New York Remains the World’s Richest City in 2024

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New York, the San Francisco Bay Area and Tokyo are the three wealthiest cities in the world, according to the latest report by Henley & Partners.

“The document offers a fascinating view of the changing face of global wealth, revealing a landscape where investment migration programs have emerged as a powerful tool for high-net-worth individuals looking to capitalize on the world’s most promising cities,” highlights Juerg Steffen, Chief Executive Officer of Henley & Partners.

The report shows the clear leadership of the United States, with 11 cities within the ranking of the world’s 50 richest cities. At the top is New York, with an astonishing 349,500 millionaires, followed by the Northern California Bay Area (305,700) and Los Angeles (212,100). “China also has a notable presence, with five cities in mainland China and seven cities if we count Hong Kong (a Special Administrative Region of China) (143,400) and Taipei (30,200). Beijing (125,600 millionaires), Shanghai (123,400), Shenzhen (50,300), Guangzhou (24,500), and Hangzhou (31,600) have seen significant increases in their millionaire populations over the past decade,” points out Steffen. In his opinion, this dynamic reflects broader changes in the global economy, where the United States maintains its traditional strongholds, while China’s rapid urbanization and growing technological prowess play an increasingly important role in wealth creation.

Focusing on the table, New York leads with 349,500 millionaires, 744 centimillionaires (with investable wealth of over $100 million), and 60 billionaires who, together, surpass $3 trillion, which is more than the total wealth of most major G20 countries. Hot on its heels, in second place, is the Northern California Bay Area, which includes San Francisco and Silicon Valley. “The Bay Area has enjoyed one of the highest wealth growth rates in the world, increasing its millionaire population by a massive 82% over the past decade, and now hosts 305,700 millionaires, 675 centimillionaires, and 68 billionaires,” notes Steffen.

Regarding Tokyo, which topped the group as the world’s richest city for a decade, it has suffered a 5% decrease in its resident high-net-worth individual (HNWI) population over the last ten years, and now ranks third with just 298,300 millionaires. Notably, the city-state of Singapore has risen two places to fourth in the global ranking after an impressive 64% increase in millionaires over the past 10 years, and it seems likely to soon overtake Tokyo as the richest city in Asia. Widely considered the world’s most business-friendly city, Singapore is also one of the top destinations globally for migrating millionaires: approximately 3,400 high-net-worth individuals moved there in 2023 alone, and the city now boasts 244,800 millionaire residents, 336 centimillionaires, and 30 billionaires.

The Decline of London

London, the world’s richest city for many years, continues to fall in the rankings and now occupies fifth place with only 227,000 millionaires, 370 centimillionaires, and 35 billionaires, a 10% decrease over the past decade. In contrast, Los Angeles, home to 212,100 millionaires, 496 centimillionaires, and 43 billionaires, has risen two places over the 10-year period to sixth place, enjoying a remarkable 45% growth in its wealthy population. Paris, the richest city in continental Europe, maintains its seventh place in the ranking with 165,000 millionaire residents, while Sydney climbs to eighth with 147,000 HNWIs, after experiencing exceptionally strong wealth growth over the past 20 years.

“The 24% gain in the S&P 500 last year, along with the 43% rise in the Nasdaq and the staggering 155% rebound in Bitcoin, have boosted the fortunes of wealthy investors. Additionally, rapid advancements in artificial intelligence, robotics, and blockchain technology have provided new opportunities for wealth creation and accumulation. However, even as new opportunities arise, old risks persist. The war in Ukraine, which has seen Moscow’s millionaire population drop by 24% to 30,300, is a stark reminder of the fragility of wealth in an uncertain and unstable world,” adds Steffen, who considers a key factor driving growth in the world’s richest cities to be the strong performance of financial markets in recent years.

China’s Millionaire Boom

China has established a notable presence in the latest ranking of the world’s 50 richest cities, with 5 cities in mainland China on the list and 7 cities if we include Hong Kong (a Special Administrative Region of China) (with 143,400 millionaires) and Taipei (30,200). Beijing (125,600 millionaires) is ranked in the Top 10 for the first time after a 90% growth in its millionaire population over the past decade. Although Hong Kong has dropped four places over the 10-year period to ninth in the ranking, Shanghai (123,400), Shenzhen (50,300), Guangzhou (24,500), and Hangzhou (31,600) have seen significant increases in their millionaire populations.

Andrew Amolis, head of research at New World Wealth, explains that Shenzhen is the world’s fastest-growing city for the wealthy, with its millionaire population soaring by 140% over the past ten years. “Hangzhou has also seen a massive 125% increase in its number of high-net-worth residents, and Guangzhou’s millionaires have grown by 110% over the past decade. When it comes to potential wealth growth over the next decade, cities to watch include Bengaluru (India), Scottsdale (USA), and Ho Chi Minh City (Vietnam). All three have enjoyed exceptional growth rates of over 100% in their resident millionaire populations over the past ten years.”

As for the Middle East, Dubai easily takes the crown as the region’s richest city, with an impressive 78% growth in its millionaire population over the past 10 years. Currently ranked as the 21st richest city in the world, it is very likely that this modern wealth magnet will enter the Top 20 in the coming years. Although Abu Dhabi, the oil-rich capital of the United Arab Emirates, has yet to secure a spot in the Top 50 ranking, growth rates above 75% make it a likely contender in the future.

While no African or South American city features among the world’s 50 richest cities, the report identifies several rising stars that could well join the ranks of the world’s leading wealth centers in the near future. Nairobi, Kenya’s bustling capital, now has 4,400 millionaires, a 25% increase over the past decade, driven by its thriving tech ecosystem and growing middle class. Cape Town, South Africa’s stunning coastal jewel, has enjoyed a 20% increase in millionaires, making it the country’s preferred city, now home to 7,400 of them.

World’s Most Expensive Cities

Monaco, arguably the world’s top safe haven for the super-rich, where average wealth exceeds $20 million, is also the world’s highest-ranked city in terms of per capita wealth. More than 40% of the Mediterranean principality’s residents are millionaires, the highest proportion of any city globally. It also tops the list of the world’s most expensive cities, with apartment prices regularly exceeding $35,000 per square meter.

New York City ranks second, with prime real estate prices averaging $28,400 per square meter, followed by London ($26,500 per m²), Hong Kong ($25,800 per m²), Saint-Jean-Cap-Ferrat in France ($25,000 per m²), and Sydney ($22,700 per m²).

Dominic Volek, group head of private clients at Henley & Partners, says that 7 of the world’s 10 richest cities are in countries that host investment migration programs actively encouraging foreign direct investment in exchange for residency or citizenship rights. “You can secure the right to live, work, study, and invest in major international wealth hubs such as New York, Singapore, Sydney, Vienna, and Dubai through investment. Being able to relocate yourself, your family, or your business to a more favorable city or having the option to choose from several different cities around the world is an increasingly important aspect of international wealth and legacy planning for private clients. The more jurisdictions a family can access, the more diversified their assets will be, the lower their exposure to regional and country-specific risks, and the greater the opportunities they will be able to enjoy. Similarly, cities and countries can use investment migration as an innovative funding mechanism to attract the world’s wealthiest and most talented to their shores,” concludes Volek.

Thornburg Signs William “Billy” Rogers and Jodan Ledford

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Thornburg has added William “Billy” Rogers as the new Chief Operating Officer (COO) and Jodan Ledford as Head of Institutional to its team, according to a statement obtained by Funds Society this Thursday.

The new hires arrived a few months after the hiring of Richard Kuhn as head of product and Jonathan Schuman as head of international, as previously reported by Funds Society.

Billy Rogers, as the new COO of Thornburg, will determine the strategic direction of technology and operations and drive interdepartmental initiatives to ensure the organization’s continued success and growth, the statement adds.

Before joining Thornburg in 2024, Rogers worked at PIMCO for 12 years in various roles, including product management, compliance officer, and head of regional operations and advisory. In 2010, he left PIMCO to join Janus Henderson, where he spent eight years as a fixed income trader and four years leading their global unconstrained macro office.

Subsequently, Rogers spent three years as an executive consultant, helping to integrate and lead a large West Coast retail SMA business. Additionally, he has participated in numerous fintech startups throughout his career.

He holds a BBA in business administration from the Anderson School of Management at the University of New Mexico and an MBA from the Marshall School of Business at the University of Southern California.

Jodan Ledford will be responsible for developing and executing sales strategies, building and maintaining high-level relationships, and representing the company within the institutional investment community, according to the information obtained by Funds Society.

Before joining Thornburg in 2024, Ledford was CEO of Smart USA, a retirement fintech provider. Previously, he was managing director of clients at Legal & General Investment Management America, where he led a team in sales, marketing, investment solutions, product strategy, and portfolio management.

Earlier, Ledford was an executive director at UBS Global Asset Management, where he developed investment solutions and risk management strategies for large institutional clients and led a mid-market initiative for medium-sized US corporate pension plans.

He also worked as an associate in the investment banking division of J.P. Morgan, developing risk management strategies for companies with large pension plans. Ledford began his career as an actuarial analyst at Watson Wyatt Worldwide.

He holds a master’s degree in applied statistics from the University of Miami and a bachelor’s degree in mathematics from Emory University.

The Afores Transfer 1.344 Billion Dollars to the Pension Fund for Welfare

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As required by the President of Mexico, Andrés Manuel López Obrador (AMLO), on Monday, July 1, his government began delivering the first pension supplements to retired workers.

The date was significant for the president and his administration because it marked the sixth anniversary of what he considers his historic electoral victory in 2018, and the start of an economic and social regime change known as the “Fourth Transformation.”

One of the initiatives promoted by the president a few months ago was the creation of the Pension Fund for Welfare (FPB), a state-managed fund that will be used to supplement workers’ pensions so that they can retire with 100% of their salary, up to a cap of approximately 932.10 dollars at the current exchange rate.

The first pension supplements were to be delivered on July 1, a promise that has been fulfilled.

These pensions will consist of the pension the worker receives from their individual account (replacement rate) and the supplement that brings their pension to 100% of their salary at the time of retirement, provided it does not exceed the cap of 16,777.77 pesos and pertains to the 1997 law generation.

Afore Transfers

In a statement, the Mexican Association of Retirement Fund Administrators (Amafore) reported compliance with the law requiring the transfer of resources to the Pension Fund for Welfare.

“As part of the process to carry out the transfer, the Afores, in collaboration with the authority, conducted a thorough review to determine which accounts belonged to people over 70 years old in the case of IMSS and 75 years old in the case of ISSSTE, and who had not contributed to social security for one year,” said the institution.

Thus, the total amount of resources sent to the trust established at the Bank of Mexico was approximately 1.34 billion dollars.

Amafore indicated that in the coming days, it will send a certificate of transfer of the resources from this sub-account to the last registered contact point of each worker.

Additionally, in the next month of September, an account statement will be generated with the latest movements under the Afore administration. Subsequently, the account statement delivered will include the performance reports of the Pension Fund for Welfare.

The Labor Market With Pre-Pandemic Numbers Brings Fed Cuts Closer

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The U.S. labor market continues to show signs of recovery, with a steady trend in job creation and a decline in the quit rate, suggesting normalization and cooling. This keeps the door open for rate cuts later this year, according to analysts.

Job vacancies increased to 8.14 million in May, which is above expectations. However, the trend remains a decline in vacancy figures as the U.S. economy moves closer to pre-pandemic levels.

The quit rate was the major warning sign of an imminent increase in labor costs that caused inflation to spike in 2021 and remain elevated since then. However, the marked decline in the quit rate suggests that the labor market is cooling, as companies are less willing to pay more to hire staff or workers themselves are becoming more reluctant to move.

Similarly, The Conference Board states in its analysis that “the modest cooling of the labor market in the second quarter, from heated to robust, should be welcomed by the Fed.”

Additionally, the weakening of consumer demand and, consequently, the growth of real GDP in the first half of 2024 should have brought some calm to the labor market, adds The Conference Board.

However, with no signs of a collapse in the labor market, the Fed can maintain a restrictive monetary policy to drive consumer inflation back towards the 2 percent target.

“We continue to forecast that the unemployment rate will peak this year below the natural rate of 4.4%,” says the study, which adds that inflation is likely to stabilize at 2% by mid-2025, allowing for a 25 basis point rate cut at each of the November and December 2024 meetings.

According to ING Bank, wage growth and inflation should continue to cool, keeping the door open for rate cuts later this year, states an ING Bank report.

Fed Chairman Jerome Powell, speaking at the ECB Forum on Central Banking in Sintra, Portugal, acknowledged that the economy and labor market have been strong, but that inflation is showing “signs of resuming its disinflationary trend” along with a “rebalancing in the labor market,” adds the report signed by James Knightley, Chief International Economist, U.S.

While Powell declined to provide details on the timing of any potential rate cuts, markets are now pricing in a roughly 75% chance of a cut at the September FOMC meeting.

“If we get another couple of core inflation numbers at or below 0.2% monthly, unemployment exceeds 4%, and more evidence of cooling consumer spending growth, we believe the Federal Reserve will begin to shift monetary policy from restrictive territory to ‘slightly less restrictive.’”

Guilherme Benchimol (XP) and Zest Want to Change the “Dress Code” of Private Banking in the Americas

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With the presence of Guilherme Benchimol, founder of XP, the top executives of the Peruvian company Zest formalized an alliance in Montevideo to expand into the onshore and offshore markets of Latin American clients, with one of their bases being the Uruguayan capital.

The giant XP, a technology platform that provides investment products to retail clients in Brazil, is now targeting various segments of Spanish-speaking Latin American clients, both locally and offshore. To this end, alongside its partner Zest and its new office in Montevideo, led by María Noel Hernández, XP will undertake a particularly challenging technological and cultural shift.

Entrepreneurial and Technological Culture

Wearing casual clothes and white sneakers, Benchimol, accompanied by Arthur Silva, founder of Zest, showcased a youthful maturity in Montevideo and began his analysis before a small group of bankers gathered at the Radisson Hotel. “In Latin America, the banking sector is very concentrated and does not provide access to good investment products for people. Our goal is to help people invest better,” said the founder of XP.

Created by Benchimol and his partner Marcelo Maisonnave in 2001, XP now has five million clients and manages 1 trillion reais. But that’s not all: the firm is currently the main vehicle for international fund managers, has offshore operations (with offices in Miami and the Cayman Islands), and in Brazil, works with a network of 20,000 independent financial advisors.

Through its fintech platform Rico, XP offers investment funds from firms like Baillie Gifford, BlackRock, Fidelity, Fundsmith, J.P. Morgan, and Vanguard. It thus makes available over 500 equity funds, 2,000 fixed income funds, 730 multi-asset funds, and 160 alternative funds.

Benchimol speaks to millennials, both end clients and private bankers, with a new “dress code” and language: “We are entrepreneurs, not account managers,” he says. “We offer infrastructure so that our network can serve their clients internationally.”

The 21st century begins with the dominance of technology companies over financial ones, a paradigm shift. It was only a matter of time before financiers like Benchimol joined the prevailing entrepreneurial and technological culture.

The word “trust,” central to traditional private banking, slips into the discourse, but XP’s competitive bet is on technology: “U.S. banks have heavy structures. Our dream is to serve American residents and bring them our culture, which consists of offering the best customer experience. We will do the same as we have done in Brazil, where we have been recognized as the best company for six consecutive years, ahead of Itaú and Santander,” says Benchimol.

“We Are Not a Bank, We Have a Bank”

XP’s innovative and technological identity is summarized in one phrase: “We are not a bank, we have a bank.”

But with its offshore structures in the Cayman Islands, Miami, and now in Latin America (Peru and Uruguay), we are talking about a true financial entity that particularly targets clients with international investments who want to move from onshore to offshore with a single click.

For its Brazilian clients, XP has managed to overcome regulatory and tax difficulties through technology, but as Benchimol says, “no client can resist a financial advisor who is empathetic and persistent.”

During the event in Montevideo, taking advantage of the B2B Summit for entrepreneurs, XP’s technicians and onboarding specialists demonstrated their mobile app, capable of “breaking down barriers and providing access to both Brazilian fixed income and U.S. Treasury bonds.”

With small print not suitable for presbyopia but adapted to millennials, the XP app is specially designed for retail clients starting from very low amounts and aims to reach financial advisors with equal efficiency. The promise of three clicks to be online and invest must translate into ease of gaining clients, overcoming regulatory barriers, and switching from the local market to offshore in seconds.

Zest, founded in 2016 by Arthur Silva, a Brazilian resident in Peru, is a young and small company now partnering with a giant to conquer, no less, the Latam market. The firm has an expansion plan with the opening of branches in Uruguay, Chile, and Colombia. With the support of XP Wealth Services US, it aims to reach 5 billion dollars in assets in the next three years and double its team. The adventure has just begun in this southern winter of 2024, perhaps marking the start of a new success story in Wealth Management.

AXA IM Repositions its Metaverse Fund to Cover a Broader Spectrum and Include Artificial Intelligence

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AXA Investment Managers (AXA IM) has announced the renaming of its AXA WF Metaverse fund to AXA WF AI & Metaverse, effective July 2, 2024. According to the company, this decision reflects the expansion of the fund’s investment universe to include the broader realm of artificial intelligence (AI) and the growth opportunities it offers as the AI revolution extends beyond the boundaries of the metaverse.

Commenting on the fund’s name change, Tom Riley, Head of Global Thematic Strategies at AXA IM Equity, explained that the management company “firmly” believes that the synergies between AI and the metaverse offer unprecedented opportunities, while also noting that the AI revolution extends beyond the metaverse. “While the existing companies in our portfolio have been at the forefront of AI innovations, by expanding our investment universe to include the broader AI environment, we believe we could capture even more exciting opportunities. By selecting one of the most significant themes of our generation, the fund can appeal to investors seeking exposure to this fast-moving sector and its growing set of credible long-term growth opportunities. The rise of AI and its possibilities have increasingly made it clear that its evolution is not just a trend or a parallel development, but a powerful accelerator of the metaverse,” Riley commented.

The management company highlights its established expertise in technology and disruptive technology, managing around 6 billion dollars in assets within these themes. The Metaverse strategy was launched in 2022 as part of AXA IM’s commitment to identifying and capturing the growth potential of disruptive technologies for its clients. The AXA WF AI & Metaverse fund will continue to be co-managed by Pauline Llandric, a technology portfolio manager, and Brad Reynolds, a technology portfolio manager, both based in London.

Asset Allocation for the Second Half of the Year: What Do International Asset Managers Prefer?

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After analyzing the perspectives that asset managers have for the second half of the year, it’s time to ask them about the asset allocation they prefer. We start from a market context that is still anticipating central banks to cut interest rates, especially the Fed. The fact that they have lowered market and investor expectations in this regard has created quite a bit of dispersion in identifying which assets should not be missed from now until December.

According to Dan Scott, head of multi-assets at Vontobel, the second half of the year presents some positive aspects: the resilience of the US consumer, China’s fiscal stimulus, and the incipient recovery of the eurozone contribute to a moderate but steady economic expansion that is likely to continue until the end of 2024.

“However, these positive prospects are not without risks. One of our main concerns is whether interest rates will remain too high for too long, ultimately causing some disruption. In the US, an increase in delinquencies on credit cards and auto loans is already being observed. The continued increase in provisions for bad loans related to the US commercial real estate sector is also a clear indicator that cracks are gradually appearing and will require a policy response,” warns Scott.

Fixed Income

This period of waiting concerning central banks makes one of the most complex allocations to make in fixed income, where durations and maturities have become key tools for investors. In this regard, Kevin Thozet, a member of Carmignac’s Investment Committee, highlights that in public debt, maturities up to two years are favored. “Longer-term rates could yield less, given the optimistic trajectory of disinflation and the increase in public debt at a time when monetary authorities are trying to make safe cuts and reduce their balance sheets. In credit markets, premiums are not far from previous or historical lows,” says Thozet.

According to the Carmignac expert, historically, the combination of low bond yields and low credit spreads has been disadvantageous for the asset class, but the current higher-yield environment means that credit spreads act as a boost to investor returns and a cushion for volatility.

“Fixed income investors were too exuberant about rate cuts earlier this year, but now that markets are not aggressively predicting cuts, fixed income yields are more attractive,” says Vince Gonzales, portfolio manager of the Short-Term Bond Fund of America® at Capital Group. In his view, bonds remain fundamental as economic growth slows and can provide a strong counterbalance to stock market volatility.

Additionally, Gonzales adds that “given the recent tightening of corporate bond spreads, we are seeing better opportunities in higher-quality sectors with attractive yields, such as securitized credit and agency mortgage-backed securities (MBS).” According to his view, mortgage bonds with higher coupons are especially attractive. “These bonds are unlikely to be refinanced before maturity, given current mortgage rates of around 7%,” he notes.

On the other hand, Jim Cielinski, Global Head of Fixed Income at Janus Henderson, acknowledges that the fixed income market is currently very different from a few years ago: “Yields are at levels that typically pay well above inflation and offer the prospect of capital gains if rates fall. Those seeking attractive yields can start here. We see solid prospects for both healthy income and some additional capital appreciation in the next six months.”

According to his stance, they prefer European markets to US ones, as they believe the relatively weaker European economy offers more visibility of a lower rate trajectory. “With an economic backdrop of resilient but moderate growth in the US, a revival of the European economy, and less pessimism about China’s economic outlook, there is a chance that credit spreads will narrow. Among corporate sectors, we continue to prefer companies with good interest coverage ratios and strong cash flow, and we see value opportunities in some areas that have been disadvantaged, such as real estate equities,” says Cielinski.

Additionally, the expert acknowledges that credit spreads as a whole are close to their historical levels, which he believes leaves little room if corporate prospects worsen. “With this in mind, we see value in diversification, especially towards securitized debt, such as mortgage-backed securities, asset-backed securities, and collateralized loan obligations. In this case, misconceptions about these asset classes, combined with the aftermath of rate volatility, have made spreads and yields offered appear attractive. Yields in the securitized sectors are more attractive in historical terms, and they are more likely not to be affected by a more severe slowdown,” he concludes.

Don’t Forget Equities

Wellington Management argues that their position is to continue overweighting equities. “The global economy is growing steadily, and the risk of recession has faded, with strong and continuous US economic growth and an increasing momentum of global growth. Although disinflationary pressures have stalled in recent months, especially in the US, we still believe that rates have peaked in this cycle and expect a relaxation of monetary policy in the next 12 months,” explains Wellington Management’s multi-asset strategy team.

Consequently, they add, this makes them prefer the US and Japan over Europe and emerging markets. “We consider the former as our main developed market due to the macroeconomic context and our confidence in the potential of AI to continue underpinning earnings growth. We have a moderately overweight view on Japan and remain skeptical of a material improvement in China, given the real estate and consumer confidence issues,” they add.

“Conditions appear favorable for US and Japanese equities to extend their good streak. The solid growth and healthy earnings of the former, coupled with the structural drivers and corporate reforms of the latter, partly justify the increased valuations in these regions, but not entirely; thus, especially in the US, we are going beyond the hottest areas of the market to uncover opportunities. Mid-cap stocks offer solid long-term growth potential at reasonable prices and should also withstand higher rates,” adds Henk-Jan Rikkerink, global head of Solutions and Multi-Assets at Fidelity International.

For its part, abrdn has also increased its conviction in developed market equities, which will benefit from interest rate cuts and solid corporate fundamentals. “The Japanese equity market remains particularly interesting, as its companies are increasingly focusing on shareholder profitability thanks to a cultural shift in buybacks and corporate governance in general. The Japanese market has exposure to a variety of companies well-positioned to benefit from demand for both artificial intelligence and the green transition. We also find European and British equities interesting, given the recovery in activity, valuations, and (at least in the case of the UK) the potential return to a more stable political environment,” says Peter Branner, Chief Investments Officer at abrdn.

On the other hand, Branner believes that Chinese equity valuations seem attractive but face the country’s real estate market problems. “The Indian market should benefit from strong growth and structural reforms, but Narendra Modi’s reduced government majority may limit the scope of the country’s reform agenda, and valuations already discount a lot of good news,” adds the CIO of abrdn.

Alternatives and Currencies

Finally, Branner acknowledges that they have improved their view of the alternatives segment after two years of underweighting. “Rate cuts, limited supply, and strong rental growth mean that the valuation adjustment is largely complete. Structural factors favor the residential sector, data centers, and logistics,” he highlights.

Fidelity International Updates Its Sustainable Investment Framework and Creates Three Major Categories

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Fidelity International has revised its sustainable investment framework to adapt to changes in this field, in line with client needs and environmental, social, and governance (ESG) regulations. As the management company reminds us, sustainability is an essential element of Fidelity’s active investment approach.

The company has a robust investment analysis methodology that incorporates sustainability into its fundamental analyses and integrates its proprietary sustainability ratings with insights generated by its equity, corporate debt, macroeconomic, and quantitative analysts to obtain a comprehensive view of the companies and markets it studies.

They explain that this framework has been designed to complement the company’s overall investment approach and provide clients with greater clarity and transparency. Within this revised framework, which will be applied starting from July 30, 2024, Fidelity has created three major categories: ESG Unconstrained, ESG Tilt, and ESG Target.

Regarding these categories, they explain that ESG Unconstrained comprises products that seek to achieve financial returns and may or may not integrate ESG risks and opportunities into the investment process. “The products in this category apply the exclusions that Fidelity has adopted for the entire company,” they clarify.

In the case of the ESG Tilt category, it comprises products that seek to generate financial returns and promote environmental and social characteristics by favoring issuers with better ESG performance than the benchmark index or the product’s investment universe. Additionally, products in this category adopt the exclusions from the ESG Unconstrained group and apply others, such as tobacco production, thermal coal mining, thermal coal power generation, and certain public sector issuer exclusions.

Thirdly, in the ESG Target category are “products that seek to generate financial returns and prioritize ESG or sustainability as a key investment objective, such as investing in ESG leaders (issuers with superior ESG ratings), sustainable investments, sustainable themes (such as climate change or transition), or complying with impact investment standards. Products in this category are subject to the reinforced exclusions mentioned earlier and may apply others.”

On the occasion of this announcement, Jenn-Hui Tan, Director of Sustainability at Fidelity International, stated: “We have long been committed to sustainable investing and have continued to evolve our approach and capabilities in line with client needs and ESG regulations. Integrating sustainability into investment analysis and portfolio construction is part of our core process of identifying the drivers of long-term value creation. The objective of our revised framework is to facilitate the creation and maintenance of a consistent, transparent, and practical range of investment capabilities that cover changes in client needs and regulation. We believe this framework appropriately combines a robust approach to sustainability with a flexible approach that can accommodate different investment styles, asset classes, and client preferences.”

New Trends in Private Markets

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The growth of private markets has so far been primarily driven by the demand from institutional investors such as sovereign wealth funds, insurers, or pension funds, among others. However, various experts from M&G Investments note the expansion of the topics of conversation around private markets, as well as a greater interest in different forms of access to them, such as through impact strategies. “There are three major changes in this market that are too significant to be ignored: the size of the opportunity set, the increase in the number of geographies, and the very definition of what private assets are, which has broadened,” says Ciaran Mulligan, CIO of Investment Management and Oversight and co-director of M&G Life’s Treasury and Investment office.

Opportunities by Segments

The global financial crisis marked a turning point for private markets from a credit origination perspective, transferring much of the prominence held by banks to more agile players in the market. Emmanuel Deblanc, CIO of Private Markets at M&G Investments, states that to operate in private markets, “size and having a good name are important, because they inspire confidence in banks, which has a multiplier effect in making banks feel comfortable with underwriting assets.”

The expert also notes that the investment ecosystem has evolved, exemplified by the presence of many infrastructure funds now having their own financing teams, enabling them to attract flows beyond banking. He also observes that the role of banks has evolved, now acting more as facilitators than in the past, advising on transactions without necessarily taking positions on their balance sheets.

Deblanc adds that the emergence of large structural investment themes is also affecting this investment universe, specifically citing the climate transition: “It will provide key growth for this asset class, allowing access to thematic investments in energy and social infrastructure.” “Investments in energy transition open up a significant investment charge by risk and volume; we are seeing much faster growth than expected five years ago, accelerated by the geopolitical events of recent years,” adds the expert.

Regarding private credit, Deblanc states that the investment universe has expanded and matured significantly, though it remains an “inefficient, very complex market where understanding the local context is necessary.” Ciaran Mulligan adds to these observations the increase in capabilities in Europe and, to a lesser extent, in emerging markets, where professional investors like M&G are beginning to consider the possibilities presented by this universe through leveraged loans, direct lending, and corporate debt. The expert clarifies that the investment horizon is crucial for investing in this asset class, with a recommended duration of 15 to 25 years. With this in mind, operations “will take into account that debt levels will increase in the future.” Specifically for M&G, the private credit investment strategy focuses on companies with revenues between 40 and 100 million euros, considering it a segment with less activity.

Structured credit is the last segment Deblanc cites, particularly in the ABS segment. The expert recalls that this is a market with “fewer players because it is a complex asset in a closed market,” but in return, it offers the possibility of a differential with additional points of profitability. The expert observes that capital requirements have increased, a trend accelerated by the collapse of Silicon Valley Bank, opening new opportunities for investors in “a very sophisticated market segment.”

M&G Investments manages 84 billion euros in private assets, with the largest segment being real estate, with over 39 billion.

A Transition Phase

Deblanc does not see systemic risk in private markets and considers the current environment, where global GDP will move between 2% and 3% and there is no excess demand, to be benign for this investment universe. That said, he notes that the market is undergoing a transition phase, as the large gap that used to exist between buyers and sellers is narrowing. This is a trend he believes will accelerate from the fourth quarter of 2024, leading to increased dispersion among managers: “Good managers will become more visible,” he concluded.

Neal Brooks, Global Head of Product and Distribution at M&G Investments, admits that the growth of the private assets market has slowed in recent months due to the ‘higher for longer’ environment, but he expects demand to remain to the point that he anticipates the total investment universe to reach 13 trillion dollars by 2028, primarily in three areas: infrastructure, private equity, and private debt. Brooks speaks of growing appetite from clients, but also from governments and regulators, which he believes will open up markets by allowing access to a larger number of companies. This growth, according to the expert, will occur at the expense of other vehicles traditionally used to gain exposure to these markets, such as hedge funds.

Finally, Brooks highlighted the importance of the current moment in terms of developing product strategies that are accessible to a wide range of investors, noting that currently, 80% of companies with over 100 billion in revenue are not publicly traded. This is compounded by the increasing trend of public companies being delisted to become private again. M&G is advancing in developing new structures to facilitate this access, for example, through the launch of ELTIFs. “Financial education is very important; clients themselves are aware that they need it to help them allocate their capital correctly,” Brooks concluded.

Santander AM to Appoint Pablo Costella as New Head of Fixed Income in Latin America

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Santander AM, the asset management division of Banco Santander, is set to appoint Pablo Costella as the new Head of Fixed Income for Latin America as part of a broader plan to modernize operations in the region through centralization, according to information published by Bloomberg.

Costella, who previously served as the Director of Global Fixed Income at BICE Inversiones Asset Management, will replace Alfredo Mordezki, who is based in London and will leave the Spanish entity after 14 years, according to sources within the company consulted by Bloomberg.

Costella’s appointment, based in Chile, is part of a broader reorganization by Banco Santander, aiming to relocate asset management positions for Latin America within the region rather than placing them in other parts of the world. Last year, Santander AM appointed Héctor Godoy to lead the Latin American Equity division, also from Chile.

Santander AM, led by Samantha Ricciardi since February 2022, has focused on attracting new institutional clients and aims to grow in alternative investments with private debt and infrastructure funds. Santander AM manages 226 billion euros in assets under management.

The investment fund business is part of the wealth management and insurance division, headed by Javier García-Carranza, who replaced Víctor Matarranz in May.