Institutional Channel Assets Gain Slight Edge Over Retail

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Professionally managed assets in the U.S. stand at $60.4 trillion with the retail client channels comprising $30 trillion, while institutional channel assets climbed to $30.9 trillion, according to Cerulli’s research, The State of U.S. Retail and Institutional Asset Management 2023.

The marketshare split between retail and institutional grew closer to parity from 2013 to 2021, but after greater retail channel asset declines in 2022, the trend reversed.

“Retail client channels that tend to have higher equity allocations, experienced a larger asset decline, reversing a longer-term trend where retail client channel assets had been growing faster than institutional client channel assets,” says Brendan Powers, director.

Cerulli expects this reversal to be temporary, as trends including retirement plan rollovers into advisor-managed individual retirement accounts (IRAs) and pension plans freezing and terminating should favor increased growth of retail channels.

Asset managers evaluating addressability in either channel should continue to foster relationships with professional buyers making investment decisions. Investment professionals building product shelves and model portfolios at broker/dealers (B/Ds), banks, or registered investment advisors (RIAs) should be a focus on the retail side.

On the institutional side, consultants and outsourced chief investment officers (OCIOs) as well as the RIA retirement plan aggregators and third-party fiduciaries that work with defined contribution (DC) plan sponsors should be a priority. “Asset managers cannot discount the role that intermediaries hold in distribution and should closely evaluate their sales and marketing resources to ensure coverage,” says Powers.

Additionally, asset managers’ focus on vehicle proliferation remains increasingly important as retail and institutional client segments continue to prefer a vehicle choice. On the retail side of the industry, there is heightened focus on exchange-traded funds (ETFs) and separate accounts. Additionally, firms are focused on optimizing the vehicle wrapper for retail alternative (e.g., private equity, private debt, hedge funds) exposures.

On the institutional side, there is a greater focus on collective investment trusts (CITs), especially among DC plans and their intermediaries.

“Despite the greater focus on other vehicle offerings, managers still need to be diligent about product management efforts for their existing mutual fund strategies, as the mutual fund is not going away. This includes share class/pricing analysis, rationalization exercises, and training/product position for distribution and marketing support,” concludes Powers.

Amundi US Appoints Head of US Intermediary and International Distribution

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Amundi US announced the appointment of Jason Xanthakis as Senior Managing Director, Head of US Intermediary and International Distribution, effective January 1, 2024.

Xanthakis has been a member of the Amundi US Intermediary Distribution team since December 2009, most recently as Senior Managing Director, Head of US Intermediary Strategy, Partnerships & National Accounts.

In his expanded US role, Xanthakis will lead Amundi US’s Intermediary Distribution Team in the US, while continuing to lead the distribution of US-managed investment solutions in the International Retail and US Offshore/Retail Latin American channels. Jason will continue to serve on the Amundi US Executive Committee, the firm said.

Jason Xanthakis

Xanthakis joined Amundi US in December of 2009, and has served in a variety of senior business development and sales positions inside and outside of the US. During a three-year appointment starting in 2019, Xanthakis was based in Paris and led the distribution of US-managed investment solutions across retail channels in EMEA and Asia. Upon his return to the US, he was appointed Senior Managing Director, Head of International Retail Business & US Intermediary Strategy, Partnerships, and National Accounts.

Xanthakis has 24 years of experience in financial services. He launched his career at Fidelity Investments where he was a Research Analyst in the Investment Services Division and held individual contributor and leadership roles across functions. Jason continued his career in Manager Research and Business Development at Ameriprise Financial’s Asset Management arm (RiverSource Investments; now part of Columbia Threadneedle). He has an MBA from Columbia Business School and a B.Sc. in Economics from the University of Piraeus, Greece.

Asset Managers Should Sharpen Focus on Independent RIAs That Insource Portfolio Construction

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The distinctions between advisor channels make it increasingly difficult for asset managers to break through and establish their products and services. Cerulli recommends asset managers focus their distribution efforts on the channels where home-grown portfolios remain prevalent, according to The Cerulli Edge—U.S. Asset and Wealth Management Edition.

According to the research, nearly two-thirds of financial advisors (60%) say their primary portfolio construction influence comes from within their own practice, while less than one-third (28%) report being influenced primarily by their broker/dealer (B/D) or custodian.

Asset managers should pay close attention to the profile of advisors who say they construct their own portfolios—advisors in the independent registered investment advisor (RIA) channel are the most likely to construct portfolios entirely in-house, followed closely by hybrid RIAs. Conversely, just one-third of advisors in the insurance B/D channel create portfolios within their own practices.

“While the RIA channel is made up of significantly more firms than the B/D channel, and with higher rates of practices that insource the investment management function, the channel has continued to consolidate, presenting an increased opportunity for asset managers to engage with the largest firms through key accounts efforts,” says Stephen Caruso, senior analyst.

Cerulli recommends asset managers aim distribution resources in favor of the channels such as independent and hybrid RIAs where advisors are more likely to select their own investments and can succeed by providing the resources needed to help advisors grow their asset bases and nurture client relationship.

“RIA advisors tell Cerulli they are more likely to respond positively to asset managers that take the time to understand their unique characteristics and needs and those that provide transparent access to key investment decision makers for a given strategy,” says Caruso.

SEC Finally Approves ETPs that Invest in Bitcoin

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The SEC has approved a list of ten exchange-traded products (ETP) that directly invest in the most popular cryptocurrency in the market, bitcoin, as announced by its chairman Gary Gensler in a statement.

“Today, the Commission approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares,” Gensler commented.

The measure is seen as a milestone for the digital asset sector of approximately $1.7 trillion, which will expand access to the cryptocurrency on Wall Street and other markets.

The funds will be able to start trading from this Thursday, January 11th.

The approvals also mark the end of over a decade of opposition from the SEC, since Tyler and Cameron Winklevoss first proposed a bitcoin ETF in 2013.

Last June, BlackRock made a request, which was initially denied but then supported by a ruling from an appeals court that called the denial “arbitrary and capricious.”

“I have often said that the Commission acts within the law and how the courts interpret the law. Beginning under Chair Jay Clayton in 2018 and through March 2023, the Commission disapproved more than 20 exchange rule filings for spot bitcoin ETPs,” added the chairman of the regulatory.

Gensler said that in the face of a new series of applications similar to those the SEC had already disapproved, the circumstances have changed.

“We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed. The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order). The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares,” detailed the chairman.

In addition, Gensler clarified that “importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”

On the other hand, he emphasized that “nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.”

Currently, investors can already buy and sell bitcoin in a number of brokerages, through investment funds, on national stock exchanges, through peer-to-peer payment applications, on non-compliant cryptocurrency trading platforms, and of course, through Grayscale Bitcoin Trust, says the SEC.

The commission clarifies that the action approved on January 10th will include certain protections for investors.

First, sponsors of bitcoin ETPs will be required to provide full, fair, and truthful disclosure about the products. Investors in any bitcoin ETP that is listed and traded will benefit from the disclosure included in public registration statements and required periodic filings. While these disclosures are required, it is important to note that today’s action does not endorse the disclosed ETP arrangements, such as custody arrangements.

Second, these products will be listed and traded on registered national securities exchanges. Such regulated exchanges are required to have rules designed to prevent fraud and manipulation, and we will monitor them closely to ensure that they are enforcing those rules. Furthermore, the Commission will fully investigate any fraud or manipulation in the securities markets, including schemes that use social media platforms.[3] Such regulated exchanges also have rules designed to address certain conflicts of interest as well as to protect investors and the public interest.

Further, existing rules and standards of conduct will apply to the purchase and sale of the approved ETPs. This includes, for example, Regulation Best Interest when broker-dealers recommend ETPs to retail investors, as well as a fiduciary duty under the Investment Advisers Act for investment advisers. Today’s action does not approve or endorse crypto trading platforms or intermediaries, which, for the most part, are non-compliant with the federal securities laws and often have conflicts of interest.

Third, Commission staff is separately completing the review of registration statements for 10 spot bitcoin ETPs simultaneously, which will help create a level playing field for issuers and promote fairness and competition, benefiting investors and the broader market.

The decision comes a day after a false post on the SEC’s X account (former Twitter) claimed that the agency had approved ETFs. The regulator later said the account had been compromised, causing a significant fluctuation in the price of Bitcoin.

Voya Financial Announces Leadership Succession Plan for Voya Investment Management

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Photo courtesyMatt Toms, new Voya Investment Management's

Voya Financial announced that Christine Hurtsellers, CEO of Voya Investment Management (IM), has informed the company of her decision to retire later this year.

Matt Toms, CIO of Voya IM, will succeed Hurtsellers as CEO, effective immediately, and Hurtsellers will now serve as a strategic advisor to the company until her retirement.

Toms has also joined Voya Financial’s Executive Committee and will now report to Heather Lavallee, CEO, Voya Financial. Hurtsellers will also continue to report to Lavallee.

Voya also announced that Eric Stein, who most recently served as CIO, fixed income, at Morgan Stanley Investment Management, has joined Voya IM as head of investments and CIO, fixed income. Stein reports to Toms.

“I am grateful to Christine for her amazing leadership and stewardship of our Investment Management business,” said Lavallee.

Lavallee added that over her almost 20-year career with Voya IM, including seven years of service as CEO, “Christine achieved a number of strategic, financial and operational outcomes, including the successful integration of several acquisitions that have expanded our asset management capabilities and global reach.”

I am thankful for having had the benefit of Christine’s insights, drive and passion for our business, and I wish her and her family all the best as she begins her transition to retirement. Also, I am excited to have Matt leading Voya IM as it executes on its growth strategy and continues to build on its strong pipeline across institutional and retail markets in the U.S. and internationally. Matt has been global CIO since 2022, has 30 years of asset management expertise, and has great insights into the needs of our clients. His deep knowledge and experience with our firm, and his passion for our clients, will serve him well as he leads Voya IM into its next stage of growth,” stated Lavallee.

“We have made great progress in evolving Voya IM to become the global firm that we are today,” said Hurtsellers. “The growth and expansion that we have achieved is the result of the hard work of our colleagues, who have always prioritized the needs of our clients. After almost 20 years at Voya, and as I look ahead to retirement and the ability to attend to my family’s needs, I am grateful for and proud of all that the team has accomplished over the years. In the meantime, I look forward to working closely with Matt and Heather — and to engaging with our clients, intermediaries and employees — to ensure a smooth transition.”

As Voya IM’s global CIO, Toms led the firm’s more than 300 investment professionals who are managing approximately $310 billion in assets under management across fixed income, equities, multi-asset solutions and alternative strategies. Previously, Toms served as CIO, fixed income. Prior to joining Voya IM in 2009, Toms worked with Calamos Investments, where he established and grew its fixed income business. He also previously held roles with Northern Trust and Lincoln National.

“It’s an honor to be leading Voya IM, and I am excited about the opportunities ahead,” said Toms. “Over the past several years, we have successfully grown our capabilities and our reach to serve the expanding needs of our clients, and I’m looking forward to working with the many talented professionals across our firm to continue our growth trajectory. I also want to express my tremendous gratitude to Christine for her leadership and guidance. I am grateful to have her insights and perspective as we make a smooth transition.”

Stein, in his new role as head of investments as well as CIO, fixed income, will directly lead the public fixed income investment team as well as oversee the broader equities, income and growth, and multi-asset strategies and solutions investment teams. Chris Lyons, head of private fixed income and alternatives investments, will continue to report to Toms.

As CIO, fixed income at Morgan Stanley IM, Stein was responsible for overseeing 275 professionals and the management of investment strategies for Morgan Stanley’s approximately $200 billion fixed income platform, including agency mortgage-backed securities, emerging markets, floating-rate loans, high-yield, investment grade credit, multi-sector, municipals and securitized strategies.

Prior to Morgan Stanley IM, Stein held several portfolio management roles at Eaton Vance since 2009, including most recently serving as CIO for Eaton Vance’s entire fixed income group, which included investment teams across high-yield, bank loan, municipal investments, emerging market debt/global macro, securitized, investment grade corporate and multi-asset investment disciplines, the firm added.

“I am excited to have Eric on the Voya IM leadership team,” added Toms. “His more than 20 years of investment experience and demonstrated expertise in leading sizable teams throughout his career will no doubt bring great value to our investment teams and our clients. Equally important, Eric’s approach to money management aligns fully with the collaborative approach of our investment professionals at Voya IM. I am looking forward to having his leadership and insights as we execute on our growth plans.”

As ESG Landscape Shifts, Corporate America’s CEOs Face Fresh Challenges and Opportunities

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The center of gravity in ESG is shifting, which presents a fresh set of challenges—and opportunities—for corporate America’s CEOs, as detailed in a new report by The Conference Board.

While major institutional investors were once the most consistently vocal stakeholders driving companies’ ESG agendas, today, regulators and business partners are exerting increasing influence. At the same time, companies are facing opposition to their ESG agendas, with 61% of surveyed US firms saying “ESG backlash” will stay the same or increase in the next three years.

“As CEOs seek to integrate sustainability more deeply into their business strategy, they will face the challenge of not having their sustainability initiatives driven by generic regulatory requirements, but instead shaped by external factors such as customer demand, the state of sustainability in their industry, and the interplay of technology and sustainability,” said Merel Spierings, Senior Researcher at The Conference Board and co-author of the report.

This evolving landscape calls for CEOs to take a proactive approach to ESG, including focusing on ESG-related business opportunities; assessing the ROI of sustainability investments; engaging the board as thought partners; collaborating effectively with business partners; and deciding whether to adopt a purpose statement.

Insights and findings from the report include:

-CEOs should maintain their focus on ESG-related business opportunities

–While companies are increasingly held accountable for delivering returns on their ESG initiatives, they lack a consistent methodology for measuring and reporting on the ROI of ESG

-CEOs should meet the board where it is on its sustainability journey

–Compared to traditional business objectives, companies need increased levels of horizontal and vertical collaboration to achieve their ESG goals

The report was produced in collaboration with Ramboll and Weil, Gotshal & Manges LLP. It features insights from a Chatham House Rule convening with CEOs from the US and Europe on how to best integrate ESG into a company’s business strategy and operations. To see the full report you must access the following link.

The AMCS Group Grows US Offshore Team with Carlos Aldavero based in New York

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Photo courtesyCarlos Aldavero, Head of Northeast US Offshore Sales at The AMCS Group

The AMCS Group, a Miami and Montevideo-based third-party distribution firm, announced the appointment of Carlos Aldavero as Head of Northeast US Offshore Sales.

“Aldavero joins the firm at an exciting time, as the business is seeking to significantly grow the market presence of its three asset management partners, AXA Investment Managers, Jupiter Asset Management and Man Group, while continuing to explore further expansion in  areas such as alternative investments”, the press released said. 

He will report to Chris Stapleton, co-founder and managing partner, who is based in Miami.

Aldavero core focus will be growing the presence of Jupiter Asset Management and Man Group funds with major wirehouse and global bank platforms, while also looking to capitalize on the growth of independent broker dealers that has been a burgeoning trend in the US non-resident wealth channel.  

Aldavero was most recently President at Dominari Financial, a wealth management rollup private equity venture, where he built all enterprise infrastructure by sourcing and  executing M&A deals, focused on the RIA/BD sector.

Prior to Dominari, he also spent almost a decade at Morgan Stanley Wealth Management, where he served as Associate  Complex Manager to the largest Complex in the country, supervising and managing  approximately 245 advisors, including more than 100 Internationally focused Advisors, servicing more than 40 countries globally.

Prior to Morgan Stanley, he held various senior leadership roles in New York at Merrill Lynch, Copernicus Institutional  Advisors, Deutsche Bank Securities and Bear Stearns, with over 25 years of experience  and deep knowledge of all aspects of financial services business.

Chris Stapleton, co-founder and managing partner, the AMCS Group, commented: “We are delighted to have Carlos join the AMCS Group. His experience with all aspects of the wealth management sector in the greater New York metro area and large network of international advisor relationships will help us to significantly enhance our footprint in the northeast and raise assets for our asset management partners. We recognize that, in the post pandemic era, an on-the-ground presence in New York to opportunistically connect with advisors is essential.” 

On the other hand, Aldavero said: “I’m very excited to have joined the AMCS Group at such a pivotal time. The extremely strong and market leading lineup of funds across Jupiter and Man differentiates the group from others, making it a unique opportunity for growth within the US offshore market. I look forward to partnering with such a talented team and expand the firm’s business and presence in New York and the wider Northeast region.”

The AMCS Group team details: 

Chris Stapleton, co-founder and managing partner, oversees global key account relationships across the region, as well as advisor relationships in the Northeast and West Coast. 

Andres Munho, co-founder and managing partner, oversees all advisory and private banking relationships in South Florida, as well as firms located in the Northern Cone of LatAm, including Colombia and Mexico. 

Santiago Sacias, managing partner, based in Montevideo, leads sales efforts in the Southern Cone region, which includes Argentina, Uruguay, Chile, Brazil and Peru. Alvaro Palenga, sales director, is responsible for select advisory and private banking relationships in greater Miami and the US Southwest. 

Alfonso Penasco, head of marketing and product, leads AMCS’s marketing and events  engine from Montevideo, as well as coordinating product and client strategy across the  group. 

The team is supported by Sebastián Araujo, sales associate and Virginia Gabilondo, client services manager. 

FortCay Family Office Advisory Invests in Octogone Advisors Cayman

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FortCay Family Office Advisory announced a strategic investment into Octogone Advisors (Cayman), a wealth manager and investment advisor founded in 2017 and previously part of the Swiss-based Octogone Group.

The alliance will enable both firms to continue their local and international expansion. Octogone Advisors (Cayman) and its  Miami-based SEC-regulated subsidiary will be rebranding over the coming weeks as FortCay Investment Advisors. 

FortCay Office Advisory is a multi-family office founded in 2023 in the Cayman Islands. Both firms are registered with the Cayman Islands Monetary Authority and together service over $2 billion of client assets. 

The transaction will allow FortCay Family Office to expand its reach and service offering, bringing Octogone Cayman’s investment management expertise, developed over many years, to a wider community. Over time, it is expected that the firms’ Cayman-centric businesses will  continue to grow and create new local jobs and opportunities.

Both existing management teams will remain intact and there will be no changes for existing clients, which will remain with their  respective firm.  

Reinforcing both companies’ commitment to prudent growth, the alignment of efforts will allow FortCay Family Office to establish a deeper base of operations more quickly in the Cayman Islands and offer a referral option for their prospects not needing full family office services. It will also provide Octogone Cayman with access to complementary FortCay Family Office services for Octogone Cayman’s own ultra-high-net-worth clients. 

Benjamin Hein, Founder and Partner of Octogone Cayman, commented: “This is a strategic opportunity for Octogone Cayman as we continue to grow our presence and  profile in Cayman, looking to deepen our work with the local high net worth community, such as  executives of well-known law firms and accounting firms.” 

Paul-Martin Seguin, Founder and Partner of Octogone Cayman noted: “The Octogone Cayman management team has, on a combined basis, decades of experience  providing wealth and investment management services in Cayman. Being familiar with the  various players in the wealth management space here, we have aimed to differentiate ourselves by creating an open-architecture, multi-custodian model which, while familiar in other jurisdictions, is not common here.”

SEC Charges Florida Real Estate Developer Rishi Kapoor

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The SEC announced that it obtained an asset freeze and other emergency relief concerning an alleged $93 million real estate investment fraud perpetrated by Miami-based developer Rishi Kapoor.

The SEC also charged Location Ventures LLC, Urbin LLC, and 20 other related entities in connection with the fraud scheme.

According to the SEC’s complaint, from approximately January 2018, until at least March 2023, Kapoor and certain of the defendant entities solicited investors by, among other things, making several material misrepresentations and omissions regarding Kapoor, Location Ventures, Urbin, and their real estate developments.

The false statements allegedly included misrepresenting Kapoor’s compensation; his cash contribution to the capitalization of Location Ventures; the corporate governance of Location Ventures and Urbin; the use of investor funds; and Kapoor’s background.

The SEC’s investigation uncovered that Kapoor allegedly misappropriated at least $4.3 million of investor funds and improperly commingled approximately $60 million of investor capital between Location Ventures, Urbin, and some of the other charged entities. The complaint also alleges that Kapoor caused some entities to pay excessive fees and to represent higher returns to investors by significantly understating cost estimates.

“As alleged in our complaint, Kapoor was the architect of a multi-pronged real estate offering fraud that misappropriated millions from more than 50 investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “This emergency action reflects our commitment to protecting investors and holding those who defraud them accountable for their actions.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Kapoor, Location Ventures, Urbin, and the 20 related entities with violating provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The SEC seeks permanent injunctions, civil monetary penalties, an officer-and-director bar against Kapoor, and disgorgement of ill-gotten gains with prejudgment interest against Kapoor and certain of the charged entities.

Don’t Count on a March Rate Cut

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After the Fed’s December meeting, market expectations for a March rate cut jumped to surprising heights. Markets are currently putting a 75% chance, approximately, on rate cuts beginning in March. However, Morgan Stanley Research forecasts indicate that cuts are unlikely to come before June.

Central bank policymakers have likewise pushed back on investors’ expectations. As Federal Reserve Chairman Jerome Powell said in December 2023, when it comes to inflation, “No one is declaring victory. That would be premature.”

Morgan Stanley expects rates to remain stable through mid-2024 primarily for two reasons:

Inflation Outlook

A renewed uptick in core consumer prices is likely in the first quarter, as prices for services remain elevated, led by healthcare, housing and car insurance. Additionally, in monitoring inflation, the Fed will be watching the six-month average—which means that weaker inflation numbers from summer 2023 will drop out of the comparison window. Although annual inflation rates should continue to decline, the six-month gauge could nudge higher, to 2.4% in January and 2.69% in February.

Labor markets have also proven resilient, giving Fed policymakers room to watch and wait.

Data-Driven Expectations

Data is critical to the Fed’s decisions and Morgan Stanley’s forecasts, and both could change as new information emerges. At the March policy meeting, the Fed will have only data from January and February in hand, which likely won’t provide enough information for the central bank to be ready to announce a rate cut. The Fed is likely to hold rates steady in March unless nonfarm payrolls add fewer than 50,000 jobs in February and core prices gain less than 0.2% month-over-month. However, unexpected swings in employment and consumer prices, or a marked change in financial conditions or labor force participation, could trigger a cut earlier than we anticipate.

There are scenarios in which the Fed could cut rates before June, including: a pronounced deterioration in credit conditions, signs of a sharp economic downturn, or slower-than-expected job growth coupled with weak inflation. Weaker inflation and payrolls could bolster the chances of a May rate cut especially.

When trying to assess timing, statements from Fed insiders are good indicators because they tend to communicate premeditated changes in policy well in advance. If the Fed plans to hold rates steady in March, they might emphasize patience, or talk about inflation remaining elevated.

“If they’re considering a cut, their language will shift, and they may begin to say that a change in policy may be appropriate ‘in coming meetings,’ ‘in coming months’ or even ‘soon.’ But a long heads up is not guaranteed”, concluded the report.