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The Three Pillars of JP Morgan Asset for Offshore Investments

Expanding foreign investments for Brazilian investors has long been a challenge, as Brazil’s atypical market—very different from many of its Latin American peers—barely allocates 1% of its investments abroad. In this scenario, subordinated funds and international asset managers compete for a small portion of “diversified” portfolios of potential clients.

One such player is J.P. Morgan Asset, which has been striving to highlight the results of offshore investments through three key pillars and a diversified portfolio that delivered an annual return of 11.6%, according to Giuliano de Marchi, director for Latam at J.P. Morgan Asset and director at Anbima.

“We can demonstrate that not putting all your eggs in one basket works,” says de Marchi, at the ANBIMA Global Insights event held this Tuesday (1) in Sao Paulo. He emphasizes that the CDI (Brazil’s interbank rate) over the same period provided an almost 8.5% annual return, or a cumulative 130%. “It’s a fact that diversification works, and everyone [in the market] knows this.”

First Pillar: Looking at Global Opportunities

Understanding investment opportunities in other countries is the first step when looking at the world of global assets. De Marchi points to data showing the size of the global investment market. “In the global fixed income market, the percentage outside Brazil is 98%,” he says, highlighting the limited opportunities available in the South American giant.

Equity investments present even fewer opportunities. “99.9% of the equity market is outside Brazil,” he adds. “If the investor does not invest in global markets, they are excluding 98% of their wealth: 98% in fixed income and 99% in equities. Therefore, from a size perspective, it’s crucial to observe the global market.”

The manager notes a similarity between Brazilian and U.S. investors: both have limited global exposure. However, he stresses that the markets differ greatly in size. The U.S. market, considering both fixed income and equities, “is 117 times larger and 25 times more liquid than Brazil’s.”

Second Pillar: Sector Diversification

One of JP Morgan Asset’s strategies is to assess sectors that do not exist in Brazil and how they can protect Brazilian investors.

In one panel, De Marchi compares three sectors to the Ibovespa, Brazil’s benchmark stock index, which currently has a value of $356 billion. In contrast, the U.S. growth market stands at $23 trillion, Europe’s luxury sector at $552 billion, and Asia’s technology market at $2 trillion.

“These are very large markets, much larger than Brazil’s, and sectors that are theoretically not present in the Brazilian market. So, if I want to invest, I have no local access,” he says. And how do they perform? De Marchi presents an analysis showing the cumulative returns of various sectors relative to the Ibovespa over eight years (2015 to 2023).

During this period, the CDI yielded 116% and the Ibovespa 140%. In contrast, the sectors examined showed much higher cumulative returns: luxury (480%), U.S. growth (520%), and biotechnology (250%). “It’s not only important to diversify to reduce risk but also to achieve better returns,” he asserts.

Third Pillar: Understanding Companies

Using a chart of the MSCI All Country World Index, which tracks the performance of large and mid-sized companies with a global presence in developed countries, de Marchi compared the top five companies in Brazil in 2005—Vale, Itaú, Ambev, Petrobras, and Bradesco—with the U.S. market’s top companies: Citi, British Petroleum, Microsoft, General Electric, and Exxon Mobil.

By 2023, only Microsoft remained among the U.S. companies, while three Brazilian companies continued to lead. “We’ve seen an absolute change in sectors. It’s crucial to understand the trends and the companies,” he emphasizes. “MSCI has around 3,000 companies, and only 48 of them are Brazilian.”

Jupiter AM Acquires the Institutional Team and Assets of Origin AM

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Jupiter Asset Management has announced the proposed acquisition of the investment team and assets managed by Origin Asset Management, a London-based global investment boutique, as part of a broader review of the firm’s emerging markets franchise.

Under the terms of the deal, more than 800 million pounds of predominantly institutional assets currently managed by Origin will be transferred to Jupiter AM, subject to customary approvals and consents. These assets are primarily held in long-standing segregated institutional mandates for a globally diversified client base, spanning Europe, Canada, and Australia.

The acquisition aligns with Jupiter’s growth strategy, particularly in strategically important areas such as the institutional client channel and the group’s international business. Jupiter notes that Origin brings additional scale to its Global Emerging Markets strategy and provides investment capabilities in International ex-US and Global Smaller Companies, areas of identified demand that will expand Jupiter’s ability to attract a wider range of clients.

Origin invests using a quantitative stock selection approach, combining proprietary algorithms and data with qualitative due diligence by its experienced investment team. The team consists of five investment professionals, all of whom will move to Jupiter upon completion of the acquisition, ensuring that their investment process remains intact. Origin’s strategies in Global Emerging Markets, International ex-US, and Global Smaller Companies have consistently outperformed their benchmarks over both the short and long term.

“I believe that the addition of the Origin team offers an attractive option for clients of both firms on the Jupiter platform as we look to broaden our offering. In addition to strengthening our global equity range and adding new global small-cap capabilities, the acquisition is a key part of our efforts to scale our emerging markets capabilities as we aim to build truly differentiated investment propositions. Origin’s rigorous and robust investment process, which combines both fundamental and quantitative elements, is unique and has delivered strong long-term results for clients,” commented Kiran Nandra, Head of Equities at Jupiter AM.

Meanwhile, Tarlock Randhawa, Managing Partner at Origin, added: “We are excited to join Jupiter, whose philosophy and culture of truly active and differentiated investment management aligns with our own, and whose strong client-centric approach is very clear. The transition for our existing clients will be seamless, and we believe they will benefit from Jupiter’s commitment to excellence in the client experience. In addition to the benefits for current clients, we are well positioned to grow our client base and assets over time.”

Additionally, Jupiter AM announced that Nick Payne, lead portfolio manager of Global Emerging Markets Equities, will leave the company at the end of 2024 to pursue other opportunities.

Balanz USA Appoints Kerry Hamana as Chief Operating Officer

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Balanz USA has announced in a statement the expansion of its financial advisory teams, and in this context, the appointment of a Chief Operating Officer: Kerry Hamana, who has a long track record with firms such as Robertson Stephens and First Republic Private Wealth Management.

“As we continue preparing for the next evolution of Balanz USA, we have made a very strategic hire to take over the operational management of the business. Balanz will hire several key advisory teams in the coming months, and one of our top priorities is to execute flawlessly and deliver superior service to advisors and their clients. As a result, Balanz has hired Kerry Hamana for the role of Chief Operating Officer. Kerry will lead our growth process on the operational side, ensuring that both advisors and clients receive the best possible user experience,” the Balanz statement said.

Richard Ganter, Executive Director of Balanz Advisors, its registered investment advisor, highlighted Hamana’s experience and track record: “We are thrilled to have Kerry on board as our new Chief Operating Officer. His extensive experience and proven track record in managing and growing operational infrastructures will be invaluable as we continue to expand our services and capabilities. We are confident that Kerry’s leadership will help us deliver exceptional value to our advisors and their clients, taking Balanz USA to new heights.”

Hamana joins Balanz USA from Robertson Stephens in San Francisco, California, where he was Managing Director and primarily responsible for overseeing the company’s operational infrastructure. He played a key role in helping the firm grow from an emerging RIA and brokerage to $5.4 billion in assets under management within five years. He brings more than 30 years of experience in the financial services industry.

Previously, Hamana was Senior Vice President at First Republic Private Wealth Management, where he managed national middle office operations supporting $120 billion in assets under management. Prior to that, he held management positions in business and operations at major investment firms and financial institutions such as Charles Schwab, Wells Capital Management, Wells Fargo Bank, Russell Investments, Silicon Valley Bank, and Dean Witter Reynolds.

Hamana holds an MBA from Saint Mary’s College of California, Graduate School of Economics and Business Administration, and a Bachelor’s degree in Business Administration from San Francisco State University.

Santander Private Banking Restructures its Leadership Team and Creates a New Commercial Area to Boost its Global Growth

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Santander Private Banking restructuring — Alfonso del Castillo, global head at Santander Private Banking.

Changes in the structure and leadership of Santander Private Banking teams, led by Alfonso del Castillo, the global head, who has established his office in Madrid, moving from his previous position in Miami. The entity has made new appointments and a new addition, with the aim of accelerating its international growth.

The new addition to the team is Carmen Gutiérrez, the new head of the Global Family Office, who will lead the entity’s value proposition across all geographies. She has developed her career in institutions such as Julius Baer and Credit Suisse, in countries like Mexico and Switzerland.

The other positions have been filled with professionals from within the company. Antonio Costa, who was CEO in Switzerland (BSISA) for many years, has been appointed as the Global Head of Commercial, a newly created position in which he will be responsible for strengthening the entity’s business dynamics in all countries. His previous role will be assumed in 2025, pending the relevant regulatory approvals, by Frans Von Chrismar, who will be the new head of BSISA, the Swiss unit.

Verónica López-Ibor, previously head of Products and Private Wealth at BPI, will be the new Global Head of Products and Investments.

Javier Martín-Pliego has been appointed Global Head of Strategy, a position from which he will develop, coordinate, and implement the entity’s growth projects.

Additionally, Beltrán Usera will be the new Global Head of the UHNWI segment, which serves the group’s high-net-worth clients. Usera will relocate from New York to Madrid to take on this new role, where he will lead local and global teams serving ultra-high-net-worth clients to implement a coordinated global strategy in this area.

The Global CIO for Santander Private Banking will be Kamran Butt. He has been the CIO for the Middle East and will now hold both roles.

Meanwhile, Víctor Moreno will lead the Strategic Solutions unit globally, which he had previously co-led from Miami.

Javier Rodríguez Hergueta, in turn, expands his current role at BPI by taking on global leadership over Private Banking Platforms.

Additionally, the entity has appointed a new Global Head of Transformation, which will be Carlos Rengifo.

Market May Improve its Growth Outlook as Fed Cuts Rates

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The cuts made by the Fed and announcements that this trend will continue will benefit investments in companies targeting long-term growth, Todd Morris, portfolio manager of Large Company Growth at Polen Capital, told Funds Society.

“Long-duration, high-growth companies benefit from a lower capital costs, lower interest rates and therefore lower discount rates, which drives their valuations up,” Morris commented, explaining that this effect allows for a more productive use of capital.

Regarding Polen’s case, Morris said the strategy features “resilient companies.”

“The companies we invest in are not dependent on the debt markets. They can fund their operations and growth initiatives with the cash they generate; they don’t need to go to the capital markets, which is really, I think, a sign of the quality of the companies we are investing in at Polen Capital,” he said.

On the other hand, according to Polen analyst said that both former President Donald Trump (2017-2021) and current Vice President Kamala Harris are interested in fiscal expansion but with different paths.

Trump is going to cut taxes, “which further increases the deficit,” said Morris who added that Harris talks about some tax incentives, but is actually more interested in expanding budget outlays, “which is also expansionary from a fiscal standpoint.”

“In recent years, expansionary fiscal policy has offset restrictive monetary policy, so I think we’ll probably see a continuation of what’s been happening in the U.S. in recent years from a fiscal standpoint,” he predicted.

On the other hand, Morris highlighted the importance that the regulatory stance of the two parties could have. While the Democrats have a more aggressive or progressive regulatory stance, the Republicans could go for a rollback of these types of policies, “which would be another shift on the margin for well-established large-cap companies and that I think would be a difference,” he explained.

Moreover, from a fiscal standpoint, the monetary aspect is independent of policy, Morris insists. According to the expert, year-on-year comparisons will be easier in a couple of months.

“We are curious to see how the inflation data evolves over the next couple of months, because the inflation trend has been downward, which favors rate cuts.

But if inflation comes back up, the Fed could find itself in a very difficult position. Because labor markets are softening and they have embarked on rate cuts. But they may have to stop if inflation starts to pick up,” he explained.

Inflation

Regarding the inflationary problem that the US has been facing, according to Morris it was caused “first by shortages in the supply chain and then by fiscal expansion.”

For this reason, the expert says he does not have a firm opinion on whether one of the candidates will be more inflationary than the other, but he does assure that both will have policies that can stimulate price increases.

However, he qualifies that the economic cycle is independent of politics. If you are looking at an inflationary outlook because of the way the economy is evolving, politics can do what it is going to do, but it may not really register in inflation readings.

Emerging Markets

Polen is also betting on companies in emerging economies and have found “very good businesses”, Morris said.

“We look around the world for great companies that fit our eye as investors. These are companies with competitive advantages and inherent profitability, which generate high returns on capital and have solid balance sheets,” he explained.

The portfolio manager said that at Polen they have found companies that fit that description in emerging markets.

In addition, he explained that with the Fed’s tapering season that has begun, we could see a weakening of the dollar that would increase the attractiveness of emerging market companies.

“We think it’s an interesting combination. So we like the opportunity set in emerging markets,” he asserted.

Finally, he commented that from the firm they are analyzing “all the time” companies, whether they are from Latin America, Asia or other parts of the world and they remain open to opportunities that arise, “as long as they are competitively advantageous companies that fit our criteria and that fit what we are looking for as investors in Polen.”

Klosters Capital and Capital Advisors Finalize an Agreement to Serve the Latin American Wealth Management Market

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Klosters Capital, a multi-family office based in Florida, United States, and Capital Advisors, an independent Chilean financial advisor, have entered into a collaboration agreement to jointly serve the Latin American wealth management market from Miami. Klosters Capital has been operating in Miami since 2016 under a Registered Investment Adviser (RIA) license, serving clients from the United States and Latin America. Since 2022, it also has an office in Madrid, Spain, where it operates as a financial advisory entity (EAF).

For Javier Rodríguez Amblés, Managing Partner of the company, “this agreement represents a strategic alliance that allows us to extend our services to several countries in the region where we had little presence, such as Chile, Peru, and Argentina, where Capital Advisors has established experience.”

With 25 years of experience, Capital Advisors is a recognized independent financial advisor that advises clients in Chile, Argentina, and the United States.

Pablo Solari, a partner at the firm, adds that “this agreement allows us to consolidate our presence in the United States by supporting our clients through Klosters Capital’s platform, with which we share a strategic business vision and the same values in the management and advisory of our clients.”

Capital Advisors is a member of the Global Association of Independent Advisors (GAIA), where all members must remain certified by CEFEX (Center for Fiduciary Excellence). This entity, headquartered in Pittsburgh, aims to “promote and verify excellence by evaluating and certifying compliance with high professional standards of conduct,” according to its website. In 2018, Capital Advisors Family Office became the first Latin American investment advisor to receive this recognition.

Both companies share a business model in which they are compensated exclusively by their clients, ensuring and guaranteeing their independence and rigor in management, always prioritizing the interests of their clients.

Société Générale and Bitpanda Close Agreement to Boost Digital Asset Adoption in Europe

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Bitpanda, a platform specializing in digital assets, has announced a collaboration with Societe Generale-FORGE (SG-FORGE), an integrated and regulated subsidiary of Société Générale Group. Through this partnership, Bitpanda will offer the EUR CoinVertible (EURCV) stablecoin, managed by SG-FORGE and compliant with MiCA1 regulations, to the entire European market. This agreement stems from the commitment of both companies to increase accessibility and adoption of digital assets across Europe.

Thanks to Bitpanda’s reputation and its extensive user base, European investors will have access to a stable, secure, and accessible digital currency. As a dedicated issuer of a reliable stablecoin, SG-FORGE focuses on delivering seamless financial experiences to its users.

Regulated stablecoins, such as EURCV, aim to bridge the gap between traditional finance and new digital economy products. They provide a stable and reliable store of value, particularly given the inherent volatility of cryptocurrencies.

With this collaboration, EURCV can expand across Europe and be used for cross-border payments, remittance transfers, or daily transactions, thanks to the ease and security offered by Bitpanda’s ecosystem.

Lukas Enzersdorfer-Konrad, Deputy CEO of Bitpanda, stated that euro-based stablecoins “are essential for the future of digital assets in Europe. The landscape is changing, the integration with traditional finance is increasing, and fully regulated stablecoins are the key to making this possible. We will work with Societe Generale-FORGE to bring that future closer.”

Jean-Marc Stenger, CEO of Societe Generale-FORGE, explained that this partnership “is a crucial step toward realizing our vision of making stablecoins a central component of the global financial system. Together with Bitpanda, we are confident in our ability to offer European users a stable, secure, and accessible digital currency.”

BTG Pactual Acquires Wealth Management Firm Greytown Advisors in Miami

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BTG Pactual announced on Wednesday (25) the acquisition of Greytown Advisors, a Miami-based wealth management firm, as part of its global expansion strategy. While the transaction value was not disclosed, the acquisition has already received regulatory approval.

With $1 billion in assets under management, Greytown Advisors specializes in serving high-net-worth families, particularly in Latin America, a market where BTG had less penetration. The acquisition strengthens BTG’s operations in the region and complements its multi-family office segment. The cultural alignment between the firms played a significant role in the agreement, as Marcello Correa, president of Greytown, is Brazilian and has extensive experience in the financial market.

Following the acquisition, Correa will join BTG’s team as a partner.

Rogério Pessoa, partner and head of Wealth Management at BTG Pactual, highlighted that negotiations with Greytown lasted two years and hinted that this might be the first of several future acquisitions. “This transaction reinforces our presence in the United States and allows us to serve a demanding and global audience,” Pessoa said.

The acquisition of Greytown Advisors is part of BTG Pactual’s strategic moves to expand its international presence. In June of this year, the bank also announced the acquisition of M.Y. Safra Bank, a private bank based in New York, following the previous year’s purchase of FIS Privatbank in Luxembourg.

Currently, BTG Pactual operates in several countries, including Argentina, Chile, Colombia, Spain, Mexico, Portugal, the United Kingdom, and Luxembourg. With these acquisitions, the bank reinforces its global growth strategy, managing around $45 billion in assets under management in the multi-family office sector.

Overall, BTG Pactual recorded significant growth, reaching R$ 799 billion in assets under management as of June 2024, representing a 27% increase compared to the previous year.

The SEC Accuses Merrill Lynch and Harvest Volatility Management of Ignoring Client Instructions

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The SEC announced charges against Harvest Volatility Management and Merrill Lynch, Pierce, Fenner & Smith for exceeding the investment limits designated by clients over a two-year period starting in March 2016, resulting in clients paying higher fees, being exposed to greater market risk, and incurring investment losses.

As part of separate settlements, Harvest and Merrill have agreed to pay a combined total of $9.3 million in fines and restitution to resolve the SEC’s claims, according to the regulator’s statement.

According to the SEC’s orders, Harvest was the primary investment advisor and portfolio manager of the Collateral Yield Enhancement Strategy (CYES), which traded options on a volatility index with the goal of generating incremental returns.

The SEC determined that, starting in 2016, Harvest allowed dozens of accounts to exceed the exposure levels designated by investors when they subscribed to the CYES strategy, including many accounts that exceeded the limit by 50% or more, as detailed in the statement.

Merrill and Harvest earned higher management fees when investors’ exposure levels rose above the pre-established thresholds, thereby subjecting investors to increased financial risks.

The SEC’s order regarding Merrill concludes that Merrill introduced its clients to Harvest and received a portion of Harvest’s management and incentive fees, as well as trading commissions. It also found that Merrill was aware that CYES investors were exceeding the pre-established exposure levels but did not adequately inform the affected CYES investors, most of whom had advisory relationships with Merrill, the statement added.

The SEC also found that Harvest and Merrill “failed to adopt or implement policies and procedures reasonably designed to ensure that they communicated all material facts to their clients and alerted them to excessive exposure.”

“In this case, two investment advisors allegedly sold their clients a complex options trading strategy but failed to follow basic client instructions or apply and adhere to proper policies and procedures,” said Mark Cave, Associate Director of the SEC’s Enforcement Division.

The SEC’s orders conclude that Harvest and Merrill violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

Without admitting or denying the findings, Harvest and Merrill agreed to be censured, receive cease-and-desist orders, and pay penalties of $2 million and $1 million, respectively. Harvest will also pay $3.5 million in disgorgement and prejudgment interest, while Merrill will pay $2.8 million in disgorgement and prejudgment interest.

Alternative Funds Continue to Reign in Chile

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The latest report from the Chilean Association of Investment Fund Managers (ACAFI) reveals that public investment funds reached $37.483 billion at the close of the first half of this year. Of the assets managed by new funds, 86% corresponds to alternative assets.

Despite the industry’s dynamism, the first half of the year saw a 1.9% decline compared to June 2023, mainly due to the evolution of the exchange rate, which posted an annual increase of 18.6% during this period.

However, when analyzing the total figures in Chilean pesos, the industry’s assets grew by 16.3% year-on-year, reaching CLP 35.647 trillion in June.

Focusing on just the second quarter of this year, the ACAFI report reveals that 31 funds were created between April and June. As a result, a total of 50 new funds were launched during the first half, representing $410 million in new assets under management.

During this period, alternative assets continued their upward trend. Of the assets managed by new funds, 86% were in this category, with private debt vehicles dominating preferences.

According to Luis Alberto Letelier, president of ACAFI, another key aspect is that half of these 50 new funds invest directly in assets in Chile, primarily in projects that promote development, such as renewable energy plants, loans for entrepreneurs and startups, and initiatives to facilitate access to housing.

Regarding private debt funds, Letelier asserts that the observed increase “demonstrates that they are consolidating as a source of financing for various productive sectors in our country, contributing to Chile’s growth.”