Giorgia Baistrocchi (Pictet Alternative Advisors): “The Clearest Entry Point in a Generation”

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Photo courtesyGiorgia Baistrocchi, Head of Investor Relations – Real Estate & Infrastructure at Pictet Alternative Advisors.

The traditional reasons for investing in real estate—durable income, inflation protection, diversification and low volatility—have been challenged during this cycle, unlike private equity, private credit and infrastructure, where valuations have become increasingly elevated.

According to Giorgia Baistrocchi, Head of Investor Relations – Real Estate & Infrastructure at Pictet Alternative Advisors, global real estate entered 2026 trading at a substantial discount relative to other risk assets such as listed equities and private credit, both of which have appreciated significantly. If that discount reflected structural deterioration, it would represent a value trap. Instead, she argues that it is largely technical in nature and creates “the clearest entry point in a generation.”

Transaction activity supports the thesis

According to her analysis, global real estate transaction volumes reached $873 billion in 2025, an increase of 11.7% versus 2024 and the second consecutive annual increase since the 2023 trough. Activity was concentrated in residential, prime office and industrial assets (Source: McKinsey / RCA-MSCI), suggesting that demand remains healthy.

“In fact, real estate is the only major private asset class whose weakness is being driven more by technical dislocations than by deteriorating fundamentals. That said, in an environment of higher interest rates and lower liquidity, discipline is essential because the truly investable universe has narrowed. The most attractive opportunities are no longer based on a broad macroeconomic recovery, and institutional investors are rebuilding exposure selectively rather than through passive allocations,” Baistrocchi says.

Four of the five forces that compressed valuations are fading

Baistrocchi argues that four of the five forces that have weighed on real estate valuations and liquidity over recent years are now coming to an end. For more than a decade, capitalization rates offered a substantial premium over the risk-free rate. With the U.S. 10-year Treasury yield now around 4.6%, that spread has largely disappeared, bringing the market back toward historical norms.

“In 2022, while listed portfolios declined sharply, private real estate valuations remained relatively stable. As equities and credit subsequently recovered, asset allocators facing redemption requests rebalanced portfolios by selling real estate—not because they were overweight, but because it was the most readily available illiquid asset to generate liquidity. Those were forced sales that should reverse as portfolio allocations normalize. In addition, the quarterly appraisal process typically used in private real estate smoothed volatility, causing valuations to continue adjusting downward while listed and credit markets had already recovered,” she explains.

Private credit displaced real estate

She also notes that real estate lost part of its appeal as an income-generating asset to private credit, an asset class that has now grown to approximately $2.2 trillion in senior floating-rate debt with lower sensitivity to changes in interest rates. For some managers, private credit now represents a larger share of assets under management than private equity.

However, she points out that private credit has recently faced redemption restrictions, valuation concerns and litigation involving retail-oriented vehicles, where secondary market discounts have reached as much as 35% relative to reported net asset values.

“As a result, investors have begun to reassess the value of the liquidity premium and the perceived liquidity advantage of private credit. Moreover, real estate and private credit were both marketed as independent sources of income, yet they share many of the same characteristics: they are illiquid assets, they can experience mismatches between liquidity and redemptions, and price discovery is often delayed,” she says.

In her view, the key difference is that much of the valuation adjustment has already taken place in real estate, whereas private credit is only beginning that process. Although she does not see systemic risk—default rates in direct lending remain below historical averages and current stress is largely concentrated in semi-liquid retail vehicles—she believes private credit now represents less competition for real estate allocations.

Infrastructure: the new competitor

Turning to infrastructure, Baistrocchi highlights that return dispersion among managers is significantly lower than in real estate. This reflects the sector’s long-duration regulated contracts, inflation-linked revenues and sovereign or quasi-sovereign counterparties.

“Infrastructure offers predictable income streams protected against inflation—the very value proposition that real estate has marketed for the past three decades,” she argues.

Data centers, energy transition assets, telecommunications towers, fiber networks, senior housing and student accommodation have become some of the most sought-after assets among infrastructure managers. Many institutional investors have even created dedicated strategic infrastructure allocations funded by reducing their real estate exposure.

Even so, she warns that infrastructure also shares some of the vulnerabilities currently emerging in private credit: illiquid assets, semi-liquid vehicles and potential gaps between official valuations and secondary market pricing.

“The question is whether the stability of infrastructure cash flows will be sufficient to protect against future liquidity mismatches and confidence shocks. For now, infrastructure represents a significant competitive force for real estate,” she says.

Selectivity has become essential

Finally, Baistrocchi argues that the source of real estate returns has fundamentally changed. In a higher-rate environment, returns can no longer rely on cap-rate compression, multiple expansion or inexpensive leverage.

“Today, the market values buildings more like operating businesses than bond-like income streams. Dispersion between assets continues to widen, making security selection more important than ever,” she says.

Against this backdrop, value-add strategies—income-producing assets requiring operational improvements, repositioning or redevelopment—accounted for 55% of global real estate fundraising during the first quarter of 2026, while opportunistic strategies declined.

In logistics, secular demand continues to be supported by resilient supply chains and reshoring trends, although speculative development has slowed considerably. Office remains far from a full recovery, but improving lending activity and opportunistic buyers targeting supply-constrained prime offices suggest selective opportunities are emerging.

Global investment volumes increased 15% year over year during the first quarter of 2026, led by North America (+19%), followed by Asia-Pacific (+15%) and Europe, the Middle East and Africa (+14%). By sector, investment remained concentrated in multifamily residential, industrial assets and prime offices.

Industrial accounted for 47% of global fundraising, while data centers stabilized at around 25%. North America attracted 65% of investment flows into the data center segment, up from 30% previously, reflecting growing investor demand for regional rather than global strategies.

Regarding capital structures, Baistrocchi sees the most compelling opportunities in recapitalizations, preferred equity and structured equity investments, as well as single-asset continuation vehicles.

“Preferred equity is particularly attractive for acquiring high-quality assets financed under a very different interest-rate environment. Recapitalization opportunities should continue expanding as the refinancing wall approaches. By contrast, passive core strategies—which prioritize stable, lower-risk assets—are in a weaker position because higher risk-free rates make it increasingly difficult for assets with limited upside potential to generate sufficient excess returns,” she concludes.

Guinness Global Investors Expands Its Real Assets Platform With a New Acquisition

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Guinness Global Investors (Guinness) has announced the acquisition of Foresight Capital Management (FCM), the public markets division of Foresight Group. The transaction includes seven investment strategies focused on listed real assets and sustainable and impact investing funds.

According to the firm, FCM’s listed real assets team will be integrated into Guinness’ Real Assets team, led by Mark Brennan, who helped develop and manage these strategies at FCM before joining Guinness. Meanwhile, Nick Scullion, Partner and Head of FCM, will remain at Foresight.

“The diversification benefits offered by listed real assets are more relevant than ever in today’s markets. Reuniting Mark Brennan with the funds he launched at FCM represents an excellent opportunity to strengthen our real assets investment platform,” said Edward Guinness, CEO of Guinness Global Investors.

For his part, Mark Brennan, Portfolio Manager at Guinness, commented: “The addition of these strategies and the listed real assets team to Guinness accelerates our growth plans by providing greater scale and expanding our investment team.”

Eric Bright and Mayank Markanday, Portfolio Managers at FCM, added: “Guinness will provide our listed real assets teams with an outstanding platform to support future growth. Collaborating with Guinness and with Mark is a natural evolution that will allow us to expand our capabilities.”

WHEB Strategies

The transaction also includes WHEB’s sustainable and impact investing team, now part of FCM, which will work alongside the Guinness team responsible for the Guinness Sustainable Energy strategy, launched in 2006, and the Guinness Global Environment strategy, launched in 2025.

WHEB’s impact investing approach—widely regarded as a market benchmark—will be maintained. Its framework combines the impact generated by portfolio companies with the contribution made by investors, while incorporating measurement criteria, stewardship, corporate governance, and transparency.

Edward Guinness added: “FCM’s WHEB team is recognized as a thought leader in responsible investing and will strengthen the expertise we have built at Guinness in this area. FCM’s WHEB funds offer attractive long-term prospects, and their portfolio companies are currently trading at historically low relative valuations.”

Ted Franks, Portfolio Manager of the impact strategies, said: “We have always admired Guinness’ disciplined investment and research process, as well as its expertise in areas closely aligned with our strategies. The integration will create a larger investment team, and I am very excited about this new chapter.”

The Strait of Hormuz, Inflation, and Interest Rates: What Will Warsh’s Message Be?

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Geopolitics and the agreement to reopen the Strait of Hormuz—which is expected to provide relief to markets—set the stage for a week in which inflation and monetary policy return to the forefront. It is a busy week for central banks, with the Bank of Japan (BoJ) expected to raise interest rates by 25 basis points, while the Federal Reserve and the Bank of England (BoE) are both expected to leave rates unchanged.

What these three institutions have in common—along with the European Central Bank (ECB), which met last week and raised rates by 25 basis points—is that persistent inflationary pressures are testing their resolve. Undoubtedly, the announced peace agreement between Iran and the United States adds a new dimension to the current environment and to inflation expectations.

“After weeks of negotiations and swings between optimism and pessimism, it appears that a key diplomatic milestone has been reached to bring the war with Iran to an end. There will be setbacks along the way, but the path out of the crisis now seems clear. The energy crisis has been far less threatening than feared, as markets have once again demonstrated their resilience. While several long-term uncertainties remain, energy markets appear to be heading back toward a situation similar to the previous one, where oversupply dominates. We maintain our cautious outlook and expect further downward pressure on oil prices,” says Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer.

According to investment managers, global central banks—including the Fed—are likely to maintain a hawkish stance to combat persistent energy-related inflationary pressures. Raphael Olszyna-Marzys, International Economist at J. Safra Sarasin Sustainable AM, argues that this stance is reinforced by oil prices remaining at around $85 per barrel, adding approximately one percentage point to inflation this year. “In addition, the prolonged closure of the Strait has already triggered visible second-round inflation effects. At the same time, extremely tight credit spreads leave very little room for further compression,” he notes.

Focus on the Fed: Growth and Inflation

However, the greatest attention is focused on the Federal Reserve, and not only because it marks Kevin Warsh’s first meeting as Fed Chair. “While Donald Trump continues to call for rate cuts and some observers still expect one, the arguments in favor of such a monetary policy move do not withstand even the most basic analysis,” says Enguerrand Artaz, strategist at La Financière de l’Échiquier (LFDE).

From a growth perspective, the recent trend has been decidedly positive: economic growth remains solid, investment continues to expand thanks to AI, and the labor market is once again strengthening, with more sectors participating in the recovery. “This last point is especially important because, beyond being positive for consumer spending, it directly affects one of the Federal Reserve’s two mandates,” Artaz adds.

As for inflation, the latest figures clearly show an increase driven primarily—as expected—by higher energy prices, but also by a faster rise in services inflation, which is far more troubling for the Fed. Services inflation was the central concern during the Fed’s tightening cycle and, unlike energy prices, is not directly linked to the consequences of the conflict with Iran.

In other words, according to Artaz, “the Fed is simultaneously facing a resurgence in inflation—even excluding energy—and an economic cycle that continues to accelerate. It is difficult to envision a rate cut in such an environment, and markets are already pricing in a rate hike in 2026. Nevertheless, it is highly likely that Kevin Warsh, the new Fed Chair, will at least try to preserve the status quo for as long as possible amid pressure from the White House.”

Warsh’s First Meeting

Regarding what to expect from Warsh’s first meeting as Fed Chair, most investment managers expect the Federal Open Market Committee (FOMC) to leave the federal funds target range unchanged at 3.50%–3.75%, in line with market consensus and investor expectations. They also agree that he may remove the accommodative bias that has been in place since the current easing cycle began in September 2024. For some, this shift in tone would reflect a more balanced approach and, above all, growing concern over persistent inflation.

“The new Chair, Kevin Warsh, faces his first meeting in an especially complex environment. He inherits the most divided committee in more than three decades: three voting members had already opposed the accommodative bias in April, while outgoing Governor Stephen Miran once again voted in favor of a rate cut. The minutes make it clear that the committee’s internal balance has shifted toward a more hawkish stance, given the increasing uncertainty surrounding the duration and economic impact of the conflict in the Middle East. Recent data have done little to dispel those concerns,” says Michael Krautzberger, CIO of Global Public Markets at Allianz Global Investors.

According to Alessia Berardi, Head of Global Macroeconomics at the Amundi Investment Institute, this week’s meeting is not really about interest rates. “There is not much focus on rates themselves, but rather on Kevin Warsh’s first press conference and how he will balance the demands of President Trump with those of the bond market. Inflation is rising and the economy remains resilient—particularly the labor market, which is not cooling. The emerging agreement with Iran may make that balancing act easier for now. Questions about the balance sheet are expected during the press conference, although there are unlikely to be any clear answers.”

Finally, Benoit Anne, Senior Managing Director and Head of the Investment Insight Group at MFS Investment Management, highlights two key questions ahead of this week’s meeting: Will the median projection indicate no change in interest rates throughout 2026, which seems plausible? And will it continue to point toward some degree of monetary easing in 2027?

In his view, the broader issue is how the Fed’s communication strategy will evolve going forward. “This matters because Fed signals continue to move markets. The era of forward guidance may be coming to an end. Looking back, this tool appears to have gradually lost its effectiveness. It worked when interest rates were low and stable, and when the macroeconomic environment seemed relatively predictable. Going forward, we believe the Fed faces a challenging environment: persistent inflation, political pressure, and the challenge for a new Chair of building consensus around monetary policy,” Anne concludes.

How Have Pension Funds Changed Their Approach to Asset Allocation?

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Global pension assets have reached record highs, surpassing $68.3 trillion, but how has their asset allocation evolved? According to the Global Pension Assets Study published by the Thinking Ahead Institute (TAI) and sponsored by WTW, across the seven largest pension markets, over the past 20 years, the allocation to equities has declined by 9%, representing 48% of total assets, while allocations to bonds and other asset classes have increased by 3% and 6%, respectively, reaching 31% and 19% of total assets.

Looking specifically at last year, when pension assets exceeded $68.3 trillion, global markets delivered broad-based gains, with most major asset classes generating positive returns. “Equities performed particularly well, while fixed income also posted gains in light of global interest-rate cuts and narrowing credit spreads,” noted Jessica Gao, Director of the Thinking Ahead Institute.

Looking ahead to 2026, Gao highlights that fiscal support and AI-related investment should continue to be important drivers of growth. “Inflation trends and central bank actions will be key, particularly in the U.S., where strong capital spending and supportive fiscal policy may continue to drive growth and keep yields relatively elevated,” she added.

Change in Approach

The main conclusion of the report is that the current aggregate asset allocation more closely resembles that of 15 years ago. In addition, it argues that the Total Portfolio Approach (TPA) has reached a defining moment, as portfolios have moved beyond traditional asset-class silos. “What began as a cutting-edge concept among a small group of asset owners has entered the mainstream, supported by high-profile adopters. This shift reflects a growing recognition that managing today’s portfolios requires whole-portfolio decision-making rather than asset-class optimization, as well as organizational and portfolio resilience rather than simply managing volatility and tracking-error risks,” the report explains in its conclusions.

According to WTW, the TPA framework changes the fundamental question: “It is no longer about how an asset performs in isolation, but rather how each exposure contributes to the fund’s overall objectives, making this approach both a test of organizational maturity and an investment framework.”

In this regard, the report argues that a total portfolio perspective is better suited to the interconnected risks investors now face, including inflation, liquidity, concentration, systemic, and climate risks, all of which cut across asset classes. “TPA supports more coherent portfolio construction by clarifying the role of each exposure, the next unit of risk the fund is willing to assume, and the trade-offs among private market opportunities, liquidity, and long-term resilience. Its focus on integrated decision-making and enhanced data helps investors manage risk over time—not just short-term volatility—and promotes adaptability through scenario analysis and a broader view of risk than traditional models allow,” the report states in its conclusions.

It further argues that TPA is particularly important now because the investment environment is more uncertain, complex, and interdependent than the governance models for which many funds were originally designed. “Rapid technological change and rising political and systemic risks require frameworks that can operate with less certainty and less model stability. TPA addresses this by enabling faster and more coordinated decision-making, supported by better data, technology, and an organization-wide perspective,” the report concludes.

Harvey Schwartz of Carlyle: “Demand for Private Capital Will Be Extraordinary”

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Harvey Schwartz, de Carlyle
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Harvey Schwartz, CEO of The Carlyle Group, was unequivocal during Insite 2026, an event organized by BNY: the world is undergoing a structural reconfiguration of the global economy that will create unique investment opportunities, and the wealth segment will be one of its main drivers.

For Schwartz, the current moment leaves no room for half measures. “I believe this is the most important inflection point in capital formation that I have seen in my lifetime,” he stated. The argument is straightforward: the major trends that shaped finance for decades—disinflation, declining interest rates, manageable deficits, and global economic integration—have either reversed or been put on hold. The only force that continues unabated is technology.

The geopolitical backdrop is central to his analysis. Russia’s invasion of Ukraine, he argued, was “one of the most significant events of this century, perhaps of the last 50 years,” and, together with the conflict in the Middle East, it has completely reshaped government priorities. “Everywhere I go in the world—Japan, South Korea, Beijing, Central Europe—the narrative is always the same: national security, economic growth, and political stability,” he said.

But there has been a key redefinition of that concept. “Historically, national security was synonymous with defense. Now it is a much broader concept: it includes energy security and data security.” And that expansion, according to Schwartz, is precisely where private capital flows will be concentrated over the coming years.

Defense, Energy, and Other Sectors Where Carlyle Sees Opportunities

The Carlyle CEO was specific about the sectors expected to attract investment. Aerospace and defense, industrials, and healthcare top the list, all of them increasingly converging with technological advancement. “Look at all the defense investment announcements around the world: Canada, Europe, Japan. The demand is enormous,” he noted.

However, it was on energy that Schwartz made one of his strongest arguments, and where Carlyle holds a distinctive position. “We were the only major private equity firm that maintained a full energy business when energy was unpopular.” That decision, which at the time may have appeared contrary to consensus, now looks strategic: “The conversation around the world has shifted from ‘energy transition’ to ‘energy diversification,’ which is really code for: I need energy security.” Carlyle’s business in this sector ranges from traditional energy to renewables, covering the entire spectrum.

The underlying thesis is that governments cannot finance this transformation on their own. “Deficits are too large. So where will the capital come from? From banks, public markets, and private capital.” And within that trio, private markets—and the financial advisors who channel them—will play a leading role.

Wealth Management as a Driver of Private Capital

Schwartz was direct about the importance the wealth segment will have in this new cycle. “There are 43 million households in the United States that spend $15 trillion a year. That’s the size of China. All of that wealth needs to be managed by this audience,” he told the advisors in attendance.

The executive described how, upon joining Carlyle, he personally set out to listen to financial advisors before making decisions. “I went and spoke with them directly. I asked them what was important to them, about portfolio construction, what their clients needed. And I was surprised by how sophisticated they are. It bothers me when I read articles saying advisors are confused. They are not confused. They manage enormous pools of wealth, as sophisticated as my institutional client base.”

Regarding the product strategy for this segment, Schwartz emphasized diversification as the guiding principle. “You may not own the winning asset that rises 130% or 40%, but you will mitigate much of the downside risk. And as the industry evolves, you have to build the right vehicles for this audience.” The implicit warning was clear: the world is changing too quickly to bet everything on a single sector. “When I arrived at Carlyle, everyone told me the big gap was software. Three years later, nobody likes software.”

Despite the complexity of the environment, Schwartz concluded on an optimistic note. “I believe all of this can be very, very positive for markets. The marginal returns on that capital will be quite attractive over the next decade.” Geopolitical risk is difficult to quantify, he acknowledged, but it also creates inefficiencies that generate opportunities for those with the scale and sector expertise needed to navigate this environment.

Maximilian Kunkel (UBS GWM): “Family Offices Are Actively Diversifying Their Currency Risk”

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Photo courtesyMaximilian Kunkel, Chief Investment Officer, Global Family and Institutional Wealth at UBS GWM.

Sixty percent of family offices plan to modify their strategic asset allocation over the next 12 months. This is the highest percentage ever recorded in the UBS Global Family Office Report 2026 and, according to Maximilian Kunkel, Chief Investment Officer, Global Family and Institutional Wealth at UBS GWM, it reflects “both a defensive reaction to a more complex macroeconomic environment, increased geopolitical uncertainty, and concentration risk, as well as a proactive repositioning to capitalize on new megatrends, particularly artificial intelligence, as well as areas such as infrastructure and emerging markets.”

In addition, a paradigm shift is emerging in currencies: 65% of family offices expect confidence in the U.S. dollar as a reserve currency to weaken in the short term due to concerns about U.S. debt, and 47% acknowledge being overly exposed to the greenback. We spoke with Kunkel about these and other trends highlighted in the report.

Continuing with the currency theme, how is UBS advising clients to structure multi-currency frameworks without compromising the returns of the underlying assets, which are traditionally denominated in U.S. dollars?

With 65% expecting a weaker dollar and nearly half considering themselves overexposed to the currency, family offices are actively diversifying their currency risk. This involves designing multi-currency frameworks that balance diversification with return objectives. In practice, this may mean maintaining strategic allocations to currencies such as the euro and the Swiss franc, while employing hedging strategies to manage foreign exchange risk without undermining the performance of dollar-denominated assets. The goal is to enhance portfolio resilience and flexibility—not to abandon the dollar, but to ensure portfolios are prepared for a range of scenarios.

Interest in AI remains strong, but we are seeing a shift in focus from highly valued software companies toward the physical ecosystem supporting AI. For a fund selector, what is the most efficient way to capture this “second derivative” of AI? Is it time to rotate from purely technology-themed funds into global infrastructure funds?

Interest in artificial intelligence (AI) remains strong, but investors increasingly recognize that the opportunity extends beyond the technology itself and encompasses the entire value chain that supports it, including the energy and resources required for its growth. For investors, this means it is important to take an active management approach not only within the AI universe itself—software, hardware, and applications—but also across the sectors that enable its development, such as commodities, utilities, and industrials, ensuring portfolios are positioned to benefit from innovation throughout the ecosystem.

Historically, gold has represented a modest allocation within family office portfolios (around 2%). However, the 2026 report shows that the average planned allocation has risen to 3%. Are wealthy families increasingly using gold as a structural hedge against the erosion of purchasing power in traditional fiat currencies?

Beyond its role as a safe-haven asset against geopolitical risks, family offices are increasingly using gold as a structural hedge against the loss of purchasing power in fiat currencies. Concerns about rising sovereign debt levels, currency volatility, and geopolitical risks have contributed to this trend. Family offices typically view gold as a long-term store of value and a diversification tool within multi-asset portfolios.

The report highlights a striking geographic divergence: while family offices in Europe and Asia are actively seeking to reduce concentration risk in the United States by diversifying into Asia-Pacific and Western Europe, U.S. family offices have increased their domestic bias from 86% to 88%. How do you explain to a North American family office that concentrating on its domestic market may represent a dangerous concentration risk in the current geopolitical environment?

Global diversification can help mitigate risks arising from domestic disruptions, regulatory changes, or sector-specific slowdowns. It also provides access to opportunities unique to different regions. We believe the most resilient portfolios are those that successfully balance local expertise with global opportunities.

Finally, the report once again highlights a persistent challenge: governance. With the multi-trillion-dollar intergenerational wealth transfer already underway, what are the real risks for financial advisors of losing relationships with these structures if families fail to professionalize their governance today?

Despite significant progress in the institutionalization of investment processes, governance remains an area requiring greater attention. With only one-third of family offices having a defined succession plan and just 27% actively preparing the next generation, there is a risk of losing continuity, family cohesion, and long-term stability as wealth passes from one generation to the next. In the context of the Great Wealth Transfer, professionalizing governance through proactive succession planning and the involvement of younger generations is essential to preserving family wealth, ensuring smooth transitions, and maintaining the effectiveness of family office structures over time.

ECB Raises Interest Rates by 25 Basis Points Due to the Inflationary Impact of the War in the Middle East

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The Governing Council remains committed to setting monetary policy in a way that ensures inflation stabilizes at its 2% medium-term target. In line with this commitment, the Governing Council has decided to raise the ECB’s three key interest rates by 25 basis points. The war in the Middle East is generating inflationary pressures, and the decision to increase interest rates is appropriate across the various scenarios assessing the possible evolution of the shock and its impact on the euro area’s medium-term outlook.

The baseline scenario in the latest Eurosystem staff projections foresees headline inflation averaging 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. Inflation excluding energy and food is projected to average 2.5% in both 2026 and 2027, and 2.2% in 2028 under this scenario. Compared with the March projections, staff have revised upward the baseline inflation forecasts for 2026 and 2027 due to a higher projected path for energy prices, which is expected to pass through to food, goods, and services inflation to some extent.

The baseline scenario projects economic growth to average 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028, implying downward revisions for 2026 and 2027 due to a more pronounced impact of the war on commodity markets, real incomes, and confidence.

The outlook remains uncertain, with upside risks to inflation and downside risks to economic growth. The full implications of the war for medium-term inflation and growth will depend on the intensity and duration of the energy price shock, as well as the magnitude of its indirect and second-round effects. This uncertainty is also reflected in the wide range of inflation and growth outcomes across the updated illustrative scenarios prepared by Eurosystem staff. These scenarios will be published alongside the staff projections on the ECB’s website.

With today’s decision, the Governing Council remains well positioned to navigate the uncertainty caused by the war. It will continue to closely monitor developments and follow a data-dependent, meeting-by-meeting approach in determining the appropriate monetary policy stance. In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, taking into account incoming economic and financial data, underlying inflation dynamics, and the strength of monetary policy transmission. The Governing Council is not pre-committing to any particular rate path.

ECB Key Interest Rates

The Governing Council has decided to raise the ECB’s three key interest rates by 25 basis points. Accordingly, the interest rates on the deposit facility, the main refinancing operations, and the marginal

Will It Be a Record-Breaking World Cup… Financially?

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The 2026 FIFA World Cup will not only be the largest edition in the history of soccer. It could also become one of the biggest sports monetization events ever recorded.

With 48 participating national teams, 104 matches, and a tournament jointly hosted by Mexico, the United States, and Canada, the competition represents an unprecedented expansion of the global soccer product. But behind the sporting spectacle lies a story equally relevant for investors, technology platforms, betting operators, and media companies: the creation of an ecosystem with larger audiences, more data, and more monetization opportunities.

FIFA estimates revenue of $8.911 billion during 2026, a record figure driven primarily by broadcasting rights, hospitality, ticket sales, and commercial agreements. Television rights alone are expected to generate approximately $3.925 billion, equivalent to 44% of projected revenue, while hospitality and ticket sales will account for another 34%.

The economic scale far exceeds the approximately $7.5 billion generated by Qatar 2022 and reflects how soccer has evolved into a global platform for entertainment and digital consumption.

More Matches, More Betting

The expansion of the tournament implies a substantial increase in business opportunities for the sports betting industry.

The 104 matches represent an increase of more than 60% compared with the 64 matches played under the traditional format. Each game generates hundreds of potential betting markets, ranging from final outcomes to specific statistics and live betting opportunities.

The trend coincides with the strong global growth of online betting and increasing technological sophistication driven by artificial intelligence, data analytics, and content personalization.

However, the biggest transformation may be taking place outside traditional sportsbooks.

From Betting to Prediction Markets

Platforms such as Polymarket and Kalshi are driving a new category: prediction markets.

Although conceptually similar to sports betting, they operate under a framework that more closely resembles financial markets. Users buy and sell contracts tied to the probability of specific outcomes, with prices fluctuating in real time based on available information and collective expectations.

The line between financial speculation and sports entertainment is beginning to blur.

During 2026, aggregate trading volumes across leading prediction markets have reached record levels, surpassing $24 billion per month during certain periods. At the same time, Kalshi and Polymarket have significantly expanded their market share within the sector, benefiting from growing acceptance among retail investors and participants from the crypto ecosystem.

The World Cup appears poised to become the industry’s next major catalyst.

Streaming and Digital Monetization

Another major financial battleground is content distribution. Audience fragmentation and the rise of mobile consumption have transformed the traditional sports broadcasting model. The 2026 World Cup is expected to be the most digital tournament in history.

The combination of traditional television, streaming platforms, social media, and personalized content will create multiple revenue streams beyond conventional advertising.

Monetization through subscriptions, targeted advertising, e-commerce, and digital experiences is likely to play an increasingly important role in the economics of sports.

An Industry Increasingly Resembling Wall Street

The evolution of the sports ecosystem points toward growing convergence among entertainment, technology, and finance.

Real-time information, artificial intelligence, tokenization, probability-trading platforms, and increasing participation from institutional investors suggest that the sports business is moving toward models that increasingly resemble financial markets.

In that context, the 2026 World Cup could be remembered not only as the largest tournament in sporting terms, but also as a turning point in how global attention is monetized.

More matches mean larger audiences; larger audiences generate more data; and more data creates new business opportunities. The World Cup is no longer just a soccer tournament. It is increasingly becoming a massive global financial asset.

Janus Henderson to Develop New AI-Based Analytics and Client Engagement Tools

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Photo courtesyAli Dibadj, CEO of Janus Henderson.

Janus Henderson has announced that it is developing a suite of AI-native tools to transform the way it invests and serves its clients. According to the firm, Percepta, a transformation company backed by General Catalyst, will be responsible for building the infrastructure, while Anthropic’s Claude will serve as the AI model layer.

The firm believes that cutting-edge AI delivers the greatest impact when it enhances human expertise, enabling an even more client-centric approach to both investing and client service. Building on Claude, Janus Henderson is putting this approach into practice in two ways that could shape the future use of artificial intelligence within the asset management industry.

Specifically, it is developing new AI-native tools for its investment and client service teams. On the one hand, the asset manager is working on Prism, a global client intelligence and engagement platform designed for Janus Henderson’s distribution teams. Powered by Claude, it helps sales teams prioritize the right outreach actions, leverage internal and third-party data to better understand what clients have and what they need, and prepare personalized communications. In this way, it provides a single, consistent tool for sales and marketing teams across all regions.

On the other hand, the firm is developing Libros, an AI-native research management tool for Janus Henderson’s investment teams. Also powered by Claude, it synthesizes the firm’s internal research alongside external research and public market data, helping analysts and portfolio managers identify relevant signals more quickly and devote more time to analysis and investment decision-making.

In addition, Janus Henderson is rolling out Claude across the organization. Its engineering teams will use Claude Code, while Cowork will be available to employees in investment, distribution, and corporate functions, further integrating AI into day-to-day work.

Meanwhile, Prism and Libros are being developed in collaboration with the technology teams at Janus Henderson and Percepta. Percepta helps large enterprises transform through AI by embedding specialized engineers, researchers, and product managers directly into organizations and leveraging the Percepta Mosaic platform to rapidly develop agent-based workflows and customized decision-support tools.

At Janus Henderson, Percepta’s teams work alongside the firm’s investment, distribution, and technology professionals to develop Prism and Libros on Claude, and to build the data and knowledge foundation that connects Claude to Janus Henderson’s proprietary research, client, and market data.

According to the asset manager, this integrated model addresses a challenge that has slowed AI adoption in asset management: generic tools rarely fit the way an active manager analyzes markets, manages portfolios, and serves clients. The value comes from connecting cutting-edge AI to proprietary data and rebuilding core workflows around it, which generally requires engineering embedded within the business rather than externally purchased software.

“We believe the AI transformation will fundamentally change the way asset managers serve their clients as it becomes integrated into the core of the business. This collaboration with Anthropic and Percepta, together with Janus Henderson’s partnership with Trian and General Catalyst, reinforces our leadership in AI and tokenization innovation and supports our ambition to be the most technologically sophisticated asset manager in the world. We believe it will improve the way we serve our clients—the 75 million people* around the world who trust us to help build a brighter future together,” said Ali Dibadj, CEO of Janus Henderson.

For his part, Peter Nolan, Head of Asset and Wealth Management at Anthropic, stated: “Asset management is a knowledge-intensive industry where reliable AI can help teams work faster and deliver better client service. Janus Henderson is putting Claude directly into the hands of the teams responsible for managing investments and client relationships—from purpose-built tools such as Prism and Libros to Claude Code and Cowork across the company.”

“Transforming industries with AI requires fundamentally rethinking how work gets done within organizations and designing engineering systems purpose-built for a new way of operating. Our work with Janus Henderson focuses on strengthening research and market intelligence while enhancing client engagement. We are proud to collaborate with Janus Henderson and Anthropic in transforming the asset management industry,” commented Hirsh Jain, CEO of Percepta.

Phil Orlando of Federated Hermes: “There Is Overvaluation, Not a Bubble; Technology Stocks Could Fall 20%”

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Phil Orlando, estratega jefe de mercados globales de Federated Hermes
Photo courtesy

Phil Orlando, Chief Market Strategist at Federated Hermes, opened his presentation at INSITE 2026 with a historical perspective: from Eugene Black in 1933 to Jerome Powell, there have been eleven leadership transitions at the U.S. Federal Reserve, and the market tested every new chair without exception. “The market hits a rough patch, tests the new leader, and then recovers. By the end of the year, the new chair gains credibility,” he said.

The current transition, however, has several unique features that distinguish it from previous ones. The confirmation of the new chair was the closest in recent history, with a vote of 54 in favor and 45 against. In addition, Jerome Powell chose to remain a member of the Board of Governors after his term as chair expired on May 15, something that had happened only once before, with Marriner Eccles in 1948. This creates an unprecedented dynamic, with the outgoing and incoming chairs sitting at the same table. Finally, the meeting at the end of April recorded four dissenting votes, the highest number since 1982. The dissenters’ argument: the Fed should neutralize its bias in light of its dual mandate—inflation and employment—given that the labor market remains strong while inflation continues to exert upward pressure.

Against this backdrop, Orlando highlighted the critical calendar for the coming months: meetings on June 17, July 29, and September 16, with the new Federal Reserve chair’s inaugural speech at Jackson Hole, Wyoming, on August 28 serving as a pivotal moment. “That will be the moment when he presents his vision. We do not know what he will say or do, but the market will be paying very close attention,” he warned. His conclusion: there is a real possibility of turbulence during the summer.

Despite monetary policy uncertainties, Orlando remained constructive on the state of the economy. Combined retail sales growth in March and April reached 4.5% year over year, a result he described as solid. He acknowledged the argument of a bifurcated economy but downplayed it with a straightforward arithmetic exercise: the wealthiest 10% of the population accounts for approximately 50% of consumer spending, while private consumption represents 70% of GDP. Therefore, that top decile accounts for roughly one-third of GDP. “Stock prices are at all-time highs and home values have risen 50% from COVID lows. Sixty percent of Americans own stocks and property. They are doing well, and they are spending,” he explained.

Among lower-income households, recently approved tax reforms generated savings of approximately 18% year over year, enough to offset the impact of higher energy prices for roughly six months.

On the corporate side, Orlando highlighted the full expensing of corporate capital expenditures as the most stimulative element of the recently approved tax legislation. The result: productivity grew 3% over the last four quarters, well above the historical average of nearly 2% over the past five decades. Taking all these factors into account, he projected U.S. GDP growth of around 3% in 2027, significantly above the market consensus of approximately 2%.

On monetary policy, Orlando was direct. The two-year Treasury yield rose from 3.40%—the level at which pressure was mounting on the Fed to cut rates—to 4.10% currently, reflecting the energy supply shock and inflation. Looking at the data objectively, the more likely move would be a rate hike rather than a cut. However, he noted that the Fed typically does not react to temporary supply shocks. “The most likely outcome is that the Fed does nothing and waits for the energy situation and inflation to normalize,” he said.

Overvaluation, Not a Bubble: The Diagnosis and Strategy

Orlando firmly rejected comparisons with the technology bubble of the late 1990s. “These are real companies, with real products, real revenues, real earnings, and real valuations,” he said. Nevertheless, he acknowledged that valuations are ahead of fundamentals: his estimate for the S&P 500 is 20 times expected corporate earnings over the next 12 months, while the current multiple is around 22.5 times, implying that the market is trading roughly 12% to 13% above where it should be.

“Could there be a 10% correction during the summer and early fall? Absolutely. But we are nowhere near the 85% collapse we saw in the Nasdaq between 2000 and 2003,” he added.

In terms of asset allocation, Federated Hermes maintains a six-percentage-point overweight in equities relative to its benchmark—66% in stocks and 34% in bonds and cash—but Orlando was specific about where that exposure should be concentrated. Not in mega-cap technology stocks, which trade at 30 to 40 times earnings, but in sectors trading closer to 14 or 15 times earnings: domestic large caps, small caps, and emerging markets. These sectors also offer dividend yields of between 3% and 5%.

“If technology falls 20% or 30%, those sectors might decline only 5%, partially offset by dividends. The key is to stay invested but remain focused on valuation,” he summarized. In fixed income, he noted that the bond market has reacted more clearly than equities to the rebound in inflation: the yield on the 10-year Treasury rose from around 4.33% to nearly 4.70%.

The Election Cycle: The Dip That Is Always an Opportunity

To conclude, Orlando placed the current environment in historical perspective. Over the last 80 years of S&P 500 history, the two middle quarters of the U.S. midterm election year have historically been the weakest, partly because the party in power typically loses seats. This year also combines a Fed leadership transition with a midterm election cycle, a combination that has occurred only six times in the last 93 years and has always been accompanied by a market pullback of roughly 10% during the middle of the year.

But that weakness has also consistently represented a buying opportunity: from the market bottom in those years, equities went on to post sustained gains over the following two and a half years. “If I am right and there is a dip over the next quarter or two, that will be the time to buy with conviction. I believe we will be back at all-time highs before year-end,” he concluded.