Is Your Strategy Ready for 2025? Five Key Trends Transforming Asset Management

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Asset management and key trends
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Is your strategy prepared for the transformations redefining asset management in 2025? Technological integration, personalization, and the reinvention of operational models are reshaping the industry. Among these trends, asset securitization stands out as an innovative solution to maximize the growth of assets under management (AUM) and respond nimbly to increasing market complexity.

In this article, FlexFunds analyzes the significant trends shaping the future of asset management and how securitization can become a key strategic tool.

  1. Large-scale personalization: the client at the center

Investors no longer seek generic products; they now demand solutions tailored to their objectives, values, and circumstances. By 2025, digitalization, powered by advanced artificial intelligence (AI) tools, will enable asset managers to build portfolios aligned with specific risk tolerances and unique goals. Personalization is becoming the key differentiator in a saturated market.

  1. Digitalization and hybrid asset management

The pandemic accelerated the shift toward digital financial services, and by 2025, hybrid asset management will become the norm. Technological platforms that combine the convenience of digital self-service with human advisory will allow firms to adapt to an increasingly competitive market.

  1. Fee reduction and new pricing models

The rise of automated advisors and investment platforms has driven down fees, forcing traditional portfolio managers to justify their value. Many are adopting alternative pricing models, such as subscriptions or fees based on service complexity.

  1. Generational wealth transfer

As the massive wealth transfer from baby boomers to younger generations unfolds, asset managers face the challenge of maintaining multi-generational relationships. Technological tools simplify this transition by offering attractive investment options tailored to diverse generational profiles—from millennials interested in ESG to traditional investors.

  1. Artificial intelligence: the transformation catalyst

AI is revolutionizing asset management, from portfolio structuring to client interaction. Its most notable applications include:

  • Predictive analysis: Identifying patterns and anticipating future client needs.
  • Portfolio optimization: Processing real-time data to detect risks and opportunities.
  • Risk management: Monitoring real-time transactions and adjusting strategies in response to market volatility.

In the second Asset Securitization Industry Report by FlexFunds and Funds Society, surveying over 100 senior executives from Latin America, the U.S., and Spain, 82% of portfolio managers stated that AI could enhance their investment decision-making process.

Securitization as a strategic tool

Asset securitization is a vital tool for portfolio managers looking to adapt to these trends. It allows them to offer clients personalized investment strategies tailored to risk profiles and time horizons that are cost-efficient and agile compared to other market alternatives.

The benefits of asset securitization for portfolio managers include:

  • Access to a broader base of international investors.
  • Enhanced distribution of investment strategies on private banking platforms through a listed security available via Euroclear.
  • Access to alternative financing sources.
  • Portfolio diversification offers flexibility in investment strategy composition by securitizing any underlying asset.
  • Simplified investor onboarding and subscription processes.

Asset management in 2025 will be defined by the ability to integrate technology, personalization, and innovative strategies like securitization. Managers who adopt a holistic approach, combining advanced digital tools with strong human relationships, will be best positioned to thrive in this evolving landscape.

To explore how FlexFunds can help you leverage securitization in your investment strategies, contact us at info@flexfunds.com.

 

Trump, Trump, Trump…: The Tune Heard by Markets and Investors

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Trump y su impacto en los mercados
Photo courtesyOfficial White House Photo

We know—the words you’ve probably heard the most last week are Donald Trump. The first week of the 47th U.S. president’s term has been intense, marked by 25 Executive Orders. These range from withdrawing from the Paris Climate Agreement and the World Health Organization to declaring a national emergency on the southern border and an energy emergency. Other areas addressed include tariffs, immigration, and ending federal workers’ remote work policies.

Experts call for caution amid the noise
“So far, he hasn’t enacted any tariffs on imports. It’s unlikely that announcements of new policy measures from the Oval Office—whether they’re implemented or not—will decrease in the short term. Reacting preemptively to these is a losing proposition for investors. At the same time, as shown by the recent tariff threats against Canada and Mexico and the related currency movements, higher financial market volatility is likely to become a permanent feature of the new Trump administration,” notes Yves Bonzon, CIO of Julius Baer.

One of the most attention-grabbing announcements, beyond concerns about tariffs, has been the Stargate initiative, which brings together SoftBank, Oracle, and OpenAI in a joint venture committed to investing $100 billion in early-stage AI. The plan starts with a data center in Texas and aims to reach $500 billion in four years.

According to analysts at Banca March, this initiative boosted the tech sector, especially Microsoft, Nvidia, and Arm, which will build the infrastructure. “For context, it’s estimated that the total investment—regular business and AI deployment—of the four major hyperscalers (Amazon, Meta, Microsoft, and Alphabet) will reach $260 billion in 2025. This shows the ambition and relevance of the announced investments. The new president highlighted the strategic importance of maintaining leadership in AI development, particularly against growing competition from China. However, Elon Musk commented on the social network X that the initiative doesn’t yet have the financial capacity to deploy such a large investment, marking the first public disagreement between Trump and the entrepreneur,” the analysts highlight.

Another Executive Order formally established the Department of Government Efficiency (DOGE).
Although Elon Musk and Vivek Ramaswamy had discussed cutting $2 trillion from the government’s annual $6.8 trillion budget, the text didn’t mention any spending cuts. “Monday’s action shifts the effort away from direct spending cuts and more toward improving efficiency through technological advancements. Ironically, these improvements will likely cost more in the short term (and could require Congressional allocation) even if they save money in the long term. We’ll have to wait to see what DOGE achieves before it expires in mid-2026,” notes Libby Cantrill, Head of Public Policy at PIMCO.

Tariffs and Trade

Everything related to trade and tariffs is drawing the attention of analysts and investors, who undoubtedly see it as a concern. “On trade, we expect Trump to reinstate at least some tariffs on China to the levels implemented during his first term as an immediate first step, with potential for steady increases from there. He could also initiate Section 301 trade investigations into Mexico, Canada, and the EU, which would be a precursor to tariff increases. Ultimately, our baseline trade assumptions incorporate a significant rise in tariffs on China but a more targeted approach by sector and product with other countries, avoiding a global baseline tariff. However, a more expansive use of emergency powers related to trade, including invoking the International Emergency Economic Powers Act (IEEPA), could indicate that trade policy is shifting toward our ‘Trump Unleashed’ scenario,” says Lizzy Galbraith, political economist at abrdn.

In Cantrill’s view, tariffs may not have been raised immediately. “We’d caution against reading too much into what’s more likely a delay rather than an absence of future tariff action. At the same time, we believe widespread tariffs on Mexico and Canada—particularly at the 25% level—are less likely than targeted, country-specific tariffs elsewhere. We still think the EU and China are quite vulnerable.

In the coming days and weeks, as the administration approaches its first 100 days, a flurry of decrees related to immigration, tariffs, and deregulation is expected. These will provide clues about the overall direction of its policy.

U.S. Equities

Meanwhile, the Q4 2024 earnings season in the U.S. started off well and will pick up speed next week. As Bonzon recalls, expectations for S&P 500 earnings in 2025 are ambitious, though “not unattainable,” with limited room for positive earnings surprises. “The risk/reward ratio outlook for the S&P 500 has significantly deteriorated compared to two years ago. After two consecutive years of double-digit returns driven largely by valuation multiple expansion, the index is fully valued, though not excessively,” states the CIO of Julius Baer.

In general, Bonzon notes that analysts currently forecast a year-over-year earnings growth of 14.8% for the S&P 500 in 2025. While this is certainly achievable, it leaves little room for positive surprises. “After two consecutive years of returns driven largely by valuation multiple expansion—resulting in a fully valued, but not overly expensive, index—the burden increasingly falls on earnings to drive returns,” he concludes.

Managers Temper Their Optimism Amid Expectations of Higher Inflation and a ‘No Landing’ Scenario

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Gestores e inflación
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Bank of America has published its first global fund manager survey of the year, reflecting a somewhat positive sentiment, particularly regarding the U.S. dollar and equities. However, the survey also reveals nuances that convey a cautious outlook, especially toward Europe, as well as concerns about inflation and monetary policy.

“Our broader sentiment measure from the FMS survey, based on cash levels, equity allocation, and global growth expectations, dropped from 7.0 to 6.1 in January, indicating that some of the ‘excess’ seen in the December 2024 FMS has dissipated. Cash levels in the FMS remained unchanged in January at 3.9%, the lowest level since June 2021. This marks the second consecutive month with a ‘sell’ signal based on the FMS cash rule since 2011. In the 12 previous instances when this ‘sell’ signal was triggered, global equity returns were -2.4% in the following month and -0.7% in the three months after the signal was activated,” the institution notes in its survey.

The most optimistic takeaway from managers is that institutional allocation to equities remains high: 41% of FMS survey investors hold an overweight position in global equities, though this has declined from the 3-year high of 49% recorded in December.

The Nuances

However, retail enthusiasm has waned in early 2025. Furthermore, in this January survey, global growth expectations fell to a net -8% from 7% in December, and optimism declined for both the United States and China.

“Global growth expectations remain moderate, but the percentage of macroeconomic investors anticipating a boom is the highest since April 2022. Inflation expectations are at their highest level since March 2022, and the probability of a ‘no landing’ scenario has increased (38%) at the expense of ‘soft landing’ (50%) and ‘hard landing’ (5%) scenarios,” BofA indicates.

When it comes to risks, the survey reveals that 41% of respondents cite inflation, which could lead the Federal Reserve to raise rates, as the biggest “tail risk,” followed by a trade war with recessionary effects.

A notable statistic is that 79% of investors expect the Federal Reserve to cut rates in 2025, while only 2% anticipate an increase. In fact, the FMS survey shows that investors, entering the first week of Trump 2.0, are most positioned for announcements related to selective tariffs (49%), immigration cuts (20%), and universal tariffs.

“When asked which development would be considered the most bullish for risk assets in 2025, respondents pointed to an acceleration in China’s growth (38%), followed by rate cuts by the Federal Reserve (17%) and AI-driven productivity gains (16%),” the report adds.

Asset Allocation

According to BofA’s interpretation of the January survey results, investors remain optimistic about the U.S. dollar and equities. Conversely, they are pessimistic about nearly everything else. This is evident in the largest underweight in bonds since October 2022 and the low cash levels of 3.9%. “However, if January’s concerns about Trump’s tariffs and messy bonds prove unfounded, asset allocation will remain tilted toward risk, allowing lagging assets to recover,” the institution states.

Looking at the asset allocation of fund managers, 41% are overweight equities, compared to an underweight of 6% in commodities, 11% in cash, and 20% in bonds. Notably, January saw a significant rotation into European equities—from a 22% underweight to a net 1% overweight—and out of U.S. equities, from 36% to just 19%. Additionally, global FMS investors rotated back into large caps over small caps and growth over value.

Specifically, investors increased their allocation to the eurozone, commodities, and defensive sectors (healthcare and consumer staples) while reducing their allocation to the U.S., financials (insurance and banks), and equities. According to the survey, investors are most overweight equities, banks, and the U.S., while they are most underweight bonds, the U.K., and energy.

Divergence: The Key Word Following the Easing of Global Monetary Policy

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Divergencia y política monetaria global
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The world is experiencing a new environment marked by a cycle of interest rate cuts by the major central banks in developed markets, as well as in emerging regions. According to experts, over the past quarter, most monetary institutions have adopted a more cautious stance.

The best example of this is the Fed, which has once again shifted its focus to inflation, as economic activity has remained strong while disinflation has stalled. “The Fed maintains its data-dependent approach and is beginning to shift its attention to the labor market. We believe labor market conditions could shape the path of its future policy decisions. Similarly, the Bank of England and the European Central Bank also cut interest rates by 25 basis points in the third quarter of 2024, emphasizing data dependency without precommitting to any specific interest rate trajectory,” explain experts from Capital Group.

According to Invesco in its outlook for this year, rates remain generally restrictive in major economies but are easing. “On the one hand, the Fed is likely to remain neutral by the end of 2025, but improved growth prospects may delay rate cuts. On the other hand, European central banks are easing their policies, with relatively weaker growth than the U.S.,” they note.

Divergences in Monetary Policy

This reality brings us to a key conclusion: yes, we are in a cycle of rate cuts, but there will be noticeable divergences in the monetary policies of the major central banks. In fact, Capital Group believes that this divergence will play a significant role in the coming months.

This is reflected in the Central Bank Watch report, prepared by Franklin Templeton, which reviews the activity of G10 central banks, plus two additional countries (China and South Korea), along with their forecasts.

According to the report, the Fed’s shift in strategy has refocused its attention on inflation, as economic activity has remained robust while disinflation has stalled. “The policies of the newly elected president are also likely to influence the Fed’s interest rate projections, which currently only anticipate two cuts in 2025. Across the Atlantic, the European Central Bank and the Bank of England are observing insufficient growth but remain cautious about the future interest rate path, as domestic and geopolitical uncertainties remain high,” the report states.

“Monetary policy divergence is likely to remain a prominent theme in the coming months. The Bank of Japan remains the exception among developed markets, as it has embarked on a rate hike cycle to end an era of negative interest rates. We maintain a relatively cautious stance regarding Japanese rates, as the central bank may make further policy adjustments in response to potential currency pressures. In Europe, the trajectory of monetary easing could depend on the weight policymakers place on downside growth risks compared to the pace and progression of wage pressures and services inflation,” Capital Group experts emphasize.

Another conclusion from the Franklin Templeton report is that “most central banks have become more cautious than they were a quarter ago.” According to their analysis, while the Bank of Canada cut its benchmark rate by 50 basis points in December, this may be its last significant move. “The Riksbank also seems to be taking a more neutral stance, and we believe the Reserve Bank of New Zealand will need to implement fewer cuts than the market currently anticipates. Meanwhile, the Swiss National Bank and the People’s Bank of China remain the most dovish,” the report highlights, noting the behavior of other key monetary institutions.

Lastly, the document underscores that some central banks face a set of dilemmas. “We believe the Norges Bank will lower rates, likely in the first quarter, followed by the Reserve Bank of Australia in the second quarter. Both were among the last to join the easing trend. Meanwhile, the Bank of Japan is expected to continue raising rates gradually in 2025. However, we believe the rigidity of inflation gives the central bank ample room to adopt a more aggressive stance,” the report concludes.

Jupiter AM Integrates the Investment Team and Assets of Origin AM

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Jupiter AM y Origin AM
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Jupiter Asset Management has announced that the investment team and assets of Origin Asset Management, a global investment boutique based in London, were transferred to Jupiter on January 21, 2025. This integration follows the acquisition announcement made on October 3, 2024.

According to the firm, this addition strengthens its presence in the strategic institutional client channel and enhances its capabilities in emerging market equities, while also expanding its expertise in other multiregional equity strategies. The team, led by Tarlock Randhawa, includes Chris Carter, Nerys Weir, Ben Marsh, and Ruairi Devery-Kavanagh. As noted by Jupiter AM, the team’s solid track record is based on an investment process that combines a quantitative asset selection approach with proprietary algorithms and rigorous qualitative analysis.

Following the announcement, Kiran Nandra, Head of Equities at Jupiter, stated: “Origin is the latest example of Jupiter’s ability to attract highly successful investment talent with strong commercial vision. We aim to expand our investment capabilities to serve a wide range of clients. Last year’s arrival of Adrian Gosden and Chris Morrison, followed by Alex Savvides and his team, significantly strengthened our UK equities expertise. Likewise, we eagerly anticipate the addition this year of the prestigious European equities team comprising Niall Gallagher, Chris Sellers, and Chris Legg.”

For his part, Tarlock Randhawa, who leads the team, added: “We are excited to join Jupiter, where the active and differentiated management philosophy, combined with a strong client focus, is clearly evident. The transition for our clients will be seamless, and we believe they will benefit from Jupiter’s commitment to excellence in client experience.”

The Global ETF Industry Reached Inflows Worth $1.88 Trillion in 2024

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Industria global de ETFs y flujos de inversión
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In December, the global ETF industry captured $207.73 billion, raising net inflows for all of 2024 to $1.88 trillion, according to the report by ETFGI. This marks a new record for the sector, surpassing the previous high of $1.29 trillion recorded in 2021 and, of course, exceeding the 2023 total of $974.50 billion.

Additionally, global ETF assets stood at $14.85 trillion in 2024, the second-highest level ever recorded, only below the record of $15.12 trillion in November of the same year. “Assets under management increased by 27.6% in 2024, rising from $11.63 trillion at the end of 2023 to $14.85 trillion at the close of 2024,” notes the latest report by ETFGI.

Regarding the behavior of flows, the ETFGI report shows that out of the $207.73 billion in net inflows, equity ETFs captured $151.58 billion, raising 2024 net inflows to $1.11 trillion, far exceeding the $532.28 billion in 2023. As for fixed income ETFs, these vehicles attracted $16.14 billion in December, bringing 2024 net inflows to $314.32 billion, higher than the $272.90 billion in 2023.

Looking at other asset classes, commodity ETFs reported net outflows of $1.11 billion in December, bringing 2024 net inflows to $3.91 billion, better than the net outflows of $16.88 billion in 2023. Meanwhile, active ETFs attracted net inflows of $41.78 billion in December, bringing 2024 net inflows to $374.30 billion, much higher than the $184.07 billion in net inflows in 2023.

According to Deborah Fuhr, managing partner, founder, and owner of ETFGI, “The S&P 500 index declined 2.38% in December but rose 25.02% in 2024. Developed markets, excluding the U.S. index, declined 2.78% in December but increased 3.81% in 2024. Denmark (down 12.34%) and Australia (down 7.90%) recorded the largest declines among developed markets in December. The emerging markets index increased 0.19% during December and rose 11.96% in 2024. The United Arab Emirates (up 6.42%) and Greece (up 4.21%) recorded the largest increases among emerging markets in December.”

Evolution of Offerings

The ETFGI report also highlights that the global ETF industry reached a new milestone with 1,988 new products launched in 2024. It explains that this represents a net increase of 1,366 products after accounting for 622 closures, surpassing the previous record of 1,841 new ETFs launched in 2021.

Specifically, the distribution of new launches in 2024 was as follows: 746 in the United States, 606 in Asia-Pacific (excluding Japan), and 323 in Europe. Additionally, a total of 398 providers contributed to these new launches, which are distributed across 43 exchanges worldwide. Notably, iShares launched the largest number of new products, with 96, followed by Global X ETFs with 69 and First Trust with 57.

“There were 622 closures from 177 providers across 29 exchanges. The United States reported the highest number of closures with 196, followed by Asia-Pacific (excluding Japan) with 156, and Europe also with 156. Among the new launches, there were 954 active products, 650 indexed equity products, and 191 indexed fixed-income products,” noted ETFGI.

Between 2020 and 2024, the global ETF industry experienced significant growth in the number of launches, increasing from 1,131 to 1,988. In 2024, the United States and Asia-Pacific (excluding Japan) recorded the highest number of launches, reaching 746 and 606, respectively, while Latin America had the fewest launches, with only 26. The United States and Canada achieved record numbers of new launches in 2024, with 746 and 189, respectively. Additionally, Asia-Pacific (excluding Japan) achieved its launch record in 2021, with 645; Europe set its record of 434 in 2021; Latin America recorded 41 in 2021; Japan reached 44 in 2023; and the Middle East and Africa achieved 86 in 2020.

AI and Technology: Why Is It the Cornerstone of Growth for Asset Managers in the Coming Years?

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Inteligencia artificial y gestores de activos
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80% of asset management and wealth management firms state that AI will drive revenue growth, while the “technology-as-a-service” model could boost revenues by 12% by 2028, according to the Asset and Wealth Management 2024 report by PwC. A significant finding is that 73% of organizations believe AI will be the most transformative technology in the next two to three years.

The report reveals that 81% of asset managers are considering strategic alliances, consolidations, or mergers and acquisitions (M&A) to enhance their technological capabilities, innovate, expand into new markets, and democratize access to investment products, in a context marked by a significant wealth transfer. According to Albertha Charles, Global Asset & Wealth Management Leader at PwC UK, disruptive technologies, such as artificial intelligence (AI), are transforming the asset and wealth management industry by driving revenue growth, productivity, and efficiency.

“Market players are turning to strategic consolidation and partnerships to build technology-driven ecosystems, eliminate data management silos, and transform their service offerings amid a major wealth transfer, where affluent individuals and younger audiences will play a more significant role in shaping demand for services. To emerge as leaders in this new digital market, asset and wealth management organizations must invest in their technological transformation while ensuring they reskill and upskill their workforces with the necessary digital capabilities to remain competitive and innovative,” explains Charles.

This focus will be critical in addressing an industry whose assets under management are expected to reach $171 trillion by 2028. According to PwC projections, the sector will see a compound annual growth rate (CAGR) of 5.9%, compared to last year’s 5%. Notably, alternative assets stand out, expected to grow even faster with a CAGR of 6.7%, reaching $27.6 trillion during the same period.

“Despite the potential of alternative assets, only 18% of investment firms currently offer emerging asset classes, such as digital assets, though eight out of ten firms that do report an increase in capital inflows,” the report notes in its conclusions.

Key Trends

Taking into account this growth forecast and the role technology will play, PwC’s report identifies several trends. The first is that tokenization stands out as a key opportunity, with tokenized products projected to grow from $40 billion to over $317 billion by 2028, representing a CAGR of 51%.

Tokenization, or fractional ownership, can democratize finance by expanding market offerings and reducing costs. According to PwC, asset managers plan to offer tokenization primarily in private equity (53%), equities (46%), and hedge funds (44%).

Another identified trend is the consolidation and development of technology ecosystems while talent remains the top priority. In this context, 30% of asset managers report facing a lack of relevant skills and talent, while 73% see mergers and acquisitions as a key driver for accessing specialized talent in the coming years.

“The conclusions of this report highlight the urgent need for asset managers and firms to rethink their investment strategies. Their long-term viability will depend on a radical, fundamental, and ongoing reinvestment in how they create and deliver value. Strategic alliances and consolidation will play a vital role in creating technology ecosystems that facilitate greater exchange of ideas and knowledge. Smaller players will be able to modernize their systems quickly and cost-effectively, while larger players will gain access to critical talent and information for growth, particularly as new and emerging technologies like AI transform the investment management landscape,” says Albertha Charles, Global Asset & Wealth Management Leader at PwC UK.

To prepare the report, 264 asset managers and 257 institutional investors from 28 countries and territories were surveyed.

Raymond James Adds Celeste Boadas in Coral Gables

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Raymond James y Celeste Boadas
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Celeste Boadas Joined Raymond James for Its Private Wealth Management Division in Coral Gables.

Boadas joins as a Client Service Associate “with a dedication to excellence in customer service and a passion for fostering meaningful relationships,” says the firm’s statement.

With experience in the international insurance industry since 2016, she comes from Insigneo, where she held customer service roles between 2020 and 2024.

She holds a Bachelor’s degree in Fine Arts from the Art Institutes and an MBA in Strategic Business Management from ADEN Business School, with a specialization from George Washington University. Celeste has earned the SIE and Series 7 designations, “underscoring her commitment to professional growth and excellence,” adds the firm’s statement.

“Celeste assists clients by addressing their needs and inquiries regarding investment accounts with professionalism and efficiency. She also plays a key role in onboarding and managing client relationships, ensuring that every interaction is seamless and enriching. Her personal and detail-oriented approach sets her apart, allowing her to build trust and deliver personalized solutions,” the statement continues.

The advisor, originally from Venezuela, is an active member of the Body & Brain community and a certified sound healing practitioner in Miami.

Additionally, she volunteers in programs that promote balance and personal growth through body and mind practices. In her free time, she enjoys wellness activities that reflect her holistic approach to life and work, the statement concludes.

Capital Group Launches Its First Small and MidCap ETF in the U.S. Market

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Capital Group, one of the world’s largest asset managers, announced the launch of its first ETF designed to track U.S. small- and mid-cap stocks—a segment of the ETF market where new fund launches remain relatively rare, according to a Reuters report.

“The U.S. Small- and Mid-Cap ETF by Capital Group opens a new business opportunity. It was the last remaining product the company needed to launch to implement its own model portfolios before the end of the first quarter of 2025,” said Holly Framsted, Head of ETFs at the Los Angeles-based firm.

According to Capital Group data cited in the Reuters report and based on comments from Todd Sohn, ETF strategist at Strategas, of the more than $10 trillion in assets invested in U.S. ETFs, only about $440 billion is currently allocated to small-cap holdings.

“This remains a space within the ETF realm that is full of opportunities,” said Sohn.

Sohn explained that most investors gravitate toward active stock selection when choosing a small-cap fund. This is because indexes like the Russell 2000 include many unprofitable companies, making the index-linked funds less attractive.

However, it has only been five years since the U.S. Securities and Exchange Commission (SEC) opened the door to actively managed ETFs, and small-cap ETFs are still working to catch up.

Managing a small-cap equity ETF also presents unique challenges. Unlike mutual fund managers, no ETF can close its doors to new investors if managers believe the strategy cannot absorb additional capital.

Holly Framsted further explained that one reason Capital Group opted to combine small- and mid-cap stocks in the same ETF was to maximize the team’s ability to handle large inflows effectively.

From ‘Fee-Based’ Models to the Rise of Private Markets: The Future of Asset Management in Latin America and US Offshore

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Photo courtesyAitor Jauregui, Head of Latin America, BlackRock

Three trends have defined the past decade in the asset management industry*: large firms have grown even larger—with the top 20% managing 45.5% of total AUMs in 2023, up from 41% in 2013. Passive management is here to stay, representing 33.7% of assets under management compared to 14.3% in 2013. Finally, alternative assets, also known as private markets, now account for 10% of global AUMs.

Here are three additional data points for context: between 2013 and 2023, passive management AUMs grew at a compound annual growth rate (CAGR) of 14.7%, while alternative asset AUMs grew at 14%. Meanwhile, total AUMs grew by just 5.3% annually.

In 2009, BlackRock became the largest asset manager by AUM and has maintained that position for the past 14 years. The firm has adapted to industry changes, prioritizing passive management with iShares since acquiring the company in 2009 and launching alternative investments for the wealth segment in 2011. This commitment has only deepened in recent years.

What’s next? What is BlackRock doing to maintain its leadership? In an interview with Aitor Jauregui, BlackRock’s Head of Latin America, conducted from the firm’s Miami offices, we discuss the changing landscape of asset management, focusing specifically on how these shifts are impacting wealth management professionals in the markets he oversees: US Offshore and Latin America.

Changes in the Wealth Segment: The Shift to Fee-Based Models and the Rise of Model Portfolios

Aitor Jauregui highlights two key changes in the segment. The first is the rise of the fee-based model (where clients pay for advice rather than transactions) and the growing role of technology, which, he says, “go hand in hand.”

He backs this up with data: “In the US domestic market, the fee-based model accounts for 53% of managed assets; in Europe, it’s 42%. In Latin America, it’s just 20%, but this breaks down to 35% for US Offshore and only about 12% for Latin America.” For Jauregui, what’s important is that “in a business growing at double digits, the fee-based segment is also growing at double digits. In US Offshore, the fee-based market has grown from 20% to its current 35%, and much of this shift from brokerage to fee-based is explained by the growing role of model portfolios.”

Model Portfolios and Technology: A Symbiotic Relationship

The growth of model portfolios has been driven by technology over the past two years. BlackRock has positioned itself as a leading provider of these portfolios for RIAs and fintechs in the offshore and Latin American markets, outpacing competitors.

“In 2024, 25% of BlackRock’s ETF flows in the offshore market came from model portfolios. In 2021, a year of strong ETF growth, only 3% came from model portfolios. This speaks volumes about the increasing adoption of model portfolios in this market,” Jauregui explains.

While BlackRock’s initial success in model portfolios was primarily supported by its iShares ETFs, the firm is now working to incorporate technological solutions that include alternative assets. “Through our partnership with Partners Group, we are developing solutions—currently only available in the US domestic market—that allow model portfolios to combine public and private assets, including BlackRock products,” Jauregui notes. While these solutions aren’t yet available offshore, their existence underscores the feasibility of integrating private assets into model portfolios, provided infrastructure challenges—like automating rebalancing for semi-liquid private assets—are addressed. “Evergreen solutions are increasingly common among private credit funds, which is the type of alternative asset we see the most demand for from our wealth clients.”

BlackRock Embraces the Rise of Active ETFs

A direct result of technology’s growing role is the ability to segment wealth clients and serve individuals with much smaller investable assets. Advisors in the ‘mass affluent’ segment, catering to non-US residents with investable assets between $500,000 and $3 million, can now efficiently serve clients primarily through model portfolios.

“In this segment, we are witnessing the rise of active ETFs. These products offer the benefits of active management with specific tracking error objectives, packaged in an ETF that provides transparency, liquidity, and cost efficiency.”

Currently, iShares offers eight active ETFs in UCITS format, all launched last year. “By 2025, we plan to continue providing solutions to our clients through active ETF vehicles, including systematic strategies in ETF format. We also anticipate greater innovation in iBonds, defined-maturity bond ETFs,” Jauregui concludes regarding future launches.

Private Markets: Inorganic Growth for Long-Term Goals

The past year has been eventful for BlackRock’s alternative asset unit. In January, the firm announced the acquisition of GIP, integrated on October 1, to expand in the infrastructure segment—a sector that globally requires significant investment beyond what governments can finance, opening the door to private investors. “Infrastructure includes not just ports, airports, and roads but also everything related to digitalization and artificial intelligence,” Jauregui points out.

One concrete initiative is the GAIIP partnership between BlackRock, GIP, Microsoft, and MGX—an Emirati sovereign technology fund—to invest up to $100 billion in infrastructure supporting data centers and their associated alternative energy sources, driven by the growing demand for AI.

In 2024, BlackRock also announced the acquisition of Preqin, a market intelligence leader for alternative assets. “We firmly believe in the need to continue investing in data analytics to bring greater transparency to private markets,” says Jauregui. He explains that Preqin, along with eFront (acquired in 2019), complements Aladdin, BlackRock’s public markets risk management software, by providing a private markets risk management solution.

The firm’s latest acquisition in alternatives is the private credit platform HPS Investment Partners, announced in December. Closely tied to the need for new energy and infrastructure is the need for new financing sources for the future. “Direct lending strategies will become increasingly important; both our institutional and wealth clients express significant appetite for opportunities in infrastructure and private credit,” Jauregui adds.

*Data from ‘The world’s largest 500 asset managers’ Thinking Ahead Institute and Pensions & Investments joint study | October 2024.