Miami InsurTech Advocates Hub Appoints JubilaME as a Member of the Board of Directors

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Jubilame board director Miami Insurtech Advocates Hub

JubilaME, a “phygital” platform specializing in high-value financial product advisory and purchases, has become an active member of the Miami InsurTech Advocates Hub (MIA Hub) by joining its Board of Directors. The MIA Hub connects corporate clients, innovative companies, and investors, fostering partnerships and business relations.

Borja Gómez, Chief Financial Officer and Head of International Expansion at JubilaME, based in Luxembourg, will represent the company on the Board of Directors.

JubilaME emphasizes its commitment to being an active player in the development of the MIA Hub by introducing new offerings for existing and future partners and expanding its geographical reach.

Julio Fernández, CEO of JubilaME, stated: “The MIA Hub ecosystem is unique due to the diversity of profiles within the insurance and financial sectors. The opportunities for collaboration are numerous and exciting. We look forward to contributing to the growth of this international community.”

High-Net-Worth Investors Prefer Private Equity and Venture Capital Over Other Private Assets

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Private markets have undergone a transformation in the last decade, with significant capital inflows, the success of disruptive technologies, and the expansion of access in the financial services sector in general.

This is highlighted in the “Private Markets Annual Report 2024” by Barclays, which also clarifies that private investors are increasingly recognizing the opportunities offered by private market funds. “In general terms, the motivations of ultra-high-net-worth (UHNW) investors and high-net-worth individuals (HNWIs) to invest in private markets include diversification and lower portfolio volatility; historically higher returns compared to public markets and greater leverage available, which can potentially drive higher growth and profitability,” the report explains.

The report also explains that access to qualified investment managers can also yield dividends for private wealth owners. Commitments can generate higher returns, and communications with general partners (GPs) can provide valuable lessons on due diligence and operational reviews. Since many HNWIs have created their wealth by managing their own businesses, investments in private funds offer the opportunity to share information between partners.

According to some surveys, private investors show a growing preference for alternative assets, particularly private equity. Many of the respondents also indicate that they plan to increase their venture capital investments next year, as confidence improves following the market correction. The study cites an example from the 2023 Campden Wealth and Titanbay survey of 120 UHNW investors, where respondents noted a three percentage point increase in their target allocation for private equity, along with a two percentage point increase for public equities and a four percentage point decrease in their allocation to liquidity. In the same survey, 67% of respondents said their main motivation for investing was the potential to improve long-term portfolio returns.

The total assets under management of family offices more than doubled in the last decade, and the number of private wealth owners worldwide is expected to increase by 28.1% by 2028, representing a growing source of capital.

In the coming years, large private equity firms could receive more contributions from private wealth channels. While institutional investors, such as pensions and sovereign wealth funds, must meet strict investment mandates, private investors may have fewer legal restrictions and can tailor allocations more to their personal profiles and liquidity preferences.

“This opens up greater optionality for investing in private markets,” says the Barclays report, which adds that investment horizons are also less restrictive for personal wealth compared to institutional wealth. Institutional wealth, the report explains, “often requires regular contributions and distributions to support the liquidity needs of institutional investors, but private investors may face fewer restrictions and regulatory obstacles when investing in private markets.”

Private Equity Remains Strong

The study highlights that private equity is the main driver of fundraising in private markets. “In addition to being one of the favorite strategies for pension funds and endowments, which require predictable cash flows, private equity funds could be an option for private investors looking to support their own initiatives, including family businesses and philanthropy,” says the Barclays report. The typical 10-year life cycle of private equity funds often aligns with the longer investment horizons sought by these investors for part of their allocations, the report adds.

The proportion of fundraising in private markets attributed to private equity funds has increased annually since 2020, reaching a record 50.5% to date. These funds showed resilience against a broader slowdown in fundraising, raising almost as much capital in 2023 as in 2022. However, according to the report, the number of vehicles driving this total was reduced by more than half. With fewer funds maintaining or increasing their purchasing power in the last 18 months, the future flow of private equity deals and returns will tilt toward the stronger funds. This could exacerbate competition among LPs seeking the best GPs.

The selection of managers, according to the report, is as important today as it has always been. The preference of LPs for experienced private equity managers—firms that have launched at least four funds—is also increasing. “Every year since 2019, more than 80% of all new dollars directed toward private equity were closed by experienced managers, and this percentage has risen to 88% annually,” says Barclays, adding that top-tier firms have established LPs who often return for subsequent fundraising rounds, “thus limiting the entry of new investors.”

Venture Capital: Investors Seek Innovative and Sustainable Technologies

According to data from PitchBook cited by the Barclays study, nearly half of all known private market fund commitments made by private wealth investors in the last decade were with venture capital funds, “highlighting the importance of venture capital and its prevalence in non-institutional portfolios.”

Experienced managers have captured an increasingly larger share of new venture capital commitments due to the demand for managers with the best track records in an uncertain macroeconomic environment. However, with more than 650 venture capital funds successfully raised by July 2024, many opportunities still exist.

Emerging managers may offer a more timely avenue for private investors seeking short-term venture capital allocations, as these managers look for new LP bases. The risk/return profile of emerging managers may be higher without a track record, but taking on more risk for potentially higher returns is, in many ways, the essence of venture capital.

One of the main attractions for venture capital firms is their close relationship with innovative, fast-growing companies. Venture capital allocations can allow an LP to benefit from the rise of artificial intelligence, for example. The upside potential of disruptive technologies is theoretically unlimited, and the potential exposure to future industry leaders is highly valued by wealthier investors with a higher risk appetite.

Sustainability and other impact investment issues are also cited as common interests among private wealth investors. Venture capital investments are a regular financing channel for emerging technologies, such as climate tech, and an increasing number of funds are defined as “impact investors,” catering to the preferences and values of various investors through a dual goal of financial returns and positive social or environmental outcomes.

The 2023 PitchBook Survey on Sustainable Investment among private market investors worldwide revealed that respondents were more divided on the integration of sustainable investment programs between 2021 and 2023, but more than half of the LPs surveyed believe it is “extremely important” or “very important” that their GPs measure the impact in their portfolios.

Thomas Johnston Joins AllianceBernstein as New Strategic Relations Lead

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AllianceBernstein has appointed Thomas Johnston as the new Strategic Relations lead for its Latam and US Offshore business.

Johnston, who will officially assume his role on December 2 and will be based in Miami, will report to Miguel Rozensztroch, CEO for South America, Central America, and North America NRC.

“The addition of Tom reinforces AllianceBernstein’s long-standing commitment to our distribution partners in the cross-border business in the Americas, as well as our continued focus on delivering alpha in both investments and service to our clients in the region,” said Rozensztroch.

With over 15 years of industry experience, Johnston has worked at SunLife Financial International (2007–2014) and Amundi (2014–2020), holding various positions.

He later joined LarrainVial as Head of US Offshore from 2020 to 2022 and, in August 2022, joined John Hancock, where he also led distribution for US Offshore.

Boreal Capital Management Welcomes Roberto Vélez in Miami

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Boreal Capital Management Roberto Vélez Miami

Roberto Vélez has joined the Boreal Capital Management network as a senior financial advisor in Miami.

Vélez “brings extensive experience in wealth management, particularly for high-net-worth international families,” sources at the firm told Funds Society.

With nearly 20 years in Miami, Vélez’s career includes roles at Insigneo, PNC Bank, BBVA, Royal Bank of Canada, and Banco Santander, “gaining valuable expertise in private banking, portfolio management, and estate planning,” according to a statement obtained by Funds Society.

“His broad experience in the global financial market enables him to play a key role in expanding Boreal’s reach, especially in Ecuador, where the company currently has a relatively small presence,” the statement added.

With Vélez’s arrival, Boreal aims to enhance its service offerings and build stronger connections with clients in Latin America. Additionally, the firm is preparing to further solidify its position as a trusted advisor for high-net-worth families, providing comprehensive financial planning and private banking services with an international perspective.

Why are asset managers increasingly using SPVs?

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Special Purpose Vehicles (SPVs) have become essential tools in portfolio management due to their ability to optimize resources, reduce risk, and provide operational flexibility. An SPV is a legal entity established for a specific purpose, often structured as a limited liability company, according to an analysis by the specialized fund manager FlexFunds. This structure enables an effective separation of assets and liabilities from the parent company. By containing the risks of a specific project within an independent entity, companies protect their core operations and reduce exposure to potential losses or liabilities arising from high-risk activities.

Portfolio managers use SPVs for various purposes, including risk-sharing and isolation, asset securitization, asset transfer facilitation, and optimization of property sales, which can be illustrated graphically as follows:

 

Key benefits of SPVs for portfolio managers

The use of SPVs offers multiple benefits, starting with risk management. These entities allow companies to handle high-risk projects without jeopardizing the financial stability of the parent entity, as any financial or legal challenges are contained within the SPV. Portfolio managers also find SPVs to be highly useful tools for adapting to market regulations and norms, achieving operational flexibility that facilitates expansion into new areas or the development of projects with minimal risk to the core business. In regulated sectors, SPVs are particularly advantageous, as they help companies comply with market regulations without endangering their primary structure.

Another key benefit of SPVs is cost optimization. Since these entities are limited to a specific project, they enable the reduction of general and operational expenses. Construction projects or product developments can be managed through SPVs, minimizing the financial impact on the parent company’s structure and maximizing cost efficiency. Additionally, SPVs provide an accessible avenue for raising capital without affecting the parent company’s credit rating, as they maintain their own credit profile. This represents a strategic advantage for portfolio managers, allowing them to finance individual assets or projects without increasing the financial risk or debt of the main organization.

 

Despite their advantages, SPVs come with challenges, particularly regarding transparency and risk oversight. SPV structures can be complex, making it difficult to assess associated risks fully. Portfolio managers must monitor SPV assets and liabilities constantly to identify hidden risks and mitigate potential financial issues. Regulatory compliance is another critical aspect. SPVs must operate transparently and not be used to evade taxes or liabilities. Any irregularities could expose both the SPV and the parent company to significant penalties.

The demand for SPVs has surged in the last decade, driven by their effectiveness in facilitating cross-border capital flows and enabling private investors to access emerging markets. According to the “SPV Global Outlook 2024” report by CSC, the increased use of SPVs stems from their ability to protect parent company assets and liabilities, offer ease of creation and administration, and the possibility to isolate individual assets to optimize performance. This approach has made SPVs a popular choice among fund managers and investors seeking tax-efficient and adaptable structures.

Special Purpose Vehicles (SPVs) operate in an increasingly complex regulatory environment, presenting both challenges and opportunities for asset managers. As Thijs van Ingen, global leader of corporate and legal services at CSC, states, “regulation is driving complexity,” and the regulatory frameworks can vary depending on the jurisdiction in which each SPV operates. For managers, this entails significant responsibility regarding compliance and governance of these entities, which may be subject to multiple layers of regulation, ranging from funds to corporations and specific investments.

Future outlook for SPVs

  1. Increased use in emerging markets: As investors explore growth opportunities in emerging markets, SPVs are likely to play a more prominent role in managing investments in these regions. For instance, private equity firms might use an SPV to invest in a portfolio of medium-sized companies in developing markets, providing capital access while safeguarding investor interests.
  2. Sustainable investments: With the rising importance of environmental, social, and governance (ESG) factors, SPVs are expected to take on a more significant role in financing sustainable projects. Companies investing in renewable energy or social impact initiatives can channel funds through SPVs to maximize returns in high-growth sustainable sectors.
  3. Increased regulatory scrutiny: As SPVs become integral to the financial system, regulators are focusing on these structures. SPVs may face new transparency and leverage requirements aimed at mitigating risks and preventing tax evasion. This scrutiny could lead to more comprehensive reporting obligations and additional controls, raising administrative costs.

Special Purpose Vehicles (SPVs) are a valuable strategic tool for portfolio managers seeking to protect their assets and mitigate risks without compromising the financial structure of the parent company. Their ability to isolate risks, provide operational flexibility, and facilitate capital raising makes them an attractive option for managing assets and high-risk projects.

At FlexFunds, we specialize in designing and creating investment vehicles, offering solutions that enable managers to issue exchange-traded products (ETPs) through Irish-incorporated SPVs. Our solutions are tailored to client needs, halving the time and cost compared to other market alternatives. Supported by renowned international providers such as Bank of New York, Interactive Brokers, Bloomberg, and CSC Global, FlexFunds delivers personalized, efficient solutions that enhance the distribution of investment strategies in global capital markets.

For more information, please contact our specialists at contact@flexfunds.com.

The outlook for US small caps

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US small caps outlook BNP US
Tim Mossholder - Unsplash

The outlook for US small-capitalisation stocks looks better now than it has for several years. The main reasons include the US interest rate cutting cycle (small caps tend to benefit); attractive valuations; and continued reshoring and merger & acquisition trends. 

Falling interest rates and small caps

The US Federal Reserve (the Fed) began its dovish pivot in September and continued its loosening of monetary policy in November. As you can see in Exhibit 1, the stock market performance of small caps has been correlated to the change in policy rate expectations over the last 12 months. When Fed policy rate expectations turn more dovish, small caps outperform.

This phenomenon is likely a function of the cost of debt falling more for small-cap companies as they typically have a higher proportion of variable rate debt than larger-cap companies. Falling policy rates should also boost management confidence, reduce the cost of capital, and support merger & acquisition (M&A) activity heading into 2025.

 

Small-cap valuations – Attractive

Price/earnings ratios for small caps have recovered from the lows and are now near their long-run average of 17 times (excluding companies with negative earnings). Relative to large-cap indices, small-cap P/E multiples look relatively low; they are currently 11% below average (see Exhibit 2).

 

We expect earnings to drive the next leg higher for small-cap share prices. Analysts are looking for robust earnings growth: 15% this year, and by over 30% in 2025 and 2026. That is ahead of the long run rate of 13% growth (see Exhibit 3).

While earnings forecasts are often optimistic, we believe that with a soft or no landing ahead for the US economy, they are not wildly off the mark. If the higher earnings growth rates are realised, valuations should improve.

 

Mega-cap tech’s lead expected to narrow

Four big tech companies (Amazon, Google, Meta and Nvidia1) have generated the bulk of recent earnings growth on the US market. This has driven the outperformance of the tech-heavy NASDAQ 100, the small-cap Russell 1000 Growth and, to a lesser degree, the broad S&P500.

Earnings for the big four grew by 70% year-on-year in the second quarter of 2024, compared to just 6% for the remaining 496 companies in the S&P500. That gap is forecast to narrow (see Exhibit 4) and if it does, so should the gap in stock market performance.

 

Tailwinds for small caps in 2025

For decades after China’s admission to the World Trade Organisation (WTO) in 2001, US companies were focused on outsourcing production to lower-cost nations to improve profits. Industrial production stagnated in the US, while it rose sharply in China.

We see potential for that trend to reverse in the coming years. During the pandemic, having supply chains and manufacturing far from home created difficulties for US firms and many are looking to ‘re-shore’ production.

Rising geopolitical tensions and protectionism are other catalysts, abetted by the financial support from the federal government’s CHIPS Act and the Infrastructure Investment and Jobs Act.

We believe a multi-year cycle of capital expenditure driven by re-shoring initiatives lies ahead. US small caps should benefit from this trend as they are more levered to domestic investment and economic cycles.

Information technology spending on datacentres — which are a key part of the infrastructure supporting the artificial intelligence (AI) ‘arms race’ — is boosting not only sales of advanced graphic processing units (GPUs), but also revenues at many lesser-known hardware, software, industrial, materials and even utility companies.

This capex is funded largely by the profits of other tech companies that are spending to grow their business, rather than hoarding cash or boosting earnings per share (EPS) via share buybacks.

M&A is another potential tailwind for small caps.

With lower interest rates easing the burden of debt, uncertainty fading over the outlook for the economy, and political uncertainty lower now that the US election is behind us, deal flow should improve. Strategic buyers are always evaluating opportunities for innovation or disruption and may now be better able to implement their plans.

Conclusion

We see a number of tailwinds for smaller US companies emerging as the Fed pivots to monetary easing, earnings recover, and valuation dislocations normalise. These market inflections could be further supported by trends in onshoring and re-shoring, and a resumption of M&A activity.


Column by Geoff Dailey, Head for the US Equity team at BNP Paribas Asset Management, Chris Fay, Portfolio Manager on the US and Global Thematic Equities team and Vincent Nichols, Senior Investment Specialist for the US and Global Thematic Equities team

[1] Mentioned for illustrative purposes only. This is not a recommendation to buy or sell securities. BNP Paribas Asset Management may or may not hold positions in these stocks.

European Commercial Real Estate Sector: Credit Outlook Improves

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European commercial real estate credit outlook

Issuers on the brink of investment grade, as well as high-yield issuers, continue to face significant challenges in securing financing. Debt markets are slowly reopening for European commercial real estate companies, but investor confidence has yet to recover to pre-2022 levels due to high leverage, significant capital investment, and concerns over the governance of some issuers.

Only companies with a strong BBB credit rating or higher have access to the most liquid debt capital markets. Falling bond yields and tightening spreads may provide capital market-based financing competitive with secured bank loans. For these issuers, spreads on new issues range from 90 to 150 basis points, close to the 25-145 basis point range in 2021 (Charts 1, 2), the year when debt issuance in the capital markets for real estate companies reached its peak (Chart 3).

For companies at the investment grade threshold—rated BBB—the fear of a downgrade translates into much wider spreads. New issue spreads exceed 200 basis points, in stark contrast to the 60 to 145 basis points range in 2021.

Although we believe prices have bottomed out in some property segments, investor nervousness also points to the risk of further declines in property values at the riskiest end of the European commercial real estate market. Banks’ appetite for financing less attractive commercial properties remains limited, exposing real estate managers to a negative feedback loop. The sale of distressed assets could call into question current valuations and act as a catalyst for balance sheet restructuring. Additionally, possible sales of open-end real estate funds to offset cash outflows will test market resilience.

Non-Investment Grade Issuers Continue to Face Tough Financing Challenges

Spreads are even wider for issuers below investment grade and companies with governance concerns.

In practice, debt capital markets do not offer them a financing source to avoid potential covenant breaches and support interest coverage ratios. Smaller European capital markets, like the Swedish market, only offer loan borrowers shorter-term credit (Chart 4), providing little relief to an industry burdened by debt.

The Risk of Further Declines in Property Valuations Looms Over the Sector

Investor caution also reflects the considerable risk that further devaluation of real estate assets remains. Corrections in prime real estate assets (retail and office), as well as residential and logistics properties in general, are nearing the bottom (Chart 5). However, prices of non-prime assets and those requiring heavy investments—such as modernization, environmental compliance, and conversion to meet structural changes in demand—continue to decline.

Open-end real estate funds, which are experiencing large cash outflows, could exert additional downward pressure on valuations if they begin to divest less attractive properties from their portfolios to gain liquidity. So far, funds have avoided doing this to maintain the net asset values of their assets. For example, if a substantial portion of the properties—such as part of the €128 billion in investments held by German open-ended funds—were to hit the market, we would witness further devaluation of real estate assets.

A More Abrupt Shift in Interest Rates Offers the Possibility of Greater Relief

European real estate companies would clearly benefit, like any indebted sector, from a more abrupt shift in the interest rate cycle if fears of recession and stagnating growth lead to looser monetary policy in Europe and the U.S. Currently, we foresee a continued, cautious reduction in interest rates, with a single 0.25 basis point cut from the ECB and the Federal Reserve in the second half of the year.

Underlying interest rates have dropped sharply due to recession fears in the U.S. If weaker growth prospects and slow economic growth in the U.K. and the EU materialize, quicker rate cuts could provide a funding opportunity for companies with structurally solid portfolios, low leverage, and no governance issues. In general, we expect few short-term issuances from smaller real estate companies (gross asset value below €2 billion) in the eurobond market.

The benchmark bonds these companies issued to take advantage of the market’s low financing costs in the decade before 2022 have left many with the headache of refinancing them at much higher rates today, if they can.

Banks Continue to Support the Sector… Up to a Point

Banks have become more cautious and selective but are still lending to the sector. They are willing to renew existing financing for properties or real estate portfolios with solid operational performance and are even willing to grant new loans if the collateral is firm and commitments are strict. Loan margins for secured loans have increased to 60-230 basis points, depending on property type, ultimate ownership, leverage, and, most importantly, location. Thus, bank financing may be a more reasonable alternative for weaker creditors than capital markets-based financing.

However, bank financing has its limits. Banks have not only tightened loan guarantees but have also focused more on the composition of their loan portfolios with respect to maximum exposure to a sector, individual issuers, and/or properties without good energy efficiency certifications or other eco-building ratings. Secondly, high-leverage transactions are no longer viable, meaning that if a borrower has financing problems, they may need to turn to grey debt markets at much higher costs.

Bank loans can only cover a marginal portion of bond refinancing due to mature, leaving issuers with lower investment grades and non-investment grades under pressure to restructure their assets or liabilities—most likely at a high cost for both shareholders and debt holders.

European real estate companies as a whole have weathered the worst of the recent financing crisis, but the credit outlook for many companies remains highly uncertain.

The Fintech LAKPA Strengthens Its Offering in Mexico With Model Portfolios From J.P. Morgan AM

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The Chilean fintech LAKPA continues to expand its presence in Mexico, forging alliances in one of Latin America’s largest markets and broadening its offerings. The latest milestone in this growth journey is a partnership with J.P. Morgan Asset Management, which will allow the fintech to offer model portfolios from the U.S. asset manager to Mexican clients.

The agreement enables the tech firm to access model portfolios from the renowned investment house, highlighted Alicia Arias, Commercial Director at LAKPA. “This will allow our financial advisors to offer their clients an investment portfolio designed by J.P. Morgan Asset Management, which will be acquired directly in each investor’s account,” she explained.

These investment portfolios, tailored to the needs of Mexican investors, utilize efficient investment vehicles available through the International Quotation System of the local market, according to Arias.

“We are pleased to provide our advisors with portfolios designed by a team of experts with more than 50 years of experience in multi-asset investment solutions, backed by a solid track record of value generation,” Arias emphasized. This team, she noted, manages over $460 billion globally and has more than 1,300 investment professionals.

The fintech aims to establish itself as an investment advisor offering a comprehensive ecosystem for financial advisors who wish to work independently. With this model, investors can maintain their investments with their preferred brokerage house — with which LAKPA has commercial partnerships — while the management remains in the hands of their trusted advisors, facilitated through the fintech’s platform.

To date, the Chilean firm has formed alliances with Actinver, GBM, Invex, Finamex, Scotia Wealth Management, and Banorte Casa de Bolsa, as stated on its website.

Conquering the Mexican Market

Strengthening ties with various players in the Mexican market is one of the key drivers of the company’s evolution in the country. “Beyond technology, which is a central pillar of our value proposition, LAKPA Mexico continues to establish commercial partnerships, both with counterparts for operations and custody and with global asset managers, to access the best financial market solutions in the public and private sectors,” said Arias.

In this regard, she expressed optimism about replicating the success LAKPA has achieved in Chile in the Mexican market. “We are very pleased to have reached milestones like surpassing $1 billion in advised assets,” she added.

The fintech views Mexico as fertile ground for financial advisory services, both in terms of supply and demand. “In the country, few people have access to investments and financial advisory services. According to data from Banxico and AMIB, there are more than 400 billion pesos in resources held in sight or term deposits — nearly double the value of the mutual fund industry, to put it into perspective,” noted Arias.

Furthermore, according to AMIB, there are just over 9,000 certified individuals providing financial advisory services.

“We are convinced that our solution will contribute to the development of a new network of financial advisors who will operate under a conflict-free model, independent of a single institution or compensation scheme,” she concluded.

Funds of Funds Take a Back Seat to Model Portfolios

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Elecciones en EE.UU. y mercados

Financial advisors are prioritizing the use of model portfolios over funds of funds (FoFs), according to the latest Cerulli Report – U.S. Product Development 2024.

The value and level of customization offered by model portfolios are more appealing to both financial advisors and asset managers, the report adds.

61% of advisors plan to prioritize model portfolios over FoFs. Additionally, 44% of financial advisors report using the FoF structure, but only 8% expect to increase their use of FoFs in the future.

Advised assets placed in FoFs are generally used for core client segments with lower investable assets. Advisors prefer to use actively managed strategic funds for these clients and remain divided on whether the fees charged by FoFs are proportional to the value they provide—a key reason why advisors are expected to deprioritize their use in the future, the report explains.

“The FoF structure is under pressure as it continues to conflict with part of financial advisors’ value proposition as portfolio managers, while other solutions, such as model portfolios, serve as a middle ground by offering outsourced, fully constructed portfolios that still allow customization by advisors,” says Matt Apkarian, Associate Director.

On the other hand, according to Cerulli, nearly two-thirds of asset managers believe FoFs encroach on the value proposition of portfolio construction by wealth managers, including model portfolios built by wealth management headquarters and advisors who prefer to create customized portfolios for clients. This creates a significant barrier for these products to get past gatekeepers and onto the shelves of key platforms.

Similarly, both gatekeepers and individual advisors face obstacles regarding fees, as FoF expense ratios and the underlying product expense ratios are subject to rigorous scrutiny, Cerulli adds.

“While the FoF structure will remain a staple in defined contribution retirement plan lineups, its use outside of 401(k) plans will be limited. Instead, more customizable solutions, such as model portfolios, are available to advisors for whom outsourced investment management aligns, and these will be preferred in the future,” Apkarian concludes.

Amundi Acquires the Technology Platform Aixigo to Accelerate the Development of Its Tools for Savings Solution Distributors

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Amundi acquisition aixigo technology platform

Amundi has announced the acquisition of aixigo, a technology company that has developed a modular offering of high-value-added services for distributors of savings solutions. According to the asset manager, aixigo’s platform, fully API-based, enables the quick and easy deployment of new services within the existing IT infrastructure of banks and financial intermediaries.

The asset manager explains that in a context where digital technology has become a key factor in managing client relationships in wealth management, managers are seeking technological tools that allow their teams to advise, distribute, and manage investment solutions more efficiently. “As a result, the market for technology services for wealth management players, as well as private and retail banks, is experiencing significant growth,” they state.

Amundi, already active in this booming market through its business line Amundi Technology and its Alto solution, will accelerate its development with the acquisition of aixigo, further strengthening its position as a provider of technology and services. Amundi’s client and geographic coverage in this market will be expanded thanks to aixigo’s client base in Germany, Switzerland, and the United Kingdom.

Combination of Platforms

Founded in Germany 25 years ago by a group of academics, aixigo has experienced rapid growth in recent years, with significant revenue increases. With a team of 150 employees, aixigo currently serves more than 20 clients, including major international financial institutions representing over €1 trillion in assets under management. Around 60,000 advisors use aixigo’s services daily to onboard clients, build and manage allocations, execute orders, and generate reports.

Meanwhile, Amundi Technology has also been enhancing its offerings, “providing the investment and savings sector with technological solutions for portfolio management, employee savings and retirement, wealth management, and asset services,” the company states.

Currently, its high-profile client portfolio includes more than 60 entities, including banks, private banks, pension funds, insurers, fund custodians, and asset managers across Europe and Asia. “From now on, aixigo’s tools will become part of the solutions that Amundi Technology offers its clients across the entire savings value chain,” they note.

A High-Value Transaction

Amundi explains that this transaction, aligned with its strategic plan and financial discipline, will generate significant value due to the business’s growth potential, as well as revenue and cost synergies. “The transaction amount is €149 million. The return on investment will be close to 10% after three years and exceed 12% after four years,” they state.

On the operation, Valérie Baudson, CEO of Amundi, remarked: “Institutions distributing savings products are increasingly seeking solutions and external partners to improve operational efficiency and offer advice, services, and products in a more personalized, faster, and higher-quality way. To meet these needs, Amundi has developed a range of services and a technological platform that will be strengthened with aixigo. With this new expertise, already adopted and recognized by major financial firms, we will continue developing innovative new services and play an active role in the evolution of the financial advisory and wealth management sectors. This transaction will generate significant value for our clients, partners, and shareholders.”

Guillaume Lesage, Chief Operating Officer of Amundi, added: “We are delighted to welcome aixigo’s experienced teams, who will bring their entrepreneurial spirit, cutting-edge technological skills, and deep understanding of client needs. With this development, we will accelerate the deployment of Amundi Technology’s services for private banks and wealth managers, offering a broader, more flexible, and scalable solution to address an even greater range of business cases.”

Benjamin Lucas, Managing Director of Amundi Technology, commented: “Amundi Technology is fully committed to providing pioneering technological solutions and exceptional service to our clients globally. By combining the leading capabilities and solutions of Amundi Technology and aixigo, we will create a transformative offering for the wealth management and banking industries. We share a vision and a focus on excellence and growth for all our stakeholders, and we are extremely excited to welcome aixigo’s teams as we continue this journey together.”

Arnaud Picut, CEO of aixigo, stated: “Joining Amundi Technology represents a unique opportunity to expand our service offering and leverage Amundi’s expertise, enabling us to become the undisputed leader in Europe before gradually extending our reach to Asia. This vision perfectly aligns with our values and ambitions. It is also an opportunity to thank Urs Ehrismann, founder of Fronttrail Equity Partners, who has supported us as an investor over the past six years, helping us build a successful European wealthtech platform.”

Finally, Christian Friedrich, member of the Executive Board and co-founder of aixigo, added: “The union of aixigo and Amundi Technology will create a true powerhouse in the wealthtech sector. I am very excited about the opportunities and possibilities this will create for the aixigo team. Our long-standing clients will benefit from the combination of our shared skills and strengths, driving new services in the wealth management market. I look forward to the innovations this partnership will bring.”