BBVA Receives Green Light from UK Regulator to Take Indirect Control of a Banco Sabadell Subsidiary

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New advances have been made in the approvals for BBVA’s takeover bid (OPA) for Sabadell. The UK Prudential Regulation Authority (PRA) has given the green light for BBVA’s indirect acquisition of TSB Bank plc, Banco Sabadell’s UK banking subsidiary.

According to the bank, this authorization is one of the conditions tied to the purchase offer for Banco Sabadell’s shareholders and a necessary step to complete the deal, as TSB would become part of the BBVA Group.

BBVA submitted a purchase offer for Banco Sabadell shares to its shareholders on May 9th, and the process will begin once the necessary regulatory approvals are obtained. “Since then, BBVA has received approval for the operation from the competition authorities in several countries where Banco Sabadell operates (the United States, France, Portugal, and Morocco). The UK Prudential Regulation Authority, responsible for supervising around 1,500 entities, including banks and insurers, oversees TSB Bank, which is owned by Banco Sabadell,” BBVA explained.

Additionally, this authorization follows the Spanish regulator CNMV’s acceptance of the takeover bid for processing, “understanding that the prospectus and other documents submitted, following complementary documentation and modifications registered on 06/04/2024, comply with the provisions of the relevant article.” This does not mean the operation is final, but regulatory steps are being taken, as is customary in such cases. As Sabadell noted before the summer, the final decision will depend on the will of the shareholders.

Among the next steps before launching the purchase offer to Banco Sabadell’s shareholders is the approval of the offer by the European Central Bank (ECB) and the Spanish National Securities Market Commission (CNMV). Furthermore, the offer is conditioned on acceptance by the majority of Banco Sabadell’s share capital (a minimum of 50.01%) and approval by the Spanish competition authority (CNMC).

The Investment in Alternatives by AFOREs Is Growing in Amount, but the Percentage Remains Unchanged

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As the assets under management by AFOREs have increased, the resources allocated to alternative investments have also grown. However, the percentage these investments represent in the portfolio at market value remains low, not yet reaching double digits on average for all AFOREs, currently standing at just 7.8% of the $359 billion they manage (as of June 30). If commitments are considered, the percentage is higher, as only 58% of these commitments have been called.

To reach this 7.8%, in nearly six years, there has only been a 1.7% increase relative to assets under management (from 6.1% in 2018 to 7.8% in June 2024) when comparing in dollars. This equates to an average annual increase of 0.28% over six years. However, when looking at the growth in assets and alternative investments, the amounts are significant.

Over the past three years, the weighted percentage of AFOREs’ investment in alternatives has stabilized between 7.5% and 7.8%, with some individual cases sometimes approaching or exceeding 10%, while others are slightly above 4%.

Investments in alternatives rose from $10.3 billion at the end of 2018 to $27.8 billion by June 2024, representing a 2.7 times increase relative to the percentage growth during this period.

The assets under management by the 10 AFOREs ended June at $359 billion. The compound annual growth rate (CAGR) over five years (2018-2023) is 15.1% in dollars, while alternative investments had a five-year CAGR of 19.9%, a slightly higher percentage than the growth in assets under management.

Investments in private equity funds have been channeled both into Mexico (56% at market value as of June 2024) and internationally (44%). Regarding investments in Mexico, according to information published by Dario Celis (El Heraldo de México on July 31), the AFOREs invested $805 million in 12 combined cycle plants and a wind farm that the government purchased from the Spanish company Iberdrola. This investment is close to the average growth rate over the past six years (0.22% investment in Iberdrola vs. 0.28% average growth over six years), representing a significant amount invested in Mexico.

The market value of all alternative investments made in Mexico and internationally is $30.207 billion, according to public information from the 343 CKDs (133) and CERPIs (210) as of June 2024. Investments in Mexico made through CKDs represent 56%, while 44% is predominantly international since CERPIs invest at least 10% in Mexico.

The appetite for alternative investments by AFOREs is expected to increase as assets under management grow, and the percentage they represent is likely to approach the 9-10% range, which seems to be the level where AFOREs feel most comfortable.

Tikehau Capital Completes the Sale of Its Stake in Preligens to Safran

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Tikehau Capital has completed the sale of its stake in Preligens, a global artificial intelligence (AI) firm specializing in the aerospace and defense sector, to Safran for an enterprise value of €220 million. Following an exclusive negotiation process that began in June 2024, Tikehau Capital is divesting its stake in Preligens to Safran.

According to the asset manager, Preligens, founded in 2016 by two French engineers, offers field-tested AI analysis solutions for high-end imagery, full-motion video, and acoustic signals. “Tikehau Capital’s investment in November 2020 has been pivotal in accelerating Preligens’ growth, which has seen its revenues increase tenfold (from €3 million to nearly €30 million), expanded its operations in the U.S. and Asia, and now employs around 250 people, including 140 R&D engineers,” they noted.

This sale marks the first divestment of Brienne III, the Group’s first private equity fund dedicated to cybersecurity. According to the asset manager, this strategy has raised nearly €4001 million across its two funds and has now invested €150 million in 16 companies, including Trustpair, Chapsvision, and Egerie in France, and VMRay in Germany.

U.S. Equities don’t Have a Performance Problem, They Have an Expectation Problem

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The second-quarter earnings season in the U.S. is coming to an end. So far, results have surprised to the upside, with earnings per share (EPS) growth of 8% year-over-year, exceeding market estimates by 4%. A noteworthy aspect of this season is the broader participation in earnings growth, as the EPS of the S&P 500 has shown an increase even when excluding the large tech companies (Mag-7) for the first time in five quarters, notes Felipe de Solminihac, Investment Analyst at Fynsa.

In terms of sector performance, the highest earnings growth continues to be seen in technology-related sectors. In fact, the earnings growth of the Mag-7 has been 26% year-over-year.

Solminihac explains that despite the strong growth shown by the Mag-7 companies this quarter and exceeding market expectations by 6% (vs. +11% on average over the last four quarters), this has not been rewarded by investors, as the prices of all the stocks—except Meta—fell by an average of 8% in the three days following the earnings reports. In other words, when you have a sector with such high valuations in historical terms and so much implicit earnings growth, it is not enough to simply beat the current quarter’s estimates; it must exceed what had been surprising in previous quarters and also offer a strong forward-looking guidance.

For the Fynsa analyst, another risk factor is that the proportion of companies exceeding sales estimates has significantly decreased across the S&P 500. This factor could put pressure on margins in the second half of the year, as slower revenue growth combined with persistent costs could affect the future profitability of companies.

“With this background, and already thinking more about 2025, one might wonder if the market’s expected earnings growth of +15% might be a bit optimistic, especially in the context of a clearly slowing U.S. economy and valuations that are at the higher end of their historical range (Today, the market trades at 21.5 times forward P/E, representing a 23% premium compared to its historical average),” says Felipe de Solminihac.

For this reason, the bar by which corporate earnings in the U.S. should be measured is different from when the market was trading at lower valuations and prior to the AI boom.

Finally, the expert observes a crucial differentiation within the equity market: the S&P 500 equal weight trades at a 20% discount compared to its market cap-weighted version. This differentiation could present a better way to gain exposure to the U.S. market.

Industry Professionals Expect the SEC to Be More Flexible With Digital Assets

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SEC fines J.P. Morgan subsidiaries

Institutional investors and wealth managers expect more flexible regulation from the U.S. Securities and Exchange Commission (SEC) in the coming year regarding digital assets, along with greater clarity, according to a new global study conducted by Nickel Digital Asset Management (Nickel), a London-based, leading regulated and award-winning digital asset hedge fund manager in Europe, founded by former alumni of Bankers Trust, Goldman Sachs, and JPMorgan.

The study, conducted with organizations already investing in the sector, found that 68% expect greater flexibility from the SEC compared to 35% who anticipate stricter regulation. More than half (53%) expect increased clarity and guidance, while 44% believe the regulator will be more constructive, reflecting political changes.

Nickel’s research, which surveyed institutional investors and wealth managers in the U.S., U.K., Germany, Switzerland, Singapore, Brazil, and the United Arab Emirates, who collectively manage around $1.7 trillion in assets, found strong support for the SEC and recognition of its importance in the sector.

Around 90% believe the SEC has been an effective regulator of the digital assets sector, and 85% say it is currently very or somewhat favorable to the sector. Only 5% say it is either not constructive or aggressively restrictive. Approximately four out of five (80%) believe it has been clear in distinguishing between securities and non-securities in the digital assets space.

Nearly three out of four (73%) say the SEC’s recent clarifications on Security Token Offerings (STOs) have had the most significant impact on the sector, compared to 42% who highlight its guidelines for Initial Coin Offerings (ICOs).

Around four out of five (80%) agree that SEC regulatory clarity is important for the sector, and 83% say the SEC’s regulatory actions will have a very or somewhat positive impact on innovation in the digital assets space.

However, only 35% of respondents say SEC regulations have a significant impact on their investment decisions in the digital assets sector, while 55% say the regulations have a moderate impact, and 10% say they have a slight impact.

“Strict regulatory actions against FTX and Binance have contributed to increasing confidence in the digital assets sector. The survey reveals that institutional investors and wealth managers now expect more flexible regulation of the sector by the SEC after a period of intense scrutiny. It is reasonable to assume that a more accommodative regulatory environment will drive growth of the asset class in the U.S.,” comments Anatoly Crachilov, CEO and founding partner of Nickel Digital, in light of the survey results.

Muzinich & Co. Strengthens Its Presence in US Offshore With Jesús Belascoain in Miami

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Muzinich & Co. has strengthened its presence in the US Offshore Latin American market by relocating Jesús Belascoain Gómez to Miami.

“The offshore market is one of our key targets as we seek to expand our credit solutions through a wider range of distribution channels. Jesús’s relocation, to be closer to our clients in the region, demonstrates our commitment to this channel as we continue to develop and promote our ability to create solutions based on our clients’ risk/reward parameters,” said Rafael Ximénez de Embún, Country Manager for Iberia and LatAm at the firm.

Belascoain, who has 20 years of experience in financial services, joined Muzinich in 2015.

At Muzinich’s Madrid office, Belascoain was responsible for the business development of the company’s wholesale and institutional client base in Spain, Portugal, and Latin America.

“Muzinich is already recognized as a respected corporate credit manager in the region, with a diverse offering that covers the entire credit spectrum. In this new challenge, I am looking forward to continuing to work on established relationships and creating new ones that highlight the firm’s longevity, expertise, and range of credit products in both public and private markets,” commented the industry veteran who arrived in Miami.

According to BrokerCheck, Belascoain obtained his FINRA licenses in July of this year.

August Has Passed… and the Market Is Once Again Suffering From Excesses

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The correction in the S&P 500’s price at the beginning of August was resolved almost as quickly as it occurred, and the market is once again suffering from the same symptoms of overvaluation and technical and sentiment-driven excesses.

The market is nearing overbought territory again, and retail investor surveys are once more showing excessive confidence, as evidenced by investors’ reaction to Nvidia’s results on Wednesday, with a post-market drop that reached 7%.

The numbers highlighted the potential of the business: the company continues to exceed consensus expectations in sales, margins, and EPS quarter after quarter. Its outlook for medium-term demand maintained the optimism of previous quarters. “We expect to grow our data center business significantly next year. Blackwell is going to completely change the game for the industry,” said Jensen Huang, CEO of Nvidia. Additionally, concerns about delays in the launch of its new product, Blackwell, were alleviated. However, the strong performance and the CEO’s comments—unclear regarding the ROI impact of the massive GPU investments by companies like Microsoft, Google, Amazon, or Meta—did not fully satisfy investors’ optimism.

This is relevant because Nvidia is one of those rare cases where a single company, or sometimes a single industry, like technology in 1999, becomes so significant that it comes to dominate the macroeconomic landscape by embodying the essence of the generative AI theme. This is the underlying idea behind the stock market rally over the last two years, since the official launch of ChatGPT in November 2022.

The numbers don’t lie: this year, the GPU company contributed about 230 points to the S&P 500 before the earnings release, accounting for 27% of the total returns the U.S. index has generated so far this year.

Maintaining business momentum like the one Nvidia has shown over the past 12 months is not sustainable, and its growth is slowing both year-over-year and quarter-over-quarter—although, to be clear, sequential growth is expected to pick up again in the fourth quarter as Blackwell begins reaching end customers, while demand for Hopper remains strong.

At a macro level, a similar situation is unfolding, despite the desire to celebrate Jerome Powell’s comments at Jackson Hole a few weeks ago. Despite the strong U.S. GDP data for the second quarter and the July retail sales figures, there is evidence of weaker growth. Manufacturing activity has contracted again, and the U.S. consumer, the main driver of global expansion over the past two years, is now less dynamic.

Real disposable income is growing at only 0.9% year-over-year, and a number of multinationals tied to household spending disappointed during earnings season (e.g., McDonald’s, Ford, Alphabet, or LVMH). The excess savings accumulated during the pandemic have been spent, fiscal policy will be less generous—regardless of who ends up in the White House in 2025, and especially if it’s Donald Trump—and the labor market is showing signs of fatigue.

Cumulative unemployment claims suggest that companies are reluctant to hire, and while the most optimistic observers attribute the activation of the Sahm rule to the exceptional nature of Tropical Storm Beryl, which impacted the U.S. Gulf Coast in July, the rise in unemployment over the past 12 months is affecting not just Texas but 80% of the 51 states that make up the union.

While it is true that payroll growth continues to be positive—and is usually negative in the context of economic contractions—this fact confirms that immigration is likely the main cause of the rise in unemployment from a low of 3.4% to 4.3%. We find ourselves in the unusual situation of rising unemployment alongside a growing economy because the imbalance is coming from the supply side of workers.

Demand is moderating, as indicated by the JOLT (Job Openings and Labor Turnover Survey) data on voluntary quits and hires. Although the economy is still creating a reasonable number of jobs each month, and inflation-adjusted private sector wages are increasing by 2.5%, these figures do not pose an imminent threat to GDP. However, growth has peaked, is deflating, and raises doubts about the ability to meet the ambitious EPS growth projections that consensus is forecasting for 2025.

On the geopolitical front, the potential implications of Harris overtaking Trump in betting markets (according to PredictIt, but not Polymarket) and in polls do not appear to be adequately priced into stocks. Investors don’t like the economic platform of either candidate, but in Harris’s case, it is assumed that Republicans will control the House of Representatives or the Senate (if not both), which would prevent much of her fiscal agenda from coming to fruition. In Trump’s case, he would have near-unilateral authority on tariffs, creating risk regardless of what happens with Congress.

Financial Advisors Will Lean Even More Towards ETFs in the Coming Years

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Advisors are increasing allocations to ETFs as they become more comfortable with the product and its use across a broader range of asset classes, according to the latest edition of The Cerulli Edge-U.S. Monthly Product Trends.

According to the study, which analyzes ETF flows up to July 2024, nearly all advisors (90%) use the product in some way.

On the other hand, while active managers can add value, 61% of advisors agree or strongly agree that it is difficult to identify active managers who consistently outperform the indices.

Hybrid RIAs advisors allocate the highest percentage of assets to actively managed ETFs across all channels, and numerous asset managers are dedicating resources to expanding their product range to include more active ETFs.

In July, mutual fund assets grew by $332 billion (1.7%) over $39.5 billion in total net outflows, representing an organic growth rate of -0.2%.

Total asset growth for 2024 is $1.6 trillion, despite total net outflows of $175 billion.

Additionally, during July, ETF assets grew by $329 billion (3.6%), with $119 billion attributed to net inflows, marking their second strongest month in history.

In 2024, ETFs assets have increased by $1.4 trillion (16.8%), with total net flows of $526 billion, representing an organic growth rate of 6.5%, concludes the report.

BlackTORO GWM Adds Yael Malik in Miami

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Yael Malik has joined BlackTORO GWM in Miami for the role of Chief Commercial Officer.

Malik’s background in investment banking, corporate finance and asset management is critical to BlackTORO, said Gabriel Ruiz, president and CIO of the firm.

With more than 30 years of experience in the financial market, She held leadership positions in major financial institutions such as BACS Banco de Crédito y Securitización S.A., where she served as Investment Banking Senior Vice President, and Consultores Asset Management S.A. where she served as Managing Director.

In these companies, she had prominent roles in the different investment teams in which he participated and led the structuring and execution of complex financial transactions of equity and debt, says the statement accessed by Funds Society.

Her experience also includes participation in international primary market transactions, where she led more than 20 international debt issuances valued at more than $5 billion, the firm’s information adds.

“We are very excited to have Yael join our management team at BlackTORO. Her experience in investment banking and asset management and her ability to develop business relationships will be instrumental in delivering comprehensive service excellence to our clients and driving the growth of our firm in Latin America and the United States,” said Ruiz.

Malik holds a Bachelor’s degree in Administration from the Universidad de Buenos Aires and a Master’s degree in Finance from Universidad Torcuato Di Tella. She also holds CFA Level II certification and has earned Next Board certification in Women Corporate Directors at UCEMA.

“I am honored to join such a talented and experienced team, and I am excited to contribute my knowledge and experience to the company’s continued growth in its core business areas,” concludes Malik.

Pictet AM Hires Juan Ramón Caridad García as Head of Strategic Clients for Iberia and Latam

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Photo courtesyJuan Ramón Caridad García, Head of Strategic Clients para Iberia y Latam de Pictet AM.

Pictet Asset Management, the institutional asset management and fund management division of the Swiss Pictet Group, has made two key appointments for the Iberian and Latin American markets, under the supervision of Gonzalo Rengifo Abbad, who has been its General Manager in Iberia and Latam since 2002.

As announced, Juan Ramón Caridad García is joining the Pictet AM team as Head of Strategic Clients for Iberia and Latam, reporting to Gonzalo Rengifo from the Madrid office. Additionally, Lorenzo Coletti Perucca has been promoted to Head of Iberia, taking on the responsibility for the Iberian market, while Tiago Forte Vaz becomes Head of Latam, responsible for the Latin American market. Coletti joined Pictet AM in 2001 as Sales Director for the Italian market and has been in Spain since 2005, while Forte Vaz joined in 2013 to develop business in Portugal and Brazil.

Meanwhile, Patricia de Arriaga Rodríguez, who began her career in 1984 and joined Pictet AM in 2006, will remain with the company as Deputy General Manager in Spain until the end of 2024, and later as Senior Advisor for key clients until her retirement in 2025.

Following Caridad’s appointment, Gonzalo Rengifo Abbad, General Manager in Iberia and Latam, stated: “This is a new transversal role aimed at facilitating a differential service in the various markets of Iberia and Latam and enhancing global synergies. Juan Ramón fits perfectly into the team, as he shares our values of responsibility, entrepreneurial spirit, and long-term thinking.”

Caridad has 25 years of experience. Until last May, he was Managing Director and Head for Iberia & Latam at GAM Investments. Caridad holds a degree in Economics and Business from the Autonomous University of Madrid and a postgraduate degree in Business Analysis and Valuation from the London School of Economics and Political Science. He is the Academic Director of the Master’s in Finance and Alternative Investment at Bolsas y Mercados Españoles and Co-Director of the I3 program at Instituto de Empresa. Additionally, he is a trustee of the FIDE Foundation.

Rengifo also highlighted that “Patricia will continue to contribute to the business with her extensive experience, deep knowledge of Pictet AM’s investment strategies and capabilities, and close relationship with clients. She has helped multiply the business in the Spanish market to €8.91 billion as of March 2024, making it one of the top ten international asset managers in our country. Among her wide range of achievements, she has been instrumental in successfully advancing thematic investments as well as financial education through various initiatives over the years.”

According to the firm’s head for Iberia and Latam, “these appointments underscore Pictet AM’s commitment to experienced professionals to drive growth and establish itself as a leading partner for institutional investors in the Iberian and Latin American markets.”