with froth,” and recent cryptocurrency ETF filings are drawing attention. Among the applications are several memecoin ETFs, including one that tracks the price of Pudgy Penguin NFTs.

“Bitcoin ETFs are here to stay, but time will test the resilience of the newcomers to the digital assets category,” concludes Evens.

Prediction 3: ETF Share Classes Become Reality


ETF share classes are on the verge of becoming a reality. They haven’t been approved yet, but Evens predicts this situation should change in the second half of this year. At the time of writing, 70 firms have applied for a Vanguard-style hybrid share class.

Firms are eager to offer this share class. However, Lan Anh Tran, manager research analyst at Morningstar, noted in her prediction that “once approved, they might not be the lifeline many expected” and that the share class “could create more problems than it solves.” Tran cites capacity constraints, SEC best interest regulation concerns, and capital gains complexities as reasons.

Nonetheless, ETF share classes could be a positive development for investors under the right circumstances. And until they are approved and launched, we won’t know their impact on each fund.

Story 3: Outcome ETFs Gain Ground


Following several proprietary launches in this area, BlackRock predicted in March that assets in outcome ETFs would grow to $650 billion by 2030. Outcome ETFs, as defined by BlackRock, include covered call ETFs, buffer ETFs, and some others. All of them use options to deliver a specific outcome.

Covered call ETFs fall under the derivative income category. These vehicles typically sell call options against a long position in an underlying asset, such as the S&P 500 index, to generate income. The largest ETF in the category—and currently the largest active ETF—is the JPMorgan Equity Premium Income ETF (JEPI), which contributed to the category’s boom and demonstrates that the prudent use of options can be an effective way to restructure risk and generate income, as Evens points out. By the end of June, there were 155 ETFs with $130 billion in the derivative income category.

Regarding covered call ETFs on individual stocks, Evens explains that their sky-high yields attracted billions in inflows, “but funds like these often end up on our list of ‘worst new ETFs of the year’ for sacrificing total returns in favor of income while increasing risk and costs.”

Buffer ETFs are the most explicit outcome-based strategy, offering investors a defined range of both losses and gains. Several firms even offer ETFs with 100% downside protection: they should not lose money before fees, but only gain up to a maximum cap, usually between 8% and 10% annually.

The defined outcome category, which houses buffer ETFs, has evolved from a simple buffering strategy to much more complex products in just a few years. This new category now holds nearly $70 billion in assets spread across 408 ETFs, “the largest of all categories.”

Defined outcome and derivative income are among the fastest-growing categories, thanks to ETFs. “It is clear there is investor interest, and issuers have been more than willing to offer new products. However, ETFs in these fastest-growing categories remain quite expensive compared to traditional index funds and even many actively managed ETFs. There is room for costs to come down as the sector matures,” Evens asserts.

The New World Order of International Trade Shaped by Trump Arrives

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Trump dismisses Fed Governor Lisa Cook
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The President of the United States has made a final plot twist in his tariff game. Trump has signed the executive order that reconfigures international trade through the imposition of new tariffs, which will take effect on August 7, six days later than expected. In general terms, the new minimum rate for nations with which the United States maintains a negative trade balance has been set at 15%, according to the White House.

In this regard, about 40 countries are subject to the 15% rate, including Costa Rica, Ecuador, Venezuela, and Bolivia. Meanwhile, in the case of those with which the United States maintains a positive balance, the tariff will be 10%. However, there are also levies above 30% for some countries that have not reached trade agreements with the U.S., including Canada (35%), Switzerland (39%), Algeria, Bosnia, Syria, South Africa, Serbia, Myanmar, Libya, Laos, and Iraq. In the case of Brazil, Trump confirmed a 50% tariff, accompanied by sanctions against the Brazilian Supreme Federal Court, in retaliation for the trial against former president Jair Bolsonaro. As for Mexico, he has granted another 90-day extension to prolong their negotiations.

According to Yves Bonzon, CIO of Julius Baer, Donald Trump is determined to increase public revenues through higher tariffs, and this is a critical aspect of his economic agenda to achieve a rebalancing of the U.S. economy and move away from chronic deficits. “Part of the U.S. master plan to rebalance global trade has China as an implicit target. Beijing has made it very clear that any sovereign state is free to conclude a bilateral trade agreement with Washington, but it cannot do so at the expense of China‘s interests. If other states end up exempting U.S. imports from tariffs, it will be hard for the U.S. administration to argue that it does not benefit from a most-favored-nation clause,” Bonzon notes.

From the perspective of Mark Dowding, BlueBay CIO of RBC BlueBay Asset Management, Trump has obtained virtually all the concessions he expected in the trade negotiations held so far. “Our analysis leads us to conclude that the U.S. has increased its average global tariff rate to approximately 18%. Based on this premise, we project annual tariff revenues of around $450 billion, compared to $77 billion in 2024; an increase equivalent to 1.25% of GDP. This revenue volume should help slightly reduce the U.S. fiscal deficit, bringing it below 7% of GDP next year,” Dowding explains.

Asia and Europe: Market Openings


Following the official announcement, Trump celebrated his new trade policy on the social network Truth with a clear message: “A year ago, the U.S. was a dead country, now it is the most attractive in the world.” For their part, both Asian and European markets opened slightly lower, showing that uncertainty remains entrenched in the investor community. In Asia, the MSC Asia-Pacific fell 0.4%, the Kospi 1.6%, and the Nikkei 225 0.6%. According to experts, these declines reflect the announcement of new tariffs ranging from 10% to 41% on imports from India, Taiwan, Korea, and other countries.

In Europe, the main indices also reacted with “moderate negativity”: the DAX and CAC fell 1.6%, and the FTSE 100 dropped 0.7%. It is worth recalling that the trade agreement between the U.S. and the European Union had boosted the STOXX 600 by 0.7% on July 28, but the August 1 decision reversed that slight optimism.

“Although the agreement between the U.S. and the EU avoided a harmful trade war, its real effects remain to be seen. While progress was made in strategic sectors and energy cooperation was strengthened, the pact leaves several structural issues unresolved. Still, in a world marked by geopolitical fragmentation and economic risks, this understanding represents a diplomatic reprieve. It will be crucial for both parties to continue working on a joint agenda that prioritizes stability, fair trade, and shared innovation,” says Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS.

In Bonzon’s view, the markets have been pricing in the trade war for some time. “Collective wisdom is probably right in asserting that the trade war will not occur. Nevertheless, the rest of the world has an opportunity here to move forward and continue fostering a friendly trade framework,” he comments.

Investors Prepare


The new direction of U.S. trade policy is a clear example of how the world is transforming at an unprecedented speed. “While the global economy moves toward decarbonization to achieve the goal of net-zero emissions, trade wars are slowing globalization, demographic change is causing a shrinking labor force, and digitalization is advancing at a dizzying pace. We are now living in the era of geoeconomics. Although the idea of using economic tools for political purposes is not new, it is hard to find another moment in history when foreign policy, security, and the economy have been so intertwined and acting simultaneously with such intensity. And, logically, this has a direct impact on both economies and markets,” argues Hans-Jörg Naumer, Global Head of Capital Markets & Thematic Research at Allianz Global Investors.

According to the asset manager, for investors, this means ensuring that their investments are well diversified in this constantly changing “multiverse” of opportunities and being prepared to adjust their portfolios. “The challenge is not only to rebalance a portfolio to reflect these changes but also not to lose sight of diversification. In fact, a well-known saying, deeply rooted in portfolio theory, makes perfect sense here: don’t put all your eggs in one basket,” says Allianz GI.

In their view, multi-asset solutions could play a determining role here. “The logic is simple: why not design a portfolio tailored to the investor’s individual risk appetite that combines different asset classes? And it doesn’t have to be limited to just stocks and bonds,” they argue.

Why Customization is Becoming a Must-Have in Wealth Advisory

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Photo courtesyPablo Méndez, Chief Investment Strategist at LarrainVial

FlexFunds and Funds Society, through their Key Trends Watch initiative, share the perspective of Pablo Méndez, Chief Investment Strategist at LarrainVial, one of the leading financial advisory firms in Latin America. With a 90-year track record, the firm operates in Chile, Colombia, Peru, Panama, Mexico, Bolivia, and the United States, and holds key partnerships with investment managers in Europe.

Pablo Méndez has been part of this financial institution for over a decade. Today, he leads the Investment Strategy team and stands as a key figure in the evolution of high-level wealth advisory. A business engineer from Universidad Diego Portales with a master’s degree in Global Finance from NYU, Méndez represents a new generation of leaders in wealth management: one that combines strong academic background, strategic vision, and a deep commitment to personalized service.

Designing strategic solutions

The LarrainVial Strategy team develops both liquid and alternative investment solutions for high-net-worth clients. “Our model is similar to the Portfolio Solutions model in the U.S.: the banker manages the client relationship, but we design and coordinate the investment strategy,” he explains. In a context where financial margins are tightening and services are becoming more standardized, Méndez highlights that “the real differentiator remains the service.” Despite technological advances, he insists that “people are looking for a face, a relationship, and professional support. Technology doesn’t replace that.”

Fixed income and alternatives: Current portfolio pillars

Asked about current portfolio composition, Méndez identifies two key pillars: “In the liquid space, fixed income has regained prominence, with higher rates offering an attractive risk-return profile. In alternatives, we’ve developed programs aimed at generating decorrelation (hedge funds), stable cash flow (credit alternatives), and capital appreciation (private equity).”

Today, 28% of LarrainVial’s wealth management assets are allocated to alternative investments. Still, Méndez acknowledges an excessive concentration in local private debt and real estate, and sees expanding exposure to global and diversified assets as a major challenge.

When asked about the biggest obstacle to capital raising or client acquisition, he notes the industry is reaching maturity: “There’s no longer a large mass of underserved clients—what’s left are specific segments that are more sophisticated and demanding. Also, services tend to become standardized, which makes it even harder to stand out.”

Another relevant challenge is scaling the service without losing personalization: “It’s almost a paradox because scaling usually implies some standardization, and that can go against the individualized experience clients value. Striking that balance is a top priority.”

What do clients prioritize when investing today?

Institutional reputation and experience come first. Then, depending on their profile, clients value either technical expertise or the ability to translate that knowledge into an accessible language. In both cases, service quality is key.

For Méndez, personalization is more important than the product itself: “Closeness, real understanding of the client, and delivering tailor-made solutions are the elements that create a sustainable competitive advantage.”

The advisor as strategist: Skills that will make the difference

In his view, the financial advisor of the future won’t just be a technical analyst, but a strategic interpreter able to turn data into decisions aligned with the client’s real goals.

“The industry is moving toward a new talent configuration. On one hand, we need profiles with technical mastery—data science, automation, software management—especially in operational areas. But what will make the difference is the ability to abstract,” he says. “The key is to be able to step out of the party and look at it from above: see the big picture, understand the environment, and make informed decisions.”

This approach translates into deeply personalized wealth advice: “Before discussing markets or products, we need to understand what that person or institution wants to achieve. From that objective, we build a portfolio that aligns with their actual needs and constraints,” Méndez explains.

Although there are standardized solutions by profile—whether including alternatives or not, in local currency or dollars, conservative or aggressive—the real value lies in adaptation: “Advising a foundation with high real estate exposure in Latin America is not the same as working with a globally focused family office. Our job is to design strategies that consider that starting point and evolve over time.”

Technology: Embracing efficiency without losing human focus

On the impact of technology in the industry, Méndez is clear: “Artificial intelligence plays a fundamental role in processes and back office, but its usefulness in investment decision-making is limited by the efficiency of financial markets.”

He also points out a transformation in team structures: “The pyramid is being inverted. We used to have many data processing profiles; now we need more people who can think abstractly and make strategic decisions.”

According to Méndez, one of the clearest trends set to transform portfolio management in the next 5 to 10 years is the growing importance of alternative investments. These assets will continue to grow, as long as they remain well-aligned with clients’ goals. There is increasing demand for solutions that offer real diversification, decorrelation, and long-term investment horizons.

“On the other hand, we’ll see a significant evolution in how financial institutions integrate technology. Automation and artificial intelligence are freeing up resources previously tied to operational tasks, allowing that human capital to be redirected toward higher value-added areas like client service and strategic decision-making.”

In asset management, this doesn’t mean replacing the advisor—it means redefining teams. The human role remains central, especially in wealth advisory, but the required profiles are changing: more analytical capacity, strategic thinking, and tech-savvy professionals. It’s a reconfiguration process that is already underway.

What sets LarrainVial apart from its competitors?

“Being a non-bank firm gives us the freedom to innovate,” Méndez notes. “We can pursue internal ventures, create independent solutions, and report directly to senior management. Our only mandate is to generate returns and value for the client.”

This approach has already earned recognition. In December 2024, The Banker and PWM awarded LarrainVial as Best Private Bank in Chile, and its Strategy team as Best Chief Investment Office in Latin America.

Interview conducted by Emilio Veiga Gil, Executive Vice President of FlexFunds, in the context of the Key Trends Watch by FlexFunds and Funds Society.

Serge Weyland: “We Must Think of Regulation as a Way to Empower Investors”

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Photo courtesySerge Weyland, CEO of the Luxembourg Investment Fund Association (ALFI)

Assets in Luxembourg-domiciled investment funds — including UCITS and AIFs — reached €7.2 trillion at the end of April 2025, according to the latest figures published by the Luxembourg Investment Fund Association (ALFI). “We are witnessing strong inflows into both UCITS and alternative funds, but above all we are observing growth in the active ETF industry, an area where many managers have started to launch and market products,” highlights Serge Weyland, CEO of ALFI, when asked about the health of the industry.

In his view, the two major trends currently shaping the European fund sector are precisely active ETFs and alternative funds. In both cases, he acknowledges that Luxembourg is playing an increasingly prominent role. “I believe Luxembourg is the home of actively managed funds, whether liquid or illiquid, and whether we’re talking about traditional fund structures or ETFs. The regulation and transparency that characterize the country have been key to its leadership,” Weyland emphasizes.

ETFs and Alternatives: Growth Trends


In addition to this reflection on the country’s relevance, Weyland believes both trends will continue to grow. “It’s an emerging trend. We expect more and more asset managers to view ETFs as a distribution channel for actively managed strategies and to use platforms to bring them to investors. We already saw this with smart beta or beta-plus strategies, as well as systematic index-based strategies, which also opted for the ETF format,” he notes based on his experience.

Regarding private investments, Weyland points to the strong growth seen in the Luxembourg industry, which has grown from €2.5 trillion to €7.5 trillion in alternative fund assets. “This is the area where we’ve seen the most growth, and we expect it to continue. Of course, the interest rate hikes in the eurozone over the past two years made these assets less attractive, but the current rate-cutting cycle has turned the outlook around. After a dip in which the number of fund launches fell, ELTIFs are gaining strength in response to growing investor demand,” he comments.

Regulation: A Maze to Simplify


In this growth context comes the European Commission’s message on the need to simplify regulation to move toward a more unified, efficient, and competitive market — and to mobilize European investors. Given Weyland’s professional background, the question is inevitable: is this really what the industry needs? His response is direct: “Yes, I believe there are several areas where simplification is important — not only for the industry but also for investors.”

According to his assessment, one of the main challenges facing the European Commission is that European households are not investing — in part because legislation makes it difficult for them to invest and receive advice. “I think we must understand regulation not as an obstacle for investors or as excessive protection, but as a way to empower investors. I believe all regulatory developments around cost transparency are good, but I think we’ve gone too far, restricting their freedom to take risks,” he argues. He also points out that European regulation tends to view risk negatively: “We need a holistic view of risk that takes into account timing and investment horizon for decision-making.”

Another area where regulatory simplification could be very beneficial is the work of advisors. “There’s a lot of complexity in the investment offering process. Other countries, such as the United Kingdom, are already addressing these challenges, and we could take inspiration from them.”

In his view, this simplification will benefit the European investment product — the best example being UCITS funds — and the European industry, which has reached €23 trillion in Europe-domiciled funds, of which €5 trillion come from non-European investors. “We export far more funds than the United States, and regulation should be a catalyst for greater competitiveness — not the opposite.”

The best example is the recent revision proposed by ESMA on UCITS eligible for advisors. It suggests a systematic review of UCITS exposure, which would allow, for example, investments in real asset funds or commodity indices via total return swaps. “If this were to be implemented, it would be very unfortunate, because these are precisely the solutions that retail and institutional investors have used for many years to diversify their exposure,” argues the CEO of ALFI.

CMU and RIS: Are They Aligned?


In this regard, one of the debates heard in the industry is whether the Capital Markets Union (CMU) and Retail Investment Strategy (RIS) proposals are compatible. ALFI believes both should be aligned and, in Weyland’s words, “the CMU should consider pension systems as key components of the new European financial model,” given the major sustainability challenge faced by pension systems in countries such as Spain, Luxembourg, France, Germany, and Italy — and the opportunity presented by the so-called second pillar.

ALFI advocates for occupational pension plans — under the second pillar — with automatic enrollment, transparency, efficiency, broad availability, and choice among multiple providers. It also recommends a European tool to track first, second, and third-pillar pensions, providing citizens with a clear view of their future retirement.

“In many pension systems, this second pillar is completely outdated and ineffective due to poor design. I believe the European Commission can truly help Member States redesign this second pillar of their pension systems. Some countries have successfully implemented a second pillar that works and encourages investor participation, such as Sweden, Denmark, Canada, or Australia,” Weyland concludes, offering another perspective on the debate.

Two Alternative Asset Managers and a Dozen Funds Receive Green Light to Access Chilean AFPs

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Photo courtesy

The list of instruments in which Chilean pension funds can invest continues to grow, and July was no exception. The most recent meeting of the Risk Rating Commission (CCR) — the entity that determines which asset managers and funds can offer their strategies to the AFPs — gave the green light to two alternative asset managers and a dozen funds, including two ETFs.

According to a statement, the entity’s latest meeting — held this week — resulted in a series of approvals, including the two alternative asset managers, which were cleared for investment vehicles and co-investment operations for a specific asset.

The U.S.-based Greenbriar Equity Group received approval for private equity. This is a specialized manager with a strong focus on growth. “We don’t invest in trends or market cycles; we invest in great companies and management teams in sectors where we’ve spent our entire careers,” is how they describe themselves on their institutional website. In terms of sectors, they are primarily dedicated to companies involved in the supply chain and business services — such as logistics, specialized distribution, and transportation, among others — as well as advanced manufacturing firms, including those in aerospace, defense, and vehicles.

In the case of Sweden’s Niam AB, although the firm offers a broad range of strategies across the alternatives spectrum — including real estate, infrastructure, and credit — the CCR approval involves real estate investments. In this segment, the firm is particularly active in the European market, investing in assets across all sectors in Sweden, Norway, Finland, Denmark, and Poland.

Liquid Asset Funds


However, the investable universe for the AFPs expanded not only in the area of illiquid assets this month. A dozen funds — including a couple of index strategies — were also added to the list, brought in by a handful of international asset managers.

In terms of mutual funds, the CCR approved two Morgan Stanley vehicles, both focused on Asian equities: the Indian Equity and Japanese Equity strategies; and four UBP Asset Management (Union Bancaire Privée) fixed income funds: Dynamic US Dollar Bond, Global High Yield Solution Extended Duration, Hybrid Bond, and Medium Term US Corporate Bond. In addition, they added the European equity strategy Tocqueville Value Euro ISR, managed by LBP AM (formerly known as La Banque Postale Asset Management).

Pictet completes the list of newly incorporated mutual fund shares, with three thematic equity strategies: Quest AI-Driven Global Equities, Quest Europe Sustainable Equities, and Quest Global Sustainable Equities.

On the side of index-tracking vehicles, two Franklin Templeton ETFs were also approved: Franklin FTSE India UCITS and Franklin S&P 500 Paris Aligned Climate UCITS.

iCapital and Boreal Announce an Alliance to Expand Access to Institutional-Quality Alternative Assets

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Pixabay CC0 Public Domain. The Road to an Effective Collateral Management Program

iCapital and Boreal Capital Management AG (Zurich) and Boreal Capital Management LLC (Miami), subsidiaries of the MoraBanc Group, have announced in a statement a global collaboration aimed at expanding cross-border investment solutions. This alliance builds on the successful use of iCapital’s Marketplace by Boreal Miami since 2021 and now includes Boreal Zurich’s access to Luxembourg-domiciled funds for qualified Swiss investors.

This expansion is especially relevant for Latin America, where Boreal Miami serves a growing base of private clients and family offices seeking diversified, institutional-quality investment opportunities. The alliance underscores both firms’ commitment to transparency, innovation, and client-centric wealth management.

We believe this story will resonate with your audience, particularly given the increasing demand for access to sophisticated investments in Latin America. I would be happy to arrange interviews with executives from iCapital or Boreal, or provide additional information.

“This agreement represents a key strategic step in our commitment to offering our clients access to top-tier alternative investment solutions, always with the highest level of transparency and regulatory rigor,” stated Joaquín Francés, CEO of Boreal Capital Management LLC.

“We are pleased to expand our relationship with iCapital, a step that will further strengthen our global offering and enable us to continue providing our clients with access to high-quality investment opportunities,” added Jaime Moreno, CEO of Boreal Capital Management AG.

“We are excited to deepen our relationship with Boreal Capital Management and support their global expansion into alternatives,” stated Wes Sturdevant, Head of International Client Solutions for the Americas at iCapital.

With over $4 billion in assets under management and a team representing fifteen nationalities and ten languages, Boreal offers a unique combination of global reach and local expertise. iCapital, for its part, manages $232 billion in alternative platform assets and provides AI-driven solutions that streamline the investment lifecycle—from onboarding and regulatory compliance to reporting and portfolio integration.