New Interest Rate Environment, Capital Preservation, and Meeting Family Expectations: The Three Priorities of Family Offices

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Following the stock market rally in 2023, family offices are shifting their portfolios, reducing cash holdings, and positioning in risk assets with the expectation of gains in the coming year, according to Citi Private Banking’s report, *Global Family Offices 2024. Survey Insights*.

“We are delighted to share the results of this year’s survey, which offers an inside look at the investments and priorities of some of the most diverse and sophisticated family offices in the world. Over the last two years, we have seen the number of participants grow from 126 to 338 globally, highlighting the increasing need for unique perspectives on the main challenges and opportunities family offices face today. The broad-ranging questions cover the most current global topics, revealing significant shifts in concerns and interests. We look forward to continuing our close collaboration with family offices to provide access to all areas of Citi that support the ambitious goals and needs of the world’s most global and sophisticated investors,” said Hannes Hofmann, Head of Citi Private Bank’s Global Family Office Group.

**Top Concerns for Family Offices**

The survey results show that the preservation of asset value is the top concern for families, followed closely by preparing the next generation to be responsible stewards of their wealth.

Citi highlights that this underscores the dual priorities of family leaders: preparing wealth for their families and preparing family members to manage that wealth. Furthermore, the adoption of formal governance systems is uneven among family offices. While over two-thirds have governance systems for investment functions, less than half rely on formal governance for other family office and family-related matters.

“While family offices are inherently unique, our survey demonstrates that there are many similarities in their concerns and behaviors. Findings like these reveal the new ways they are managing their wealth, diversifying portfolios, and implementing sophisticated investment approaches while preparing families to achieve both financial and familial well-being,” emphasized Alexandre Monnier, Head of Family Office Advisory for Citi Private Bank’s Global Family Office Group.

Key Findings

Amid ongoing market volatility and geopolitical challenges, the report highlights key challenges and areas of potential opportunity for the year ahead. Among the most notable conclusions of this year’s edition is that asset preservation and preparing the next generation for future responsibilities are top concerns for families. Respondents also noted that meeting family members’ expectations is their biggest challenge.

The report reflects how family office portfolios are shifting and what concerns investors have. “Family offices are moving cash into significant portfolio changes, shifting from liquid resources to fixed income and both public and private equity,” the report concludes.

Additionally, there has been an increase in exposure to artificial intelligence, which “likely contributed to the strong returns last year.” However, the report notes that the adoption of AI technology in family office operations remains slow.

A notable finding is the continued optimism about portfolio performance over the next 12 months, with 97% of respondents expecting positive returns. However, the report shows that the future of interest rates is the primary concern, followed by geopolitical issues such as U.S.-China relations and the conflict in the Middle East.

Regarding the family office business itself, the report confirms that investment approaches are becoming more sophisticated. Sixty percent of family offices now have investment teams led by a CIO, investment committees, and formal investment policy statements, with a strong commitment to alternative asset classes.

“As they professionalize, family offices are increasingly collaborating with external partners. Investment management (54%) and reporting (62%) are the only two services most family offices manage internally; all other services are either outsourced or handled jointly,” the report points out.

The report also revealed changes in portfolio allocations. Equities and fixed income saw an increase in their weightings, rising from 22% to 28% and from 16% to 18%, respectively. Private equity declined from 22% to 17%, potentially due to delayed revaluations compared to public equities. North America received the highest allocations (60%), followed by Europe (16%) and Asia-Pacific excluding China (12%). Allocations to China nearly halved, dropping from 8% to 5%, due to economic challenges and market uncertainty in the country. The share of North American allocations increased from 57%, driven by a strong equities market.

Expert Analysis

For Citi, it is notable that for the first time since 2021, inflation is no longer the top short-term economic concern for respondents. Instead, interest rate expectations became the top priority for more than half of respondents, followed by U.S.-China relations and market overvaluation. Concerns about the Middle East conflict are now more prominent than those regarding the war between Russia and Ukraine.

Looking ahead, sentiment towards asset classes was more positive compared to last year’s survey, with increased confidence in direct private equity, private equity through funds, and global developed market equities.

Compared to the 2023 report, positivity towards developed global investment-grade fixed income dropped from 45% to 34%, reflecting an increased appetite for risk. Regarding portfolio returns, nearly all respondents (97%) expected positive returns, with almost half anticipating returns above 10%.

“Our family office clients are becoming increasingly global as they seek to create and preserve wealth amid new challenges and opportunities in the markets. As interest rates evolve and geopolitical challenges persist, investors and their families are mobilizing their cash and shifting their portfolios towards public and private equity. Family offices are focused on the future as they navigate evolving markets around the world,” concluded Ida Liu, Head of Citi Private Bank.

The survey was launched during Citi Private Bank’s 9th Annual Family Office Leadership Program in June 2024 and later distributed to Citi’s global family office clients. With 50 questions aimed at capturing investment sentiment, portfolio positioning, family governance, and best practices, the survey received responses from 338 participants, which were included in the report.

The Assets Of The Largest Pension Funds Reached 22.6 Trillion Dollars In 2023

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The 300 largest pension funds in the world returned to growth in 2023, leaving much of the previous year’s decline behind. However, the assets of the largest pension funds have not yet returned to their historic peaks, according to the Global Top 300 Pension Funds report, prepared by the Thinking Ahead Institute of WTW in collaboration with *Pensions & Investments*, a leading U.S. publication on investments.

In 2023, the assets of the top 300 pension funds increased by 10%, reaching $22.6 trillion, compared to $20.6 trillion in AUM at the end of 2022. This recovery comes after a 13% drop in assets in 2022, as markets stabilized following the high level of global economic uncertainty from the previous year. According to the report, growth has been faster among the largest plans, with the world’s top 20 pension funds registering a 12% increase in assets over the last year, outperforming their smaller counterparts. This faster growth has also been sustained over time, with a compound annual growth rate (CAGR) of 5.4% for the top 20 pension funds over the last five years, compared to 4.7% for the top 300 as a whole.

Japan’s Government Pension Investment Fund (GPIF) remains the largest pension fund in the world, with $1.59 trillion in assets under management, a position it has held since 2002. However, with $1.58 trillion in assets, Norway’s Government Pension Fund, only 0.5% smaller, could take the top spot next year after recording a 22% growth in assets over the past 12 months. “While it is encouraging to see a return to growth among the world’s major pension funds in 2023, the combination of a more uncertain macroeconomic environment and rising geopolitical instability creates greater complexity in the investment landscape,” said Oriol Ramírez-Monsonis, Director of Investments at WTW, in light of the study’s findings.

WTW also explained that last year was marked by an environment of rising inflation and interest rates, which have since moderated, but the outlook remains uncertain. “While the first half of 2024 has provided some stability, uncertainty remains high, and volatility persists in the global economy, exacerbated by geopolitical events, including major presidential elections in many countries,” they said.

In Europe, the report notes that funds continue to allocate a significant portion of their investments to fixed income, at 47%, followed by equity investments, which account for nearly 40% of the allocation. This distribution marks a significant difference compared to other regions and highlights the need to continue working on diversifying strategies. “To continue making progress, it is crucial to optimize asset allocation in our portfolios, reducing investments in traditional assets. While in North America, investment in alternative assets already reaches nearly 30%, in Europe, we have yet to surpass the 15% threshold, leaving us ample room for improvement and growth,” concludes Ramírez-Monsonis.

Luis Buceta, New President of CFA Society Spain

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CFA Society Spain, the local member society of CFA Institute – the Global Association of Investment Professionals – has appointed Luis Buceta, CFA, as its new president. This announcement follows the conclusion of the current term, in accordance with the organization’s statutes, previously held since October 2020 by José Luis de Mora Gil Gallardo, CFA. Buceta will lead a team of distinguished professionals who will join him on the Board of Directors of the Spanish Chapter of CFA Institute.

Luis Buceta is currently the Chief Investment Officer of Creand WM in Spain (Crèdit Andorrà Financial Group). He previously worked for BNP Paribas Wealth Management as Director of Equity Investments, and began his career at The Chase Manhattan Bank. Over the past four years, Buceta has also served as Vice President of CFA Society Spain.

In addition to his professional role, the new president combines his work with teaching, as he is a professor at various business schools and universities. He holds a degree in Economics and Business Studies and Market Research and Techniques from ICADE (E2 and ITM). He also has an Executive MBA from IESE Business School and certifications in CFA ESG Investing and Certified Advisor (CAd).

Among the main objectives of the new team are to continue strengthening the prestige and growth of the CFA professional accreditation in Spain and to meet the new needs of investment professionals by providing access to innovative certifications such as the Certified Advisor CAd Program, CFA Institute Certificate in ESG Investing, Climate Risk, Valuation and Investing Certificate, Private Markets and Alternative Investments Certificate, Data Science for Investment Professionals Certificate, and Private Equity Certificate.

At the local level, relationships with all stakeholders of CFA Society Spain will continue to be strengthened, including members, CFA candidates, employers, regulatory and supervisory bodies, and partner firms. The activities of all the Committees within CFA Society Spain will also be reinforced, particularly in the areas of private/alternative markets, sustainability, diversity, wealth management, relationships with Latin American professionals, education, communication, investment performance measurement (CIPM), regulatory affairs, asset management, and digital assets.

The fundamental goal is to promote excellence among investment professionals in Spain and to advance the financial sector for the benefit of Spanish society as a whole.

Luis Buceta, CFA, President of CFA Society Spain, stated: “I am honored by the opportunity to assume the presidency of CFA Society Spain following the excellent work of my predecessor, José Luis de Mora Gil Gallardo. This is something I could not have imagined when I obtained the CFA accreditation many years ago. It is an exciting and unique challenge, for which I have a magnificent team, all CFA professionals, on the Board of Directors. Together, we will work to continue growing the CFA accreditation as the benchmark for excellence and prestige, and to strengthen CFA Society Spain as the authoritative voice of investment professionals in Spain.”

José Luis de Mora Gil Gallardo, CFA, said: “Under the leadership of Luis Buceta, CFA Society Spain will continue to grow, positioning the CFA accreditation as the gold standard of prestige and excellence among current and future investment professionals in Spain. Luis has demonstrated his capability and leadership at Creand (Crèdit Andorrà Financial Group) and as Vice President of CFA Society Spain. Therefore, the next four years of CFA Society Spain could not be in better hands.”

Alongside Luis Buceta, the new Board of Directors of CFA Society Spain is composed as follows:
– Sila Piñeiro, CFA, Vice President, is Director of Wealth Management PB at Deutsche Bank.
– Gemma Hurtado San Leandro, CFA, Treasurer, is Head of Investments at SGFO Capital.
– Guendalina Bolis, CFA, Board Member, is Director of Investments at Abanca Gestión de Activos.
– José María Martínez-Sanjuán, CFA, Board Member, is Global Director of Fund Selection at Santander Private Banking.
– Constantino Gómez, CFA, Board Member, is Partner at Arcano Partners.
– Jaime Albella, CFA, Board Member, is Director of Sales at AXA Investment Management.
– Pilar Garicano Madrigal, CFA, Board Member, is Executive Director at Morgan Stanley Investment Management.
– Guillermo Barandalla, CFA, Board Member, is Chief Investment and Operating Officer at Injat Family Office.
– Kike Briega Muñoz, CFA, Board Member, is Knowledge Expert in Financial Services at McKinsey & Company.

Jupiter AM Closes its Emerging Market Debt Funds Following the Departure of the Management team and Explains the Next Steps to its Clients

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Jupiter AM has issued a note to its clients regarding its emerging market debt funds following the departure of the management team, assuring that their strategies will continue to be supported by their global team, according to an official document from the asset manager accessed by Funds Society.

Regarding the impact of the emerging markets team’s departure on the rest of the fixed income segment, Jupiter states: “No impact should be expected on the investment processes or performance of the other teams. The impact is limited to the team’s input in relation to secondary discussions and opinions on some specific credits, which are also present in other strategies. Jupiter has a global credit analyst team that covers both developed and emerging markets. All our funds are backed by the global team, as they have been and will continue to be. We are very proud of our credit team’s success over the years.”

The asset manager emphasizes that the Dynamic Bond and Global High Yield funds “have never relied on the EMD team. The Dynamic Bond holds a relatively small amount of emerging market credits, which are long-term investments very well known by the existing team. Both the Dynamic Bond and Global High Yield funds continue to be supported by the global credit team, and we will ensure that all funds receive adequate credit coverage in the future.”

Regarding the continuity and status of the team, Jupiter AM notes that Reza Karim and Alejandro di Bernardo have resigned to pursue other opportunities: “Despite building strong track records, our funds failed to generate sufficient traction among clients, mainly institutional ones. After careful consideration, we decided to close the entire spectrum of EMD funds,” the note states.

What will happen next with the two SICAVs of the EMD strategies? Will the funds be closed? Jupiter AM responds affirmatively: “The strategies will close in the old-fashioned way, following market standards. Once regulatory approval is obtained, clients will be notified with at least 30 days’ notice.”

The asset manager adds that, for now, it will maintain its investment and risk/return philosophy, and the current team will continue to manage the funds until their closure.

Jupiter states that “it has created a work environment that allows investment professionals to operate with independence and invest with a high degree of autonomy. We constantly assess our retention rates and incentive structures and believe they are highly competitive. We have demonstrated that this culture and structure has attracted and retained highly qualified professionals – evidenced, for example, by the recent hiring of Alex Savvides and Adrian Gosden along with their respective teams.”

Risk Management Is Gaining Importance In The Face Of Competition From Advisors

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Advisory services must pay close attention to risk management when advising their clients, and under this premise, ScoRe enters the U.S. Offshore market.

ScoRe is a tool that integrates traditional financial modeling and is based on indicators, perspectives, and other ratios. Additionally, it incorporates artificial intelligence components to measure qualitative variables that “have historically been difficult to evaluate,” said Oscar Manco López, CEO of Trust Investment and creator of the platform, in an interview with Funds Society.

Manco López added that risk management is crucial in financial advisory services and portfolio management. For this reason, “financial advisors can rely on a 24/7 tool for managing their risks, providing support that research departments sometimes cannot fully cover.”

The Trust CEO emphasized the importance of time management for advisors, noting that this “leaves a gap when portfolios have a large number of assets. With this tool, they can cover any number of issuers in their credit risks, enabling a more active management of their positions.”

To understand more about its application, ScoRe measures the quality of information, the level of education of executives, whether there are any pending investigations, the ability to respond to a requirement—in other words, everything that is generally not measured. However, the functionality of ScoRe does measure it, commented Manco López.

Moreover, the tool covers an unlimited number of issuers, meaning it anticipates situations that allow advisors to reallocate their positions or validate their existing allocations, explained Manco López. He also highlighted the inclusion of new technologies for forecasting and risk measurement.

Trust Investment S.A.S. – Tisas is a company founded 13 years ago to provide specialized financial solutions with high value and innovation. It offers a portfolio of services aimed at businesses, with a presence in Colombia and the United States, serving the global market, according to the information provided by the firm.

GAM and Galena Join Forces to Offer Investment Opportunities in Commodities

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GAM has announced a strategic alliance with Galena Asset Management—a specialist in commodity financing and a fully-owned regulated investment subsidiary of Trafigura Group, which specializes in commodity trading and logistics. This agreement will provide GAM’s clients with access to global commodity markets, benefiting from Galena’s expertise in metals, mining, energy, and renewables.

Commodities are a vital asset class for today’s investors, offering resilience, diversification, inflation protection, and attractive returns in a changing world, according to the company’s statement. GAM has a long history in alternative investment and innovation, and this strategic alliance with Galena will further enhance its ability to offer superior solutions to clients.

The new GAM and Galena partnership will continue to strengthen GAM’s alternative product offering and has two main aspects: a global distribution agreement for Galena Funds and future product innovation.

With this distribution agreement, GAM will be the exclusive global distributor of Galena’s existing commodity investment strategies, which include (subject to local availability):

1. Trade Finance: A strategy providing short-term financing to commodity producers and traders, generating fee and interest income while mitigating risks through collateral, insurance, and diversification.

2. Multi-Strategy: A strategy that invests in macro and commodity themes across the full spectrum of asset classes. It employs a combination of directional, relative value, and arbitrage strategies based on rigorous fundamental and technical analysis.

3. Private Equity: Invests in private companies in the commodity sector, focusing on metal and mineral mining, processing, and related infrastructure and services.

Regarding product innovation, by working closely with Galena, GAM will be at the forefront of the rapidly evolving commodities investment landscape, with access to cutting-edge research, development, and technology. According to the firm’s statement, by leveraging extensive networks, projects, and research, GAM and Galena will collaborate to develop and launch new, innovative commodity-focused investment products for clients, addressing the challenges and opportunities of the energy transition, circular economy, and digital transformation.

Maximilian Tomei, CEO of Galena, stated: “We are thrilled to have formed an alliance with GAM, a firm that shares our entrepreneurial and innovative spirit and our passion for delivering the best alternative returns to our investors. As commodities gain greater importance and dynamism globally, we see enormous potential to create value for our clients by giving them access to our unique expertise and insights. We look forward to working with GAM to offer exciting and exclusive commodity investments to a broader international audience.”

On the other hand, Elmar Zumbuehl, CEO of GAM Group, noted that this strategic alliance with Galena “is a significant step forward for our firm and our clients, as it will enable us to access exclusive and attractive commodity investment opportunities by leveraging Galena’s capabilities and resources. We believe commodities are a key asset class for the future, offering appealing return potential and diversification benefits. We are excited to work with Galena to provide our clients with innovative and differentiated solutions that meet their needs and expectations.”

Dean Blackburn, Appointed as the New Deputy CEO of Zedra

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Zedra, a global provider of wealth management services, has announced the appointment of Dean Blackburn as its new Deputy CEO. According to the company, this addition strengthens its leadership team with “innovative” and “dynamic” professionals.

Blackburn joins Zedra from JTC, where he started as Group Director in 2019 and was later appointed CEO. He also served as Chief Commercial Officer at JTC before assuming the role of Group Head of Institutional Client Services in 2022. “He is a people-focused professional with a proven track record of delivering significant business results. His leadership style is characterized by a deep commitment to team development and empowerment, which has consistently translated into strong business performance and growth,” Zedra highlights.

Following this announcement, Ivo Hemelraad, CEO of Zedra, commented: “We are thrilled to welcome Dean to Zedra. His unique combination of people-centered leadership and business acumen aligns perfectly with our values and vision for the future. We are confident that Dean will play a key role in driving our business forward and achieving our strategic goals.”

Regarding his appointment, Dean Blackburn, now as Deputy CEO, added: “I am excited to join Zedra at such a dynamic time in the company’s journey. I look forward to contributing to the continued success of the business, driving innovation, and most importantly, supporting our talented teams to reach their full potential.”

In his new role as Deputy CEO, Blackburn will work closely with the senior leadership team to help define Zedra’s strategy, ensuring the company continues to provide exceptional service to its clients while fostering a supportive and empowering environment for its employees.

WisdomTree Expands Its Range of ETPs With the World’s First ETC on European Natural Gas

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WisdomTree, a global financial products provider, has announced the launch of the WisdomTree European Natural Gas ETC (TTFW), which has begun trading on the London Stock Exchange, Borsa Italiana, and Börse Xetra. According to the asset manager, the fund aims to track the performance, before fees and expenses, of the BNP Paribas Rolling Futures W0 TZ Index, which provides exposure to natural gas in the Dutch Title Transfer Facility (TTF) and measures the total return based on the underlying ICE Dutch TTF Gas Futures contracts.

“The war between Russia and Ukraine that began in 2022 profoundly altered the natural gas markets in Europe. Natural gas flows through pipelines from Russia to Western Europe, once the main source of natural gas for the region, are now insignificant. Western Europe is much more reliant on Norwegian pipeline flows and global liquefied natural gas (LNG) imports. In its energy transition, the European Union will continue to depend on natural gas. Considering this, there will be periodic sharp increases in natural gas prices in Europe, as the fuel is used to offset renewable energy deficits. The Dutch Title Transfer Facility (TTF) is the most representative and liquid natural gas benchmark in Europe and therefore the best tool for tactical exposure to these price jumps and for hedging purposes,” explained Nitesh Shah, Head of Commodities & Macroeconomic Research Europe at WisdomTree.

The asset manager highlights that this launch complements its range of natural gas products, which offer exposure to U.S. Henry Hub natural gas, the most well-known gas trading hub in the U.S. This includes the WisdomTree Natural Gas (NGAS), a euro-hedged alternative, as well as short and leveraged exposures. These products allow investors to express both their short-term tactical view and long-term strategic view.

“We have a strong track record of innovation and launching pioneering exposures in the market across all asset classes. Investors expect WisdomTree to provide exposures they cannot find elsewhere, and that’s exactly what we’ve done with this ETC. This launch strengthens our leadership position in the commodity ETP market and offers investors an additional tool to navigate a dynamic market environment,” emphasized Alexis Marinof, Head of Europe at WisdomTree.

This new fund is passported for sale in Germany, Austria, Belgium, Denmark, Spain, Finland, France, Ireland, Italy, Luxembourg, Norway, the Netherlands, Poland, the United Kingdom, and Sweden.

Ocorian Appoints Michael Gull as Head of Funds in the U.S.

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Ocorian has hired Michael Gull as Head of Funds in the U.S. as part of the firm’s expansion strategy.

Gull, who will work at Ocorian’s New York office, brings nearly 30 years of leadership experience from companies in San Francisco, Los Angeles, and New York, according to the statement.

“The U.S. is a key market for Ocorian, and Michael’s appointment underscores our commitment to increasing our presence in the U.S. financial services markets. His expertise will be crucial in continuing to expand our services, which include fund administration, corporate services, capital markets, and private client services,” commented Frank Hattann, CCO of Ocorian.

Most recently, Gull worked at Carta in New York, where he served as Head of Sales Management and Business Development, and previously, he was Managing Director of Sales Management and Business Development at SS&C Technologies.

“This is an exciting time to join Ocorian in the U.S. I look forward to working with our expanding team to further develop our presence in the fund administration sector and deliver greater value to our clients through our unique combination of local expertise and global capabilities,” added Gull.

Ocorian first entered the U.S. market in 2021 with the acquisition of Philadelphia-based Emphasys Technologies, marking the start of its expansion across the country. Since then, the company has been enhancing its onshore capabilities, making key hires, and building out its service offering to support its growing client base, according to company information.

XP Invests in Expanding Its Operations in the U.S., Aiming to Broaden Its Offering of International Funds

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The platform already has 700 Brazilian strategies in its portfolio as its U.S. operations advance, with over 100 funds from 30 international asset managers.

It’s no secret that the international fund business faces tough competition in Brazil, a country with very favorable interest rates. However, the business is progressing due to the growing need for investor diversification. Today, XP’s portfolio holds around $1 billion in international offerings, most of which are hedged in reais.

The Brazilian firm is also investing in expanding its U.S. operations to provide its clients with a broader selection of assets in U.S. dollars.

“XP is focused on expanding its international offering to meet the demand for international investments in both reais and dollars,” Cintra states, noting that the broker’s U.S. operations have grown significantly in the past year, with more than 100 funds now available. “I see the dollar segment growing at an even faster pace,” he adds.

Cintra further mentions that client demand for dollar accounts has increased, as any brokerage client can easily ‘dollarize’ their assets or a portion of them via the app, in a simple process with a low minimum ticket of around $1,000. “It’s much easier,” he says.

“We are in talks with global managers to add more funds to XP USA, serving both Brazilian and U.S. clients,” he adds.

Investment Funds: A Growing Demand

Tax exemptions and attractive returns are creating space for exchange-traded funds within XP Investimentos’ vast portfolio. With more than 700 funds, absorbing over 300 billion reais, the platform is experiencing increasing demand for Infrastructure Investment Funds (FIP), Real Estate Funds (FII), and Agribusiness Investment Funds (Fiagros).

“CRI funds, for example, are very attractive because they distribute tax-free earnings, which is a major differentiator for investors, especially in a high-interest-rate environment,” explains Cintra, the head of XP’s fund analysis team.

These funds, which are traded on B3 and Cetip, have attracted both retail investors, particularly high-net-worth individuals, and institutional investors, such as family offices. Pension funds, which already benefit from tax advantages, have also been drawn to these funds, especially FIPs, according to Cintra.

“Brazilian investors prefer fixed income, especially in the current scenario of high interest rates. And, when combined with tax exemptions, these funds become even more attractive,” he says, adding that this type of strategy has also offered good credit rewards. Some, like FIIs, pay monthly dividends. “Some funds pay up to 1% per month, net of taxes,” says Cintra, who is seeking new FIP and FII options for investors.

Curation: Track Record, Performance, Guarantees, and Solid Origination

XP has a stringent process when selecting new funds, says Cintra, who focuses on managers with a proven track record. “I look for managers with a solid performance history, good origination and collateral management, and strong access,” he explains.

“Our team conducts a thorough technical analysis of managers and funds. It’s a meticulous process, where we analyze the fund structure to understand what assets will make up the portfolio,” he says, adding that it’s also necessary to assess all levels of collateral behind the assets, such as credit rights.

XP also evaluates the structure of the fund’s tranches. “For example, a subordinated tranche is the first to absorb losses, which is why we analyze the level of this ‘safety cushion.’ There are many technical aspects we observe during due diligence to ensure that the fund has the right configuration and that the credits are of high quality,” he says.

**Tightened Spreads Due to Demand for Credit and Infrastructure Funds**

According to Cintra, the high demand for credit and infrastructure assets has compressed spreads, “which requires an even more careful selection process regarding both the managers and the securities that make up these funds,” he says. He adds that he is actively seeking more partnerships in this asset class.