Hamilton Lane conducted a survey of 232 professional investors worldwide, in which over 90% reported allocating their clients’ capital to private markets.
The study, accessed by Funds Society, adds that nearly all financial advisors (99%) plan to allocate part of their clients’ portfolios to this asset class this year.
Additionally, 52% reported planning to allocate more than 10% of their client’s portfolios to private markets, while 70% of advisors plan to increase their clients’ allocation to this asset class compared to 2023.
Advisors cited performance and diversification as the primary reasons for the increased interest in private markets.
Regarding their own knowledge of private markets, 97% of advisors claim to have advanced knowledge. However, the report notes that their clients may not be as well-informed.
“The survey revealed that advisors recognize their clients believe alternative assets can benefit their portfolios but are not sufficiently informed about this asset class,” explains the Hamilton Lane report.
For example, 50% of advisors rate their clients’ knowledge of private market investments as beginner or having little to no knowledge of the asset class and needing basic education, despite their high interest in the asset class.
Only 4% of advisors rated their clients’ knowledge of private markets as advanced, meaning they understand the asset class well and feel confident discussing details, trends, and products in private markets.
“The conclusion of this survey is that as interest in private markets grows, there is a clear need for more education,” says Steve Brennan, Head of Private Wealth Solutions at Hamilton Lane.
When advisors were asked what tools and information about private markets they would find useful in their practice, they cited education, thought leadership, and events as the top three ways to improve their clients’ knowledge of the asset class.
The online survey was conducted from November 27 to December 22, 2023. Among the 232 respondents from around the world were private wealth firms, RIAs, family offices, and other professional advisors from the U.S., Canada, Latin America, EMEA, and APAC.
To view the full report and its conclusions, click on the following link.
When talking about lithium, attention often goes to countries like Australia, Chile, Argentina, or China. However, a recent discovery brings prominence to Peru in this market, making it one of the main key players, according to an analysis by ActivTrades.
According to analyst Ion Jauregui, the discovery of an extensive lithium deposit by American Lithium Corp in 2018 at the Falchani project, in the Puno region, near the so-called Lithium Triangle (drawn between Chile, Argentina, and Bolivia) has “significant” implications for Peru.
“The findings from November 2023 revealed that lithium resources are four times greater than initially estimated, an increase of 476% since 2019. Falchani is now among the world’s leading large-scale hard rock lithium projects and also includes uranium deposits discovered by Macusani Yellowcake, a subsidiary of Canadian Plateau Energy,” explains the analyst.
The development of this project requires an investment of nearly $800 million and has garnered international attention, representing a “transformative milestone for the Peruvian economy,” comments Jauregui.
The discovery, first observed near the border with Bolivia, 150 kilometers from Lake Titicaca, promises economic benefits for the Andean country, such as job creation in mining and infrastructure development. This, according to ActivTrade, can stimulate economic growth and diversification.
“The government could obtain significant revenues from mining royalties and taxes, which would improve public services and infrastructure,” writes Jauregui, adding that companies like Tesla could secure agreements to guarantee a steady supply of lithium for battery production.
Additionally, the uranium found could be vital for local energy production.
“On the international front, Peru will enhance its economic relations and strengthen ties with other lithium-rich Latin American countries, leading to strategic collaborations and reinforcing the region’s influence in the lithium market,” notes the analyst.
Political Factors
However, amid the enthusiasm, ActivTrades calls for consideration of the political variables at play.
While they expect that global demand for electric vehicles and renewable energy storage will drive the lithium market, which is set to grow in the long term, investors must be aware of the country and region’s developments.
“Investors should be aware of risks such as political instability and regulatory changes in Peru and South America,” warns Jauregui.
Additionally, in a context of global competition for resources—especially between heavyweights China and the United States—there is an additional layer of complexity to the matter.
iCapital announced the successful launch of the first fund leveraging emerging distributed ledger technology (DLT) from iCapital. The fund is distributed by UBS Wealth Management, marking a significant technological advancement to increase scale and real-time connectivity across the alternative investment experience.
This launch delivers on iCapital’s commitment to technology that creates unmatched operational efficiency and convenience for more than 100,000 U.S. financial advisors, the release said.
iCapital’s DLT is designed to simplify and improve the lifecycle management of alternative investments. It aims to foster a safer and more efficient alternative investment management environment, connecting key financial players and enabling seamless data sharing and transaction processing.
This accounting technology is expected to eliminate more than 100,000 activity reconciliations over the average life of a private equity fund, improving visibility and efficiency of data processing, reducing errors, and improving overall investment management.
As a result, iCapital’s DLT is expected to not only save customers thousands of hours of manual data reconciliation and version sharing, but also generate significant cost savings and productivity gains, in addition to reducing the risks associated with manual data entry.
“Distributed ledger technology represents an important milestone for iCapital innovation. Our technological commitment and experience position us to lead this advancement in support of our clients’ investment lifecycle activities. We are dedicated to optimizing the entire alternative investment experience, enabling fund managers and wealth advisors to operate with efficiency, precision and ease,” said Lawrence Calcano, President and CEO of iCapital.
“We are excited to collaborate with UBS as our distribution partner for the historic launch of the first fund using iCapital’s Distributed Ledger technology. Additionally, we hope to launch more funds with other partners in the coming months,” added Calcano.
The first fund is distributed by UBS Wealth Management and managed by Gen II. All lifecycle activities, including subscriptions, capital activities, reporting and fund liquidity, will be organized through iCapital DLT, which automates data and document connectivity between companies and minimizes manual reconciliation of data.
“This is an important step towards creating greater efficiency and improving the quality of fund data,” said Jerry Pascucci, co-head of Global Alternative Investment Solutions at UBS Global Wealth Management. “We continually strive to make it easier for our financial advisors to manage and track their clients’ alternative investment holdings.”
Cryptocurrency exchange-traded products (ETPs) have recently garnered significant attention and popularity as investors seek exposure to the growing world of digital assets. These innovative investment vehicles provide a more efficient way for retail and institutional investors to gain exposure to cryptocurrencies without the complexities of directly owning and managing digital wallets, highlights an analysis by the fund manager FlexFunds.
What is Cryptocurrency ETP?
Cryptocurrency ETPs are investment products that track the performance of one or more digital currencies. There are several types of cryptocurrencies ETPs available in the market:
Exchange-Traded Funds (ETFs)
Exchange-Traded Notes (ETNs)
Exchange-Traded Certificates (ETCs)
Each type has its unique structure and characteristics, offering different levels of exposure to the underlying digital assets.
According to the specialized consultancy firm, ETFGI, assets invested in the global ETF industry reached a record $12.71 trillion at the end of the first quarter of 2024, up 9.2% from the end of 2023, when the figure was $11.63 trillion, as shown in the following graph:
Furthermore, when examining exchange-traded products (ETPs) with digital assets as underlying collateral, Fineqia International revealed that assets under management (AUM) at the end of March 2024 reached $94.4 billion, reflecting a cumulative increase of 91% in 2024 compared to the beginning of the year when AUM was $49.5 billion.
From this, it can be inferred that cryptocurrency ETPs show an upward trend as an alternative form of participation in the digital assets market. Asset managers or investors interested in exploring the cryptocurrency market have three main ways to gain market exposure, summarized in the following table:
Cryptocurrency ETPs allow portfolio managers and investors to access the volatility and growth potential of cryptocurrencies without having to subscribe directly to one or more specific currency. One possible way to structure such digital asset ETPs is by the means of asset securitization programs like those offered by FlexFunds. As a leading company in designing investment vehicles, FlexFunds allows for the securitization of any underlying exchange-traded fund in less than half the time and cost of any other alternative in the market, facilitating distribution to global private banking channels and access to international investors.
Here are the advantages and risks that asset managers should consider when opting for a cryptocurrency ETP:
Main Advantages:
Diversification: Cryptocurrency ETPs allow portfolio diversification by gaining exposure to a wide range of digital assets, reducing the concentration risk associated with investing in a single cryptocurrency.
Accessibility: ETPs provide a nimble and effective investment vehicle that can be easily listed on secondary markets.
Liquidity: Unlike direct ownership of digital currencies, ETPs offer liquidity through their listing on regulated exchanges, allowing for buying or selling holdings at market prices during trading hours.
Exposure to different investment strategies: ETPs can replicate the performance of specific cryptocurrencies, while others may focus on specific sectors or themes within the cryptocurrency market. This allows asset managers to tailor their portfolios based on their preferences and market outlook.
Regulatory oversight: Cryptocurrency ETPs are subject to regulatory oversight, which raises compliance standards, offering investors a higher level of protection and transparency compared to other existing alternatives for participating in this type of asset.
Risks and Considerations:
Volatility: The cryptocurrency market is known for its high volatility, and ETPs tracking digital assets are not immune to this, as they reflect the value of the underlying assets.
Regulatory uncertainty: The regulatory landscape surrounding cryptocurrencies is evolving, and changes in regulations can affect the viability and availability of cryptocurrency ETPs.
Tracking error: ETPs aim to replicate the performance of their underlying digital assets, but tracking errors can occur due to various factors such as fees, market conditions, and rebalancing.
Lack of investor protection: Unlike traditional financial markets, cryptocurrency ETPs may not offer the same level of investor protection.
Technological risks: Cryptocurrencies depend on blockchain technology, which is still relatively new and evolving.
Tax implications: The tax treatment of cryptocurrency ETPs can vary depending on the jurisdiction.
The emergence of cryptocurrencies and the subsequent development of exchange-traded products (ETPs) for digital assets have opened a new realm of possibilities for asset managers, investors, companies, and the global financial landscape as a whole. An increasing number of investors are eager to delve into these types of digital assets, especially during bullish periods. This implies that asset and portfolio managers must find ways to offer their clients a means of participating in this market with minimal exposure to inherent risks and volatilities.
An example of utilizing a vehicle that securitizes digital asset ETFs is the recent issuance by FlexFunds for Compass Group, one of the leading independent investment advisors in Latin America. FlexFunds structured its first investment vehicle backed by cryptocurrency ETFs, securitizing assets with a nominal value of $10 million, making it easier and less risky for Compass Group clients to participate in such assets.
If you wish to explore the advantages of digital asset securitization, feel free to contact the experts at FlexFunds at info@flexfunds.com
The Spanish press has described a “revolution” at Banco Santander this Wednesday. In any case, what the entity has announced constitutes a full-scale restructuring, with the merger of the Investment Platforms & Corporate Investments unit and the global Wealth Management & Insurance business.
Leading this new sector is one of Santander’s strongmen, Javier García Carranza, who is now responsible for Asset Management, Private Banking, and Insurance.
According to an internal memo accessed by the Spanish press, García Carranza replaces Víctor Matarranz, who previously led Wealth Management. From now on, Matarranz will work directly with the group’s CEO, Héctor Grisi, to “support him in executing the strategy,” according to the internal memo.
According to public figures, the Wealth Management & Insurance unit manages assets worth €482 billion ($523 billion). In the first quarter, the unit’s net profit rose by 27% year-on-year, representing around 13% of Santander group’s profits.
With this change, the group’s global areas are reduced to five (Retail & Commercial, Digital Consumer Bank, Payments, Corporate & Investment Banking, and Wealth Management & Insurance) at the expense of the division into geographical markets. The changes were announced at the end of 2023 and aim to simplify the entity’s offerings.
The outcome of a portfolio is the result of many different aspects, such as commissions, time horizon, asset classes held, among others, and how they align to increase the value of an investment. One of the main determinants of the performance is the strategy that composes the holdings, which is molded by each portfolio manager’s risk appetite, that depending on the capital, goals, and approach, will range from conservative to aggressive, highlights an analysis by the fund manager FlexFunds.
Tracking a portfolio’s performance is a critical and reassuring component of the investment process, enabling investors and asset managers to gauge the efficacy of their strategies.
Typically, conservative portfolio approaches use a 60/40 strategy, which consists of assigning 60% of the value of the total allocations in equities and the remaining 40% in fixed income; the 60/40 model aims to harness the long-term growth potential of stocks while seeking stability via debt instruments. As reported by the 1st Annual Report of the Asset Securitization Sector, gathering the input of 80+ asset management companies from more than 15 countries, more than half of the professionals interviewed believe that the 60/40 model will remain relevant. To implement this strategy, investors must buy many different securities (distributed in stocks and bonds) to have a diversified holding base. Nowadays, there is a comprehensive inventory of available securities that are integrated by different asset classes within a single instrument. An example of such securities can be a structured note.
What is a structured note? It is a hybrid financial product that combines features of different vehicles in the form of a debt obligation, and its performance is tied to the returns of these underlying.
Using flexible products that repackage different assets in a single security offers a significant advantage by accomplishing the desired weighting distribution without the need for multiple subscriptions, which ends up decreasing the total account value due to fees and commissions. For instance, FlexFunds’ FlexPortfolio allows structuring actively managed notes with no limitations on rebalancing or allocation. Since the securities that compose this product are not fixed or embedded, its composition can be adjusted by the manager depending on the prevailing market conditions and clients’ (investors) best interests, all these while being able to supervise the portfolio performance given that the notes have a NAV that is frequently distributed.
Despite the objective and weighting that each underlying (whether equity or debt) may have in a portfolio, there are a variety of ways in which a note can be designed, meaning that any financial goal can be pursued; it is up to the investor to decide what focus aligns the most with its desired outcome. The most common arrangements are the following:
Offer upside and growth potential.
Offer downside protection (hedging).
Offer an illiquid asset in the form of a marketable vehicle.
Offer periodic payments/disbursements in the form of coupons.
Structured investment targets and how they can make a portfolio more conservative/aggressive:
The preceding graph visually demonstrates how the constitution of a structured security can influence the overall risk-return relationship of an investment allocation, given the nature of its underlying. Equity-like instruments tend to augment portfolio volatility while potentially offering superior returns. Conversely, instruments exhibiting bond-like characteristics can introduce an element of price stability to the allocation.
Every investment process has an expected return for a certain level of risk; considering that we are assessing some of the structured notes’ pros and cons and the impact these may have on a portfolio’s outcome, let’s delve into some of the potential structured notes’ risks.
Limited Liquidity
They may have limited liquidity, making it challenging for investors to sell their notes before the maturity date due to a lack of a secondary market. There may or may not be buyers for the note, and investors may be forced to sell the securities at a discount on what they are worth.
Market Risk
While some offer protection against losses, this safety net has its limits. When the underlying experiences high volatility due to market fluctuations, investors can still experience losses. Linking the note to more speculative positions increase the market risk significantly.
Default
Structured notes can possess a heightened credit exposure compared to alternative options. If the issuer of the note files for bankruptcy, the entire investment could be rendered worthless, regardless of the returns produced by the underlying asset.
Although achieving complete mitigation of all potential structured notes risks, or any other risks associated with individual positions or financial instruments, may be challenging, mitigating at least one may provide an edge in the market.
Empower your distribution and reach with innovative yet proven solutions. FlexFunds, a recognized fintech leader in the securitization industry, offers a program of global notes that can help you expand your client base while issuing a flexible investment strategy. Explore which of FlexFunds’ tailored solutions better adapt to your specific needs. Contact us today to schedule a meeting at info@flexfunds.com
Inauguration of Insigneo's Houston office | LinkedIn account of María Elena Orantes, Consul General of Mexico.
Insigneo was opened its flagship office in Houston, Texas. This occasion marks a significant milestone for Insigneo as it materializes its presence in Texas, the firm said in a press release.
The inaugural event served as both the opening of Insigneo‘s new office and the 2024 Q2 Quarterly Call. This dual-purpose gathering brought together clients, leadership team, and peers, providing an opportunity to explore the new office environment and gain valuable insights directly from Insigneo’s CIO, Ahmed Riesgo.
The event, which commenced on April 10th, has the speeches from Raul Henriquez, Chairman and CEO of Insigneo Financial Group, and Maria Elena Orantes Lopez, Consul General of Mexico.
This expansion underscores Insigneo‘s dedication to extending its services to the Mexican clientele and broadening its geographic footprint across Texas. Following the acquisition by PNC, Insigneo has strategically expanded its presence, with additional locations in San Antonio, El Paso, Laredo, and San Diego.
“This moment marks a significant milestone in our journey as an investment firm, expanding our reach and commitment to serving our clients with excellence and dedication.” said Maria G. Hernandez, Insigneo Market HeadTexas/US SW. “As we embark on this new chapter, we are grateful for the opportunity to further strengthen our presence in this vibrant city and contribute to its thriving financial landscape. With the support of our talented team and the trust of our clients, we look forward to achieving even greater success together.”
This expansion underscores Insigneo’s commitment to international wealth management, driven by state-of-the-art technology and continuous innovation, the statement concludes.
International advisor Ricardo Sucre is the latest recruit by Bolton Global Capital to exit Morgan Stanley.
With a career spanning more than three decades, managing ultra-high net worth individuals from Latin America, Sucre has developed and maintained relationships with international clients, resulting in a $200 million AUM business portfolio, Bolton said in a press release.
Prior to joining Morgan Stanley in 2014, Sucre held senior positions at Mercantil Commercebank in the areas of private banking, treasury sales management, and investment services. Notably, as a Senior Financial Consultant, he managed portfolios for ultra-high net worth clients executing trades across emerging markets, domestic corporate debt, and US government securities, the firm added.
At Bolton, Sucre will be joining forces with Ernesto Amengual, Leonardo Tedeschi and Jorge Aguerrevere. He will be based out of Bolton’s Miami office at the Four Seasons Tower on Brickell Avenue.
“As a consummate professional, Ricardo will undoubtedly continue along the same the path of success with the support of Bolton’s robust international wealth management capabilities. We are delighted that he is joining our firm.” said Bolton’s CEO Ray Grenier.
He has a Bachelor of Arts in Business Administration and a Major in Finance from Universidad Santa Maria in Venezuela.
The US ISM services index shows that business activity and new orders are performing well, but companies are increasingly focused on trimming their workforce. The employment component of the index has dropped into contraction territory, indicating a potential risk of job losses in the coming months.
However, with inflation pressures looking less worrying, the Federal Reserve should have the flexibility to respond, said James Knightley, Chief International Economist, ING Bank in a new report for ING Bank.
The ISM services index for February came in at 52.6, below the consensus forecast of 53.0. However, business activity and new orders improved to 57.2 and 56.1, respectively, indicating expansion in these areas. Employment, on the other hand, dropped to 48.0, the second sub-50 print in the past three months, and the six-month moving average is also below the 50 line.
The relationship between the ISM services employment index and the monthly change in nonfarm payrolls has historically been strong, but in 2023 and into 2024, they have had an inverse relationship. With job loss announcements seemingly picking up and the quit rate falling, it does appear that the jobs market is cooling.
Prices paid fell back in the report, which is a positive sign given the recent strength in core inflation readings. The ISM indices and GDP growth, indicating that the economy may not be as robust as GDP alone suggests. Nonetheless, there is little sign of employers taking an axe to jobs, and the Federal Reserve should have the flexibility to respond to any potential job losses.
The full report can be found on the ING Group site.
Pixabay CC0 Public DomainAuthor: Alessandro D'Andrea from Pixabay
U.S. equities maintained their upward trajectory in February as the S&P 500 breached 5,000 for the first time. Building upon January’s momentum, the S&P 500 delivered its best two-month performance to start a year since 2019.
Playing a pivotal role in this sustained performance were several of the mega-cap tech companies often referred to as the “Magnificent 7”, notably Nvidia (NVDA), Amazon (AMZN), and Meta (META). Their earnings were bolstered by tailwinds in artificial intelligence, accelerated growth trajectories, and strategic initiatives aimed at enhancing shareholder value.
While the Federal Reserve is unlikely to raise rates further, the timing and pace of potential rate cuts remain uncertain. Federal Reserve Governor Christopher Waller stated that he would require “at least another couple of months” of data to determine if inflation has sufficiently moderated to justify interest rate reductions. The Fed will persist in monitoring incoming data and progress towards achieving their 2% inflation target. Despite investor eagerness for imminent interest rate cuts, initiating them prematurely could potentially lead to a resurgence of inflation.
The Russell 2000 outperformed the S&P 500 in February, but remains below its all-time high set in November 2021. We anticipate a favorable environment for smaller companies in 2024 as post-peak rates and necessary consolidation in certain industries like media, energy and banking should lead to a more robust year. M&A activity began the year strong, setting the stage for catalysts to emerge within our portfolio of companies.
Merger arbitrage performance in February was bolstered by deals that made significant progress towards completion. Immunogen, a biotechnology company developing targeted therapies to treat cancer, was acquired by Abbvie in February for $31.26 cash per share, or about $9 billion. Shares of Immunogen traded at a 6% discount to deal terms days before the deal closed, reflecting the uncertainty over whether the US FTC would launch a phase 2 antitrust investigation, but the FTC approved the deal and it subsequently closed on February 13.
Deal activity was vibrant in February, giving investors many new opportunities to deploy capital including: Masonite’s $4 billion deal to be acquired by Owens Corning, Catalent’s $16 billion deal to be acquired by Novo Holdings, Cymabay Therapeutics’ $4 billion deal to be acquired by Gilead, and Everbridge’s $2 billion deal to be acquired by Thoma Bravo. Deal activity in 2024 has improved compared to 2023, and attractive spreads on deals have created additional opportunities to generate absolute returns.
February was a relatively good month for the convertibles market. With a few notable exceptions, many companies reported earnings and issued guidance that was better than anticipated moving underlying equities higher. Additionally, there has been a bid for convertibles that will need to be refinanced in the coming year. In some cases, this has been from the issuer themselves, but we have also seen a number trade higher in anticipation of a refinancing round. Issuance has picked up substantially with many companies coming back to our market to refinance these upcoming maturities. This new paper has largely been attractive, offering higher coupons and a greater level of equity sensitivity.
Opinion article by Michael Gabelli, managing director at Gabelli & Partners
