Global Financial Companies Want to Invest in Latam, but the Market Structure Doesn’t Support It

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The 84% of the global financial companies surveyed for a Nasdaq report plan to increase their investment exposure to Latin America over the next 12 to 24 months. Despite this strong intention, 59% of respondents cite market structure issues as a significant barrier.

Fragmentation, processing errors, and the lack of standardization are key obstacles that must be addressed to unlock these investment flows, according to the Nasdaq report conducted in collaboration with The Value Exchange.

The information comes from interviews with about 100 companies: 52% wealth management investors, 18% institutional investors, 16% brokers, and 14% custodian banks.

70% of the respondents identified the high cost of regional variation in processes and platforms as a significant blocker. This variation creates high operational costs and risks, particularly for institutional investors who need to maintain different operational models for each market.

61% of respondents experience high levels of failed loans/recalls, and 67% face settlement failures due to low straight-through processing (STP) rates. The lack of STP automation is a critical issue, particularly for wealth investors, who report STP rates below 55% in all Latin American markets.

Managing the complexity of Latin American markets requires significant resources, equivalent to about three times the full-time staff for wealth investors and even more for institutional investors. This complexity results in high fixed costs and limits economies of scale, making it difficult for smaller companies to operate efficiently.

Respondents expect significant savings with the harmonization of processes and messaging standards across all markets, with potential improvements in profits and losses of up to 21% in areas such as collateral movements and corporate actions. There is a clear demand for standardization and regionalization to reduce costs and improve efficiency.

Renewable Energies in Private Markets: Climate and Financial Gains

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To examine the perception of a trade-off between climate impact and returns in renewable energy investments, MSCI has analyzed the returns of private investments in the renewable electricity subindustry (renewables) compared to those in the drilling, exploration, production, and integration of oil and gas subindustries (oil and gas).

Although the two subindustry groups may differ in their operations, business models, and supply chains, a comparative analysis can provide insight into the investment appetite and relative robustness of the exit markets in both spaces.

In recent years, private fund exits from renewable energy investments have generated higher aggregated investment multiples (gross of fees) compared to exits in oil and gas. Looking at investment multiples, which compare total investments and total revenue at the ownership level, renewable exits surpassed those of oil and gas in each year from 2016 to 2023, up until the fourth quarter of 2023.

To incorporate the role of cash flow timing in returns, we analyzed the internal rate of return (IRR) (gross of fees) for both subindustry groups. Our findings suggest that the median IRRs for exits in renewables and oil and gas were largely aligned with the investment multiple results, further reinforcing the outstanding performance, up until the fourth quarter of 2023.

Therefore, the perception of a potential trade-off between climate impact and performance may not reflect the financial returns of renewable investment exits since 2016, making these assets more relevant to a broader range of energy investors, regardless of their climate focus. In MSCI‘s blog analysis from the third quarter of 2023, the relatively strong exit market for renewables in recent years was associated with an increase in net capital flows, providing the industry with the necessary capital to achieve the net-zero emissions goal.

Structured Capital I: The Controversial Fund that Complicates LarrainVial in Chile

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Structured Capital LarrainVial Chile controversy

This month marks one year since Chile witnessed the simultaneous eruption of a financial scandal involving false invoices, the brokerage firm STF Capital, and the factoring company Factop, along with a major corruption case known as the “Audio Case,” centered around the network surrounding lawyer Luis Hermosilla. The repercussions of these events remain significant in Santiago’s financial arena.

One of the reverberations involves LarrainVial Activos AGF—a management firm specializing in alternative assets and part of the LarrainVial financial group—which became embroiled in controversy due to a fund it launched in late 2022, named Capital Estructurado I. This fund led to charges by the local regulator and a lawsuit for alleged disloyal management.

Currently, the firm is undergoing a sanctioning process led by the Investigation Unit of Chile’s Financial Market Commission (CMF). The CMF has brought charges against LarrainVial Activos AGF, its directors—Andrea Larraín, Sebastián Cereceda, José Correa, Jaime Olivera, and Andrés Bulnes—and its managing partner, Claudio Yañez.

Charges were also brought against STF Capital Corredores de Bolsa—already fined last year by the CMF—and its CEO, Luis Flores, as well as Álvaro Jalaff Sanz, Antonio Jalaff Sanz, and Cristián Menichetti Pilasi.

While the details of the charges remain confidential, the CMF questioned aspects of how the investment vehicle was managed and structured. The charges focus on the structuring, marketing, and valuation of Capital Estructurado I.

Background of the Fund

Capital Estructurado I was created to pay Antonio Jalaff’s debts and convert them into an indirect stake in the renowned real estate holding Grupo Patio. Launched in late 2022 and operational from January 2023, the fund aimed to finance Jalaff’s debts through Inversiones San Antonio, totaling approximately 25 billion pesos (about $26 million). In exchange, the fund would acquire a 3.87% indirect stake in Grupo Patio SpA.

Issues with Fund Structuring

The fund offered two series of shares: Series A, for creditors of San Antonio, allowing them to exchange their debts for the possibility of becoming indirect shareholders of Patio, and Series B, for non-creditor investors brought in by STF Capital on behalf of clients. This structuring led to complaints against the manager and broker, accusing them of acting to the detriment of end clients.

The fund’s purpose, as outlined by the manager, was to “invest directly or indirectly in instruments representing (i) equity of Inversiones Santa Teresita SpA and the Fondo de Inversión Privado 180 or (ii) debt or equity of entities or funds with direct or indirect participation in the vehicles.”

Legal and Financial Repercussions

In addition to regulatory scrutiny, the situation prompted a lawsuit from 23 investors accusing LarrainVial Activos AGF of disloyal management, alleging the firm knew of Jalaff’s precarious financial situation when marketing the fund. The process is ongoing.

The case also attracted attention from the Risk Rating Commission (CCR), which mentioned the CMF’s proceedings against LarrainVial Activos in its October report. The CCR maintained approval for AFPs (pension funds) to invest in three other LarrainVial funds while the situation remains under review.

The value of fund units has sharply declined, plummeting from 27,577.5 pesos ($28.3) in November 2023 to 4,538.8 pesos ($4.7) by September 2024—a drop of 83% in one year.

Statements from LarrainVial Activos AGF

The firm expressed “confidence in the process,” emphasizing its adherence to high standards in fund creation and management. It reiterated its commitment to acting transparently and in compliance with regulations, highlighting that all investors were thoroughly informed about the fund’s characteristics, risks, and terms. The firm continues to evaluate actions to safeguard the vehicle’s assets and its investors’ interests.

Challenges Facing STF Capital

STF Capital Corredores de Bolsa faces a more precarious situation. In March 2023, the CMF suspended its operations due to financial reporting and capital requirement violations. By August, the regulator imposed a fine of 13,500 UF (approximately $382,610) and canceled its registrations, critical for operating in Chile’s financial market.

Regarding Capital Estructurado I, STF Capital is accused of prioritizing its claims and benefiting at the expense of other parties. The firm insists it is preparing evidence to refute the charges. However, financial difficulties have led its CEO, Luis Flores, to proceed without legal representation.

In October 2024, the Court of Appeals upheld fines against the brokerage and its executives. The CMF fined Flores 10,800 UF ($306,090) and imposed penalties of 9,000 UF ($255,070) each on Ariel and Daniel Sauer, owners of the controversial factoring company Factop.

The Factop Connection

Factop is implicated in a network of corruption and fraud involving thousands of false invoices. STF Capital maintains that its minority shareholders, Flores and Sebastián Somerville, have acted independently of Factop’s controlling shareholders, Ariel and Daniel Sauer, since March 2023. The firm is pursuing appeals, including at the Supreme Court, to separate itself from allegations tied to its controlling partners.

Flores, seeking leniency through a whistleblower program, claims the penalties imposed on STF Capital and himself far exceed those levied on the Sauer brothers, calling this disparity unjust.

Ongoing Investigations

The complex situation intertwines with other cases, including Factop’s alleged corruption and fraud network and the Jalaff brothers’ suspected involvement in false invoice schemes. The matter continues to unfold across multiple legal and regulatory fronts.

Jupiter AM Hires the European Equities Team from GAM Investments

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Jupiter AM hires GAM European equities team

Jupiter Asset Management (Jupiter) has announced the appointment of Niall Gallagher, Chris Sellers, and Chris Legg, who until now comprised the European equities team at GAM Investments. According to the asset manager, this hire is part of a restructuring of its investment expertise in this key area for the firm.

The three managers have worked together for several years, leading and managing GAM’s successful and established European equities franchise. The team is expected to join Jupiter by the summer of 2025. Currently, the European Equities Team manages approximately £1.4 billion in European equities strategies, serving both institutional and retail clients.

“As one of the leading European equities teams in the industry, they have a strong investment track record, delivering top-quartile returns across nearly all time periods. Notably, they have also been successful in attracting assets, achieving net positive flows in their strategies over the past five years, despite the European equities sector recording cumulative net outflows of over £100 billion during the same period,” Jupiter highlighted.

This announcement aligns with Jupiter’s strategy of attracting top-tier investment talent to deliver superior results for clients and an exemplary experience. “In the absence of any further commitment to GAM regarding the potential transfer of funds currently managed by the European Equities Team, our expectation is that, following an orderly transition, the team will take over the management of Jupiter’s existing range of European equity funds by the summer of 2025. Any transition of investment management responsibilities will be seamless and conducted in the best interests of clients,” stated the asset manager.

Following the announcement, Kiran Nandra, Head of Equities at Jupiter Asset Management, remarked: “As we realign our investment expertise within the core area of European equities, we are excited about the addition of Niall, Chris, and Chris to Jupiter. We believe their strong investment track record and institutional approach will enhance outcomes for a broader range of clients.”

For his part, Niall Gallagher, Lead Investment Manager, added: “We are thrilled to join Jupiter, where the focus on active investment management, combined with a client-centric philosophy, is fully aligned with our vision. We look forward to working with our new colleagues to expand our client base over time.”

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

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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.

BB Asset Launches ETF Linked to the Ibovespa B3 BR+

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BB Asset ETF Ibovespa B3

BB Asset, the largest investment fund manager in Brazil, announced on Monday (27) the launch of the BB ETF Ibovespa B3 BR+ Index Fund (ticker: BRAZ11), its latest product in the ETF market.

The announcement was made this Wednesday (27) during the traditional bell-ringing ceremony at B3, the Brazilian stock exchange, marking the launch of the manager’s tenth ETF and the second one this year.

Designed to replicate the performance of the newly created Ibovespa B3 BR+ index, BRAZ11 offers an expanded investment strategy.

The index combines the portfolio of the traditional Ibovespa and adds the Brazilian Depositary Receipts (BDRs) of five Brazilian companies listed on U.S. stock exchanges and traded on B3: Nubank, Stone, XP Investimentos, PagSeguro, and Inter.

Transparency and Accessibility

According to Mário Perrone, Commercial and Product Director at BB Asset, the growth of the ETF market reflects the demand for transparent and accessible solutions.

“Fostering the ETF market in Brazil is a strategic goal for BB Asset, as we believe this market will become the natural choice for investors in the future. The launch of the BB ETF Ibovespa B3 BR+, the tenth ETF in our portfolio of exchange-listed funds, underscores our commitment to providing simplified and accessible investment solutions,” Perrone said.

The fund has a management fee of 0.10% per year and D+2 liquidity, allowing investors to buy and sell shares quickly through any brokerage. The initial investment to participate in the ETF is set at R$100.00, making it more accessible to a broader range of investors.

About the Ibovespa B3 BR+

The Ibovespa B3 BR+ index was developed to provide a more comprehensive indicator of the performance of the Brazilian stock market. It includes highly tradable and representative assets on the stock exchange, such as shares, units, and BDRs.

“Products derived from the index offer a broader view of the companies driving the national economy, enabling new diversification strategies for investors,” explained Ricardo Cavalheiro, Superintendent of Indices at B3.

Another Innovation in BB Asset’s Portfolio

With the launch of BRAZ11, BB Asset strengthens its position as a leading player in the development of the ETF market in Brazil. The manager, which already boasts a diverse range of exchange-traded funds, continues to invest in products that align with global trends and democratize access to diversified investments.

The new ETF consolidates the company’s commitment to offering modern solutions aligned with market demands, promoting more inclusive and attractive strategies for investors of all profiles.

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.

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.