Fundamentals or Market Sentiment: The Ongoing Gold Rally, Under Debate

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Debate sobre el rally del oro

Gold prices have hit new highs. Midweek, the ultimate safe-haven asset reached $2,753 per ounce, marking a 33% increase for the year. According to experts, geopolitical tension stemming from the Middle East explains this surge.

At the start of the week, Ned Naylor-Leyland, gold investment manager at Jupiter AM, noted that the recent rise in gold prices was primarily due to futures contracts rather than physical demand or central bank purchases. “This is a crucial distinction as it highlights the nature of the gold market and how the dollar price of the yellow metal is driven not by physical trends but by futures market activity.”

He also pointed out that gold has gained prominence as central banks seek a buffer against the financial stability risks posed by rising geopolitical tensions, as well as events like the global financial crisis and the coronavirus pandemic. “Around one-fifth of above-ground gold reserves are held by central banks,” Naylor-Leyland added.

In contrast, Carsten Menke, Head of Next Generation Research at Julius Baer, believes this price surge has more to do with market sentiment than fundamentals. “The impressive rally in gold continues, with prices surpassing $2,700 per ounce last week. When looking for factors driving this rally, it appears to be mainly momentum and market sentiment. The position of short-term speculative traders and trend followers in the futures market recently reached one of the highest levels on record. Such extreme euphoria is typically a warning signal, as it shows a certain detachment of prices from fundamental factors,” Menke argues.

He explains that the U.S. dollar and U.S. bond yields have risen again as expectations for rate cuts have tempered. As a result, he notes that already moderate inflows into physically-backed gold products have slowed even further. “Gold buying in Asia remains weak, as indicated by Chinese imports, physical deliveries, and domestic price premiums. India’s gold imports have also normalized after high volumes in response to a surprising cut in import duties,” the Julius Baer expert added.

Short-Term Outlook

Despite this debate over the drivers behind gold’s price growth, there is a consensus on its positive short-term outlook. Marcus Garvey, Head of Commodities Strategy at Macquarie, agrees that gold’s “practically steady” rally continues, once again outperforming other assets. “While recent gains have not been explosive, the pace has been faster than estimated in our base scenario in September, when we updated forecasts, projecting an average price of $2,600 per ounce in the first quarter of 2025, with potential to advance toward the $3,000 per ounce level,” he indicates.

Macquarie maintains that challenging budget outlooks across developed markets are now a key feature of the bull market.

“Clearly, the upcoming U.S. elections contribute to uncertainty in this area. The scope and potential effectiveness of stimulus measures from Chinese authorities remain unclear, but if they succeed in significantly boosting the domestic equity or real estate markets, or both, it could dampen Chinese demand for gold,” Garvey argues.

“We continue to see a solid fundamental outlook for gold,” says Menke, explaining, “A further cooling of the U.S. economy and the prospect of lower interest rates in the U.S. could attract more Western investors to the market. The same applies to the U.S. presidential elections, which are reportedly prompting gold purchases by major investors who believe that, regardless of who reaches the White House, the U.S. dollar will be under pressure due to rising fiscal deficits.”

Finally, Julius Baer adds that Chinese investors and the People’s Bank of China should also return to the gold market. “For the former, it’s about the persistent weakness of the economy despite recent support measures. For the latter, it’s the low proportion of gold in its foreign exchange reserves and ongoing geopolitical tensions, especially with the U.S. In this context, short-term pullbacks are likely to be seen as buying opportunities,” Menke concludes.

The Miami Industry Hopes for a Quick Resolution of U.S. Election Results

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Impacto de las elecciones en EE.UU. en Miami

On Tuesday, November 5, U.S. elections will close, and who will lead the White House remains a big question. Although Donald Trump holds a slight edge according to betting markets, what matters most to the financial industry is a swift announcement of results without any dispute.

With this context, Miami’s buy-side representatives are analyzing potential scenarios and how the elections could impact investors.

Ignacio Pakciarz, Founder and CEO of BigSur Partners, expressed that he expects a “Red sweep” where Republicans win both the executive and both houses of Congress.

“We’re basing this primarily on betting markets and a range of financial indicators that consistently point to this outcome,” the expert stated.

According to Pakciarz, the market could experience a minor “relief rally” of 2-3% just from the elimination of electoral uncertainty—so long as there is no “contested election,” which would be the worst scenario. On the other hand, for BigSur’s CEO, “the best outcome would be a divided government.”

Alejandro Behrens, Managing Director at MAXIMAI Investment Partners, commented that he expects a “highly contested election” that will hinge on the swing states.

Behrens warns that “the market will react depending on the clarity and speed with which the results are known.” He agreed that much will also depend on how balanced the government will be, taking into account the Senate and House results.

“Markets usually tend to prefer a more divided government. For me, the best outcome for investments would be one where the winner is known quickly. I think the worst scenario would be one where doubts linger, and it takes several days or even weeks to find out who the new president will be. This would definitely not be positive for the markets and would cause a lot of uncertainty,” he reflected.

Fernando de Frutos, Chief Investment Officer at Boreal Capital Management, outlined three scenarios that could affect the market.

Firstly, who ultimately wins and how anticipated the result was. Secondly, whether the losing party contests the results; and finally, how Congress will be structured.

According to De Frutos, currently, prediction markets show Trump with a slight lead and around a 30% probability of a “Republican sweep.” However, “this advantage has been declining, and polls indicate a very close race,” he clarified.

Given these possible scenarios, for Boreal Capital Management’s CIO, a “Republican sweep” could be positive for stocks in the short term, but might impact bonds, as deficits and tariffs could lead to a rise in interest rates, which in turn could place downward pressure on stocks.

In this regard, De Frutos clarified that “investors generally value all available information, but the impact of fiscal and economic policies often materializes over time and may not immediately influence markets.”

However, the effects of policies related to regulation, tariffs, and taxes tend to be more immediate, the expert explained, noting that the “Trump trade” in 2016 serves as a clear reminder of how markets can react swiftly to policy changes.

Investor Recommendations

It’s well-known that election periods bring volatility and uncertainty for investors. For this reason, financial advisors need to have clear recommendations for their clients.

In this aspect, BigSur Partners “prioritized a healthy rotation toward sectors with good valuation levels.” According to Pakciarz, these sectors would benefit from deregulation that a Trump administration would bring.

Behrens, for his part, worked to help his clients “stay calm and continue with a long-term focus regardless of the election outcome.”

De Frutos, in turn, believes that beyond the “immediate market reaction,” regardless of the electoral outcome, the U.S. will continue to be one of the most attractive markets for investors.

The expert emphasized that for clients with a medium- or long-term investment horizon, “these elections are basically background noise” and noted that historically, stock markets have risen under both Republican and Democratic presidents, and “staying out of the market can be costly in the long run.”

“Since post-election market reactions are notoriously hard to predict, we do not recommend making drastic adjustments based solely on the election results,” he concluded.

Securitization and alternative assets: New opportunities for portfolio management

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Nuevas oportunidades en securitización y activos alternativos
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In the current climate of economic uncertainty, market volatility, and increasing geopolitical risks, portfolio diversification has become a priority for asset managers. Traditional strategies based on equity and bond investments have proven insufficient to mitigate the inherent risks of financial markets. Alternative assets emerge as a critical tool here, providing managers with new diversification opportunities to enhance portfolio resilience and profitability, FlexFunds highlights.

Alternative assets encompass investments in real estate, private equity, infrastructure, private debt, commodities, art, and collectibles, among others, characterized by their low correlation with traditional assets. This makes them an attractive option for managers and investors seeking to reduce portfolio volatility and mitigate the adverse effects of economic cycles.

In a high-inflation, high-interest-rate scenario, managers need to explore opportunities outside traditional markets. Alternative assets offer stability and potential returns, helping safeguard investment value during uncertain times. David Elms, head of diversified alternatives at Janus Henderson Investors, highlights that, during periods of economic transition, alternative investments can generate long-term returns independent of equity or fixed-income markets, particularly in bearish conditions.

Today, portfolio managers are increasingly turning to asset securitization to optimize their diversification strategies. This tool enables converting illiquid assets into tradable securities, facilitating distribution among investors. For managers, this approach opens up access to assets that would otherwise be unattainable due to their illiquid nature.

Securitization not only improves the liquidity of underlying assets but also provides an additional source of diversification. According to the II Annual Report of the Asset Securitization Sector by FlexFunds and Funds Society, portfolio managers are more familiar with securitizing traditional, tangible assets such as real estate projects, loans and contracts, and stocks.

One of the main advantages of alternative assets is their ability to generate absolute returns—i.e., positive returns regardless of market conditions. Portfolio managers incorporating these assets into their strategies aim to minimize economic cycle dependency by diversifying their investments into areas less correlated with equity or fixed-income markets.

In line with this, and based on a survey conducted by FlexFunds and Funds Society to over 100 investment and portfolio management experts, the most sought-after assets for securitization include real estate projects, loans and contracts, stocks, bonds, and mutual funds, as shown in Figure 1.

Source: II Annual Report of the Asset Securitization Sector 2024-2025

Figure 1: Assets of greatest interest for securitization

 

In addition to diversification and risk mitigation, alternative assets provide access to sectors undergoing growth and economic transformation. According to the same report, the most common types of alternatives that managers include in their portfolios are detailed in Figure 2.

 Source: II Annual Report of the Asset Securitization Sector 2024-2025

Figure 2: Alternative product in the portfolio

 

However, investing in alternative assets also entails challenges that must be managed carefully. The lower liquidity of these assets, as well as their opacity and lack of regulation in some cases, can increase risks. To mitigate these, rigorous due diligence and an experienced management team are crucial to understanding each alternative investment’s unique characteristics.

From a manager’s perspective, integrating alternative assets into investment strategies represents both an opportunity and a responsibility. The challenge lies in identifying suitable assets that align with investors’ objectives and risk profiles. The selection of these assets should be accompanied by constant portfolio review and adjustment, considering market fluctuations and emerging opportunities.

In this context, FlexFunds, as a leader in designing and issuing investment vehicles (ETPs), facilitates access to international markets, especially in a financial environment where diversification through alternative assets is key. With its securitization program, FlexFunds offers managers the ability to:

  • Issue ETPs at half the time and cost of other alternatives available in the market.
  • Securitize multiple asset classes, including alternatives.
  • Facilitate distribution of alternative assets across banking platforms worldwide via Euroclear.
  • Streamline capital raising from international investors.
  • Simplify the onboarding and subscription process for investors, compared to traditional alternative asset subscriptions.

For further information, please contact one of FlexFunds’ experts at contact@flexfunds.com

Latincapital Wealth Management Strengthens Its Advisory Team With the Addition of Matías Rodríguez

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(cedida) Matías Rodríguez, gestor de Latincapital Wealth Management

The Chilean firm Latincapital Wealth Management is expanding its advisory team. The company, the financial advisory unit of Sartor Finance Group, announced the addition of Matías Rodríguez Zaror.

According to a statement, the professional has been appointed as a wealth management manager, bringing 14 years of experience in the local financial industry to the group.

The company emphasized Rodríguez’s ability to manage accounts, operate in financial markets, and build strong client relationships, describing him as a “key asset” for Latincapital with a strategic focus for the company.

Before joining Sartor’s subsidiary, the executive held the position of Associate Director Relationship Manager Assistant for Chile at Julius Baer, where he spent seven and a half years. He also worked as a real estate broker for the fintech Capitalizarme, according to his LinkedIn profile.

“This appointment confirms Sartor’s commitment to excellence in investment management and growth alongside our clients,” said Rodrigo Bustamante, Co-Head of Latincapital Wealth Management and partner at Sartor Finance Group, in the press release.

Sartor is a financial services holding company that includes a fund manager specializing in private debt. The group has $850 million in assets under management (AUM), with operations in Chile, Peru, and Uruguay. Earlier this year, the firm announced its merger with the wealth management branch of the multi-family office Latincapital & Co, aiming to expand across Latin America.

Brazil’s Largest Pension Fund Seeks to Outsource Part of Its Equity Management

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Fondo de pensiones de Brasil busca externalizar gestión

Brazil’s largest pension fund, Previ (Banco do Brasil Employees’ Pension Fund), is in the process of outsourcing a small portion of its equity portfolio, according to sources from Funds Society.

The foundation, which currently manages approximately 280 billion reais (around $4.9 trillion), confirmed the existence of a study for portfolio outsourcing but declined to reveal details, stating that it is still at a very early stage.

Complementary Strategies

One of the assets that has already received pre-approval in this process is Trígono Capital, specialized in Small Caps.

In this process, Previ is specifically looking for a manager for a dividend strategy, focusing on assets that the company does not currently hold in its portfolio. Other strategies are also under consideration.

With managing partners, the foundation is expected to create exclusive funds, making small contributions from its younger portfolios, particularly from defined contribution plans.

The focus will be on enhanced management, introducing strategies and specializations that do not currently exist within the foundation’s assets.

Four Secular Trends That Offer Long-Term Certainty Amid Short-Term Volatility

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Tendencias seculares en medio de la volatilidad

“Putting money back to work” was the theme under which Oddo BHF AM recently presented its macroeconomic and market outlook in Madrid for the next four months. Laurent Denize, the firm’s Chief Investment Officer, led the presentation, focusing on three concepts investors should consider to capitalize on market trends: rotation, duration, and carry.

Denize clarified that Oddo’s stance aligns largely with market consensus, with a few nuances. Their outlook comprises four key points: a soft landing for the global economy, a continuation of the gradual trend toward disinflation seen over recent quarters, further interest rate cuts from the Federal Reserve and the ECB, and an increase in geopolitical risk, especially in the Middle East and in the lead-up to the U.S. presidential elections in November. However, Denize emphasized that the elections’ outcome is less concerning than the U.S. fiscal deficit, which he deemed “worrisome.” He also highlighted Germany’s risk of deindustrialization due to its anti-nuclear policy and growing reliance on Chinese imports, and France’s political instability and high government deficit, leading to significant tax hikes.

In this context, how can investors safeguard their portfolios? “We’re seeing that flows and market positioning are increasingly important,” Denize commented, pointing to the concentration in markets like the U.S. He believes that “valuations appear attractive, but EPS expectations are unrealistic,” which could lead to a rapid rotation.

Denize describes a landscape of rising volatility, declining liquidity, and investor indecision, yet with rich valuations across many market segments. He suggests these factors explain “the significant yield discrepancy between fixed income and equities,” arguing that “bond positioning doesn’t make sense” given the anticipated curve normalization. “We need to look for duration where it’s cheap, and today, that’s in equities, not debt,” he concluded.

Betting on Secular Trends

To navigate this environment, Oddo recommends focusing on secular investment trends. Denize points to the rise of artificial intelligence (AI) as the first such trend, noting its impact on capex could be pivotal: “We see a valuation gap between less capital-intensive companies and those investing heavily in AI. Interest is shifting from semiconductor manufacturers to software.” He anticipates that AI will drive further growth in trends like reindustrialization and robotics as a means to counter demographic shifts.

Two other secular trends noted by Denize are the growth of the healthcare sector—partly due to AI and scientific advances that enable better diagnostics and new drug discoveries—and the green economy. Specifically, Denize predicts “a rally” in green energy, driven by electrification over other energy sources, and stated, “The market is being very complacent about changes in the energy mix.”

The final secular trend mentioned by Denize is the emergence of new consumption patterns, tied to the widespread adoption of new payment methods. Oddo also anticipates a recovery in the luxury sector by 2025.

Due to these trends, Oddo recommends a defensive positioning for the coming months, favoring stocks tied to utilities, real estate, basic consumption (such as food and beverages), and construction, as they are well-positioned to benefit from both the rate-cut cycle and the trends in electrification and energy transition.

The Quarterly Flows in the European ETF Market Indicate That We Are on Track for Another Record Year

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Flujos trimestrales en el mercado europeo de ETFs

The European ETF industry is on track to reach record numbers in 2024, according to the latest market report from Morningstar. According to its data, the third quarter of the year recorded inflows worth €63 billion, a considerable increase compared to €53 billion in the second quarter. Additionally, assets under management grew by 5.7% during this period, surpassing the €2 trillion mark for the first time. “This increase marks a new quarterly record. Cumulative flows in the first three quarters of 2024 totaled €161 billion, surpassing the 2023 total and the previous annual high of €159 billion recorded in 2021. With one quarter still to account for, 2024 is set to be a record year for the ETF industry in Europe,” Morningstar indicates.

José García-Zárate, Associate Director of Passive Strategies at Morningstar, explains that the European ETF market closed the third quarter with a historic record of €63 billion in net inflows. “Surprisingly, with one quarter still to go, year-to-date cumulative flows have reached €161 billion, surpassing the previous annual record of €159 billion set in 2021. Assets have exceeded the €2 trillion mark for the first time,” he notes.

García-Zárate highlights that most third-quarter flows were directed toward equity strategies, especially U.S. large-cap stocks. “We have observed a substantial increase in interest in equally weighted ETFs in the S&P 500 following market volatility in August. This phenomenon suggests that some investors are concerned about the high concentration in technology stocks in capitalization-weighted indices. There was also an increase in demand for U.S. small-cap ETFs as investors look for tactical opportunities in the context of the interest rate cut cycle, moving away from large-caps. On the other hand, active ETFs, which have gained significant attention, attracted €4.8 billion, representing 7.7% of all ETF flows during the quarter. Although this segment is experiencing triple-digit organic growth rates, it still starts from a very low base: active ETFs represent only 2.2% of total assets in Europe.”

Key Trends

In terms of trends, Morningstar’s report shows that most assets, €1.42 trillion (71%), remain invested in equity strategies. In fact, these strategies captured €41 billion in the third quarter, slightly above the €40 billion in the second quarter. One of the most notable figures is that U.S. large-cap equities remain the most popular market exposure, although there has been a significant increase in interest in ETFs following equally weighted indices, especially the S&P 500. “These ETFs have gained popularity as a risk management tool amid concerns over excessive market concentration,” the report highlights.

Fixed-income ETF assets closed the quarter at €427 billion, accounting for 21.3% of the total. According to Morningstar, bond ETFs attracted €18.8 billion in the third quarter, up from €11.4 billion in the second quarter. “Investment-grade corporate debt ETFs and fixed-maturity bonds were favored, while inflation-linked bond strategies saw outflows,” the report indicates.

Meanwhile, ESG ETFs captured €7.5 billion in the third quarter, compared to €5 billion in the second quarter. According to the report, this increase was driven by a rise in flows toward ESG bond ETFs, while flows into ESG equity ETFs remained practically unchanged at €3.6 billion. “Flows into ESG strategies represented 12% of total ETF flows in the third quarter, up from 9.4% in the second quarter,” the report states.

Finally, active ETFs captured €4.8 billion in the third quarter, slightly above the €4.7 billion in the second quarter, representing 7.7% of all ETF flows during the period. “Strategic beta ETFs recorded net inflows of €3.2 billion in the third quarter, led by equally weighted equity strategy ETFs, while thematic ETFs saw outflows of €1.6 billion in the third quarter, with the largest outflow recorded in the energy transition ETF subgroup,” the report notes as other notable trends. One constant trend is the leadership of iShares, which topped the provider rankings in the third quarter with quarterly flows of €24 billion, followed by Amundi with around €8 billion, Xtrackers with €7.5 billion, and Vanguard with €7 billion.

BBVA, BlackRock, and Santander AM Operate Over 53% of Mexico’s Fund Market

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BBVA, BlackRock y Santander AM dominan el mercado de México

The investment fund market in Mexico is solid, growing, and has shown resilience in times of uncertainty; however, it remains highly concentrated among a few managers.

The Mexican Association of Securities Intermediaries (AMIB), in its September report, confirms this concentration: the six largest fund managers in the Mexican market hold nearly 75% of the market, precisely 74.32%, while the remaining 25.68% is distributed among 24 other managers.

According to AMIB data, the two largest managers in the Mexican market, BBVA and BlackRock, alone operate 43.35% of the total market. When adding Santander Asset Management (SAM), the other manager with a double-digit market share, the concentration among these three intermediaries reaches 53.27%.

The list of the six largest investment fund managers in the market and their shares, according to AMIB figures, is as follows:

– BBVA, the largest manager in the market, with 24.53% of the total.
– BlackRock with 18.72%
– SAM with 10.02%
– Banorte with 8.64%
– Actinver with 6.26%
– HSBC with 6.15%

The combined share of these six managers is 74.32%, while another 24 fund operators in the country hold 25.68% of the market.

The Mexican system comprises 30 investment fund managers; as of the end of September, these managers served a total of 6,591,023 clients, representing an annual increase of 18.15%.

AMIB also notes that the Mexican market currently has 634 funds available, while total assets amount to 4.129 trillion pesos ($211.74 billion), with an annual growth rate of 24.92% as of September. However, some revisions to the figures are made at year-end to produce a final report.

Santander AM Integrates Its Alternatives Business Into a Single Platform Led by Carlos Manzano

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Integración del negocio de alternativas de Santander AM

The changes and restructuring at Santander Asset Management (SAM) continue. The asset manager has decided to merge its operations with the alternative investment platform and appoint Carlos Manzano as the head, who will report directly to Samantha Ricciardi, head of the firm, according to Bloomberg and confirmed by Funds Society.

In May 2023, the bank launched its alternative asset manager, Santander Alternative Investments (SIA), appointing Luis García Izquierdo as CEO and Borja Díaz-Llanos as CIO. The asset manager communicated this integration of businesses and the appointment of Carlos Manzano, who replaces Luis García Izquierdo, to its employees via an internal memo. These changes come after the appointment of Javier García Carranza as head of Asset Management, Private Banking, and Insurance at Santander in May of this year.

Manzano’s new responsibilities are not the only recent developments at the company. The asset manager has made additional changes. Marcos Fernández has been appointed Chief Operating Officer of the division, and Antonio Faz has been named head of Legal, while Alfonso Castillo, Global Head of Private Banking, has relocated to Madrid from Miami.

Additionally, the bank has selected Jaime Rodríguez Andrade to launch its new Santander Retirement Services business.

Other recent changes include Adela Martin, currently Head of Private Banking in Spain, who was appointed last month as Head of Business Globalization for the wealth management and insurance division, and the hiring of Víctor Allende, formerly of CaixaBank, to lead client advisory services in the private banking division.

Tempus Investments Launches in Latin America to Distribute BNY Funds

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Tempus Investments lanza en América Latina

The Investment Management division of Bank of New York (BNY) has signed a distribution agreement with Tempus Investments to offer its mutual funds across Latin America.

Tempus Investments, founded in Chile by Eduardo Ruiz Moreno, will expand its operations to Uruguay and Argentina to introduce the entire range of BNY mutual funds. “The group operates with a management model that includes various specialized investment firms, offering tailored investment solutions for each asset class and client, such as Insight, Newton, and Walter Scott,” sources at the firm told Funds Society.

To drive growth in this new phase, Tempus has hired Renzo Quesada, who will be based in Montevideo and serve clients in both Uruguay and Argentina. Quesada, who has been in the industry for over 13 years, previously worked at Asset Managers Agente de Valores since 2011.

BNY Investment Management oversees more than two trillion dollars in assets for institutions, corporations, and the wealth management sector, according to the firm’s information. Insight, one of its affiliates, manages over $800 billion, making it “the third-largest fixed-income manager in Europe,” the release added.

Newton, a UK-based manager, has extensive experience in income strategies, while Walter Scott focuses on fundamentally driven equity investments in high-quality companies, the firm’s information concluded.