Allfunds has unveiled Allfunds Navigator, a new functionality designed to enhance fund distribution using real-time data, artificial intelligence (AI), and machine learning. The tool aims to help users identify new opportunities, key market entry points, and areas where unallocated capital (dry powder) is ready to move.
According to the B2B WealthTech platform for the fund industry, the tool leverages a dataset encompassing more than €4.5 trillion in fund market assets. “This tool bridges the gap between raw data and clear strategic action, helping users stay ahead of market trends and maximize their impact,” the company explains.
The tool is tailored for asset managers’ sales teams, simplifying prospecting by identifying high-potential distributors and markets, uncovering untapped opportunities, and saving time and effort. It also serves analysts, offering deep, customizable insights to refine strategies and discover hidden opportunities.
The company highlights that the tool’s exceptional feature is its use of integrated AI for strategic insights. “It employs advanced, real AI to uncover hidden opportunities and deliver precise, data-driven analyses. Among its applications, users can leverage analyses of unallocated capital and money market assets to execute specific, informed forward-looking approaches,” the company notes.
Allfunds Navigator supports decision-making by eliminating guesswork and providing actionable intelligence that optimizes efforts and drives growth in a competitive, dynamic market. Designed for both analysts seeking in-depth analysis and sales teams looking for clear, actionable leads, its interface offers intuitive navigation and unparalleled flexibility.
Additionally, Allfunds has developed an integrated assistant, named ANA, which simplifies navigation. “Analysts, sales teams, and executives highlight that ANA completes in seconds tasks that traditionally took hours of data extraction, manipulation, and analysis, delivering equally accurate results,” the company states.
Following the launch, Andreas Pfunder, Director of Data Analytics at Allfunds, remarked, “Allfunds is more than a platform: we are a partner for growth. Our Allfunds Navigator tool exemplifies this commitment, offering our clients a solution that evolves with their needs and simplifies their challenges, helping them thrive in an increasingly complex and competitive market.”
Meanwhile, Juan de Palacios, Head of Strategy and Product at Allfunds, added, “We have always believed that actionable insights are the backbone of successful strategies. With Allfunds Navigator, we are not just offering another tool; we are providing the power of real-time intelligence and AI, enabling our clients to see what others do not and act faster than ever before.”
The latest monthly fund manager survey conducted by BofA shows an extremely optimistic sentiment, reflected in a record allocation to U.S. equities, low cash exposure, and the highest level of global risk appetite in three years. According to the entity, this optimism is driven by U.S. growth associated with “Trump 2.0” and a flexible Federal Reserve regarding rate cuts.
Fund managers have improved their expectations for global growth and corporate earnings in the December edition of BofA’s survey. Specifically, six out of ten respondents believe there will be no global recession in the next 18 months. Additionally, 60% point to the likelihood of a soft landing, 33% still believe there will be no landing, and only 6% are considering a hard landing, the lowest in six months.
Part of this sentiment is clearly reflected in the cash allocation. “The level fell from 4.3% to 3.9% of assets under management (AUM), matching the lowest level since June 2021. Specifically, cash allocation decreased to a 14% net underweight from a 4% net overweight, the lowest level recorded, at least since April 2001. The 18-percentage-point drop in December represents the largest monthly decrease in cash allocation in the past 5 years. Previous low levels of cash allocation coincided with significant highs in risk assets (January-March 2002, February 2011),” the entity explains in its report.
It is also noteworthy that, in December, expectations for global growth improved to a 7% net of respondents expecting a stronger economy (compared to the 4% net that expected a weaker economy in November), being considered positive for the first time since April 2024. “December’s increase in global macroeconomic sentiment was led by greater optimism about U.S. growth, with the highest percentage of FMS investors expecting a stronger U.S. economy (6% net) since at least November 2021,” they point out from BofA. Additionally, they explain that the “Trump 2.0” political agenda (tax cuts, deregulation) drove earnings expectations, with 49% expecting an improvement in global earnings, a 22% increase from the previous month, reaching a three-year high. These expectations are also relevant in terms of what managers expect from monetary policy. In this regard, 80% expect further interest rate cuts in the next 12 months.
This optimism is not incompatible with managers identifying certain risks. In fact, 39% cite the trade war as the biggest downside risk for 2025, while 40% identify growth in China as the biggest upside risk. When asked which development would be seen as the most optimistic in 2025, the FMS respondents in December pointed to: the acceleration of growth in China (40%); productivity gains driven by AI (13%); a peace agreement between Russia and Ukraine (13%); and tax cuts in the U.S. (12%).
Asset Allocation
The survey reveals an interesting asset allocation fueled by this optimism. According to the survey, the weight of U.S. equities increased by 24% compared to the previous month, reaching a net 36% overweight—the highest level ever recorded.
The December jump was the largest observed since September 2023. “Investors are positioning their portfolios for an ‘inflationary boom in the U.S.’ next year, in anticipation of the pro-growth policies announced by the upcoming Trump administration,” notes BofA.
In relative terms, fund managers have the highest overweight in U.S. equities compared to emerging market equities since June 2012. Similarly, they hold the highest overweight in U.S. equities relative to Eurozone equities since June 2012—during the Eurozone debt crisis. Notably, the relative overweight of U.S. equities versus Eurozone equities is the fourth highest in the last 24 years.
Among the monthly changes made by fund managers, allocations highlight an increased weight in the U.S., the financial sector, and equities in general, while reducing allocations to emerging markets, the Eurozone, and cash.
As 2025 approaches, it’s time to reflect on the year that is coming to an end. 2024 has been a year of new horizons for Funds Society: a year in which we entered new markets and countries (Brazil), launched new projects, and welcomed new team members. These months have been filled with challenges—but also with new aspirations—that we have overcome thanks to our dedicated team and the support of our readers.
We have continued taking confident steps to expand our reach and to keep offering you the best financial news and updates from every corner of the globe. That’s the key: a local presence combined with a global reach, allowing us to connect with you across many points on the map and build bridges between Spain and the Americas.
Bridges that are strengthened every day by an interconnected and committed team. That’s why we want you to meet all its members—the people who make it possible for Funds Society to keep evolving, enriching its history, and seeing its family grow. After almost 12 years of hard work, we are now present in seven countries, and we hope to keep adding more!
We want to thank you for continuing to choose us as your trusted source of information and for staying by our side on this journey, which is full of dedication, commitment, passion, and specialized journalism—but above all, of people.
Here we are to wish you, through this video, a very happy New Year filled with success, growth, and new opportunities.
The next term of Donald Trump will have global repercussions, and Asia will be no exception. It is clear that a victory for Kamala Harris would likely have meant continuity in Joe Biden’s policies; however, the Republican triumph will bring significant changes in the political, economic, financial, and regulatory arenas. “Profound and rapid changes are coming to Asia. In cross-border trade, currencies, risk appetite, and geopolitics, the influence of the new Washington administration will be far-reaching. In our view, the effects will be challenging and likely materialize sooner rather than later, possibly during the first half of 2025,” said John Woods, CIO Asia at Lombard Odier.
The firm points out that the relationship between the U.S. and China is fundamental to America’s broader engagement with Asia, with trade playing a key and bipartisan role. From the U.S. perspective, this relationship is ambivalent. According to Woods, on one hand, China is one of America’s most important trading partners; on the other, it raises concerns about trade imbalances, currency manipulation, and market distortions.
“The goal of a U.S. manufacturing revival drives the Trump administration’s promises to bring back jobs and ‘make America great again.’ This was a key aspect of his campaign, backed by tariff and quota proposals. With potential 60% tariffs on Chinese goods and 10% on the rest of the region, the risks are significant. However, we have seen this scenario before. In 2018, President Trump targeted approximately $360 billion in Chinese imports to address intellectual property concerns and reduce the trade deficit. While the direct impact of the tariffs was limited, the indirect effects significantly dampened global corporate confidence and investment,” Woods emphasized.
From a regional perspective, the secondary effects of U.S. fiscal and monetary policy under the new administration could be more extensive than the tariffs. “A focus on border control, tax cuts, and tariffs could increase inflationary pressures in the U.S. economy, leading to higher interest rates and bond yields,” Woods added. In fact, after the election, Lombard Odier raised its forecast for the Fed’s terminal rate to 4%. According to Woods, as higher U.S. rates trickle down to Asia, local economies—already impacted by weaker exports—will face a slower growth outlook.
Additionally, the dollar will play a crucial role in this transmission. “A strong dollar makes dollar-denominated imports more expensive, raising inflation and straining consumers and businesses in import-dependent countries. Nations with significant dollar-denominated debt will face higher repayment costs, affecting national budgets and growth investments,” Woods noted.
In this challenging macroeconomic context, Lombard Odier believes the market opportunity question will shift from “buy Asia” to “why Asia?” While there may be attractive opportunities in Asian equities, U.S. markets continue to draw investment flows, reflecting a dynamic economy and robust corporate performance, particularly among large tech firms.
“Our recent decision to increase portfolio exposure to U.S. equities reflects this American economic exceptionalism, which we anticipate will persist as the macroeconomic effects of Trump’s policies take hold. We note that consensus forecasts for earnings growth in the U.S. are on par with those for Asian equity markets. Investors face a choice between risk and opportunity in Asia versus the U.S., and historically, they have favored the latter. While a strong dollar is likely to boost earnings for Asian companies sensitive to U.S. demand, it could also increase the debt servicing burden for quasi-sovereign issuers and banks critical to the region,” Woods explained.
In this regard, Woods clarified that companies with dollar-denominated debt will likely face higher repayment costs, straining their financing and investment activities. He noted that during Trump’s first term, dollar-denominated credit spreads steadily widened as tariffs were imposed, although they remained stable immediately after his election in 2016.
“We believe that Asian economies will maintain reasonable growth in 2025, as the economic impact of tariffs is relatively moderate compared to recent stress episodes, such as the banking crisis or the global pandemic. China’s shift toward stimulus offers hope that the country can withstand the impact of new U.S. tariffs, which could anchor the region’s financial market performance. However, it is hard to imagine growing global demand for Asian risk assets until the president-elect’s likely transactional approach to tariffs results in more encouraging developments than his campaign promises,” Woods said.
Finally, Woods noted that the most profound impact of the Trump administration on Asia could be its deglobalizing effect on international relations. He reflected that the U.S. has increasingly focused on domestic interests, a trend that is likely to continue, potentially leaving room for a more assertive China to fill the vacuum.
“The mutual desire of the U.S. and China to decouple their economic relationship has evolved from a trade dispute into a more permanent shift. Asia largely orbits around China’s economy and the U.S.’s political influence, creating tensions historically managed with pragmatism and flexibility. However, this balance is eroding. As Asia’s geoeconomic dynamics change, local investment strategies must adapt to increasing tensions and points of conflict. The economic uncertainty stemming from potential trade agreement failures and sanctions exacerbates the situation,” Woods argued.
In one of his concluding remarks, Woods highlighted that while many Asian nations have maintained a non-aligned stance between the U.S. and China, China’s economic appeal—particularly through multiregional infrastructure developments like the Belt and Road Initiative—makes neutrality increasingly challenging. “This could lead to a realignment of positions, resulting in new spheres of influence,” concluded John Woods.
The Fed has cut rates for the third time since March 2020 by 25 basis points, as expected. International asset managers highlight that Powell acknowledged this decision was “more difficult” than previous meetings and emphasized it was “the right decision” given current conditions. This follows the recent FOMC communication emphasizing the merits of a “gradual” normalization of policy, supported by resilient economic fundamentals and growing political uncertainty with the arrival of President Trump.
“A significant modification in the statement’s language reinforces how measured this trajectory is. The incorporation of the ‘magnitude’ and ‘timing’ signals a slower rate-cutting path, with markets now pricing in a 90% chance of a pause in January, aligning with our assessment. Powell reinforced this message, noting that while policy remains restrictive, they are ‘significantly closer to neutrality,’ justifying a more cautious approach reflected in the reduction from four to two projected cuts in 2025,” says Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International.
For Dongyue Zhang, Head of APAC Investment Specialists for Multi-Asset Investment Solutions at abrdn, the Fed took a hawkish tone. “These signals solidify our view that the Fed will pause in January as it slows the pace of easing. We expect a cut in March, depending on continued cooling of inflation. In our view, there’s a higher risk of fewer moves, especially if we see fireworks in the early days of the Trump administration. Judging by the slight shift in the Fed’s statement, we anticipate increased volatility due to policy changes under the Trump Administration in 2025,” Zhang notes.
This new stance represents another significant adjustment in the Fed’s approach, which just three months ago led to a 50-basis-point cut. “This shift aligns with the idea that persistent inflationary pressures would prevent the Fed from implementing the easing cycle markets had anticipated. Instead, we expect the Fed to recalibrate its policy, shifting from a restrictive stance to a less restrictive one. That’s exactly what’s happening, with Powell hinting that the central bank might end consecutive cuts, potentially pausing as soon as its next meeting in January: ‘We are at, or near, a point where it will be appropriate to slow the pace of further adjustments,’” says Jean Boivin, Head of the BlackRock Investment Institute.
In this regard, George Brown, Senior U.S. Economist at Schroders, expects an additional quarter-point cut in the March 2025 meeting, followed by a 50-basis-point hike in 2026. “It’s true that the central bank’s reaction function could be distorted if its independence were undermined by the Trump Administration. However, in our view, measures to ensure that independence are sufficient to mitigate this risk, as is the fear of market backlash,” Brown explains.
The Key Lies in the Dot Plot
Regarding the Summary of Economic Projections (SEP), Ahmed notes that the Fed appeared less aggressive in the dot plot: “The 2025 dot removed two cuts, exceeding market expectations of just one less cut. This adjustment is accompanied by stronger growth projections, higher inflation, and lower unemployment in 2025,” he states. He adds: “Importantly, the committee’s assessment of the long-term neutral rate was adjusted upward, with the median rising from 2.9% to 3%, and the central trend range increasing to 2.8%-3.6%.”
For Daniel Siluk, Head of Global Short Duration & Liquidity and Portfolio Manager at Janus Henderson, the SEP is markedly hawkish, with only two rate cuts projected for 2025, indicating heightened concern about the persistence or resurgence of inflation. “Inflation forecasts for 2025 have been revised upward to 2.5% (from 2.1%). Economic growth projections have been slightly raised for 2025, to 2.1% from 2.0%, but downgraded beyond the forecast horizon, with GDP growth for 2027 revised down to 1.9% from 2.0%. This suggests that more restrictive monetary policy has yet to make a significant dent in the economy,” notes Siluk, who observes that the market’s initial interpretation was hawkish, as evidenced by the flattening of the yield curve.
“Powell made it clear that a slower pace of cuts is the baseline case. He argued that inflation is still moving in the right direction, downplayed some of the stickiness in core inflation, and noted that the labor market is still cooling, but only gradually. We believe that if tariffs were the primary reason for the inflation uptick, we would have expected to see a softer growth forecast for 2025. Powell himself seems to have discounted tariffs, citing significant uncertainty regarding the scope, timing, and impact of tariff measures. We maintain our forecast for two more rate cuts next year, but risks have clearly shifted toward fewer (or no) cuts,” Bank of America analysts add.
David Page, Head of Macro Research at AXA IM, takes it a step further, predicting that the Fed will cut rates only once in March next year to 4.25%, depending on the magnitude of the new administration’s policies. “We are also more pessimistic about the long-term impact of these policies and expect them to weigh on growth through 2026, which we believe will prompt the Fed to resume easing in the second half of 2026. We forecast the FFR to end 2026 at 3.5%, now aligned with the Fed’s projections, but we do not believe the path will be as smooth as implied by the Fed’s mild cuts of 50, 50, and 25 basis points,” Page concludes.
Managing modern portfolios demands flexible and diversified financial instruments that enable the maximization of returns while managing risks efficiently. Two widely used instruments in this context are structured notes and special purpose vehicles (SPVs). While both serve specific purposes, their applications vary depending on project needs, portfolio structure, and investor risk profiles, explained the specialized firm FlexFunds.
To choose the most suitable instrument, portfolio managers must deeply understand the characteristics, uses, and risks associated with each tool, ensuring they align with their clients’ objectives and needs. Below, we examine the specifics of each option.
Structured notes
Structured notes are customized financial instruments that combine fixed-income elements with derivatives, offering managers potential returns tied to underlying assets like stocks, indices, or commodities.
When to use a structured note:
Risk-adjusted return optimization
Structured notes enable tailored risk-return profiles. They are valuable for managing portfolios focused on capital preservation while capturing moderate returns.
Access to complex assets
Portfolios seeking exposure to hard-to-trade or replicate assets (e.g., custom indices or baskets of stocks) can use structured notes as an efficient solution.
Risk hedging
These instruments allow for hedging strategies, such as market downturn protection, often at a lower cost than directly trading derivatives.
Cash flow management
Structured notes offer flexibility in terms of maturity and coupon payments, facilitating integration into portfolios with specific liquidity needs.
Risks:
Counterparty risk: They rely on the issuer’s solvency, typically banks or financial institutions. If the issuer defaults, the investment could be lost.
Illiquidity: These notes are illiquid and challenging to sell before maturity.
Complexity and transparency: Their structure can be difficult to understand, and associated fees may lack transparency, potentially negatively impacting the investor.
SPVs (Special Purpose Vehicles)
An SPV is a separate legal entity created to manage specific assets or risks, isolating these operations from the parent company. These structures are commonly used in asset securitization and specific projects.
When to use an SPV:
Risk isolation: SPVs separate risks associated with specific assets from the parent company’s general balance sheet, protecting both investors and the parent company.
Financial flexibility: They enable capital raising through tailored instruments, such as bonds or structured investment vehicles.
Risk distribution: Funded by multiple investors, SPVs distribute risks among participants.
Cost efficiency: Depending on the jurisdiction, SPVs may be more cost-effective to establish compared to other alternatives.
Management of complex assets: For portfolios including illiquid or high-risk assets, SPVs simplify the repackaging, valuation, and sale of these assets.
Risks:
Operational complexity: Structuring and managing an SPV can be complicated and require technical expertise.
Transparency issues: Legal separation does not always fully eliminate reputational or financial risks to the parent company.
Market exposure: SPV performance depends on the assets it manages; if these assets underperform, investors may face losses.
Both instruments offer significant benefits, but the choice depends on portfolio objectives and strategies. Structured notes are suitable for managers seeking diversification with some level of protection, while SPVs are ideal for specific projects or asset structuring. The key is to carefully evaluate the risks, costs, and benefits of each option before making investment decisions. The table below summarizes the main differences between these instruments.
As a leader in creating investment vehicles through Irish SPVs, FlexFunds simplifies a process traditionally seen as complex and costly. Thanks to our expertise and innovative approach, we enable portfolio managers to design investment structures tailored to their strategies, achieving faster and more cost-efficient execution.
By combining the advantages of structured notes and SPVs, FlexFunds offers customized solutions that maximize efficiency in capital raising and distribution. These solutions are also cost efficient, as they can be issued in half the time and cost associated with conventional alternatives.
To explore how FlexFunds can enhance your investment strategy in international capital markets, don’t hesitate to contact our specialists at info@flexfunds.com
The Republican party’s sweep of the US election is likely to boost equity markets, particularly those in the US, if the pattern of the first Trump administration is any guide. The risks are that either growth accelerates by too much and the US economy overheats, or that large tax cuts prompt a negative reaction from the bond market. We will have to wait until there is more clarity, not only on any policy proposals, but also on what can actually be implemented.
Aside from political developments, developed market central banks are cutting policy rates. This should boost both equities – as shorter-term financing costs fall – and fixed income, as the policy rate component of bond yields declines. Of course, anticipating the reaction of markets is not as simple as that because the other, arguably more important, factor driving asset prices is economic growth.
Investors should initially be circumspect in anticipating positive equity returns during a rate-cutting cycle given that four out of the last five such cycles in the US coincided with a recession. Not surprisingly, the onset of a recession led to negative returns in equities alongside gains for government bonds.
The critical consideration in anticipating returns for next year is whether 2025 will be exceptional in not having a recession.
A preference for US equities
The consensus view has been that the US will indeed see a soft landing – that growth will slow, but remain positive as core inflation moves back towards the US Federal Reserve’s 2% target. Europe has already had a slowdown, but we believe 2025 should see a modest rebound. Economic growth would be supportive of equity markets and earnings, leading to price gains in the year ahead.
Our regional preference remains the US. Enthusiasm for artificial intelligence was the primary driver of rising earnings in 2024; the bulk of earnings derived from the types of stocks making up the tech-heavy NASDAQ 100 index, while the rest of the market saw barely positive growth.
In 2025, the distribution is expected to be more balanced, even if NASDAQ earnings growth is still superior (see Exhibit 1).
European equities should also see market gains, but once again lag most other major markets. The region remains hindered by the overhang of geopolitics and structural challenges facing its largest economy, Germany.
Consumer demand in Europe will need to rebound much more strongly than we anticipate for consumer-linked sectors to thrive. Exporters will benefit from robust US growth, though tariffs remain a worry. China is unlikely to pull in European products the way it has in the past as growth in China slows.
The potential for superior returns in China will depend primarily on actions from the central authorities. China remains distinct in its dependence on government policy to drive economic growth and hence corporate profits.
While we anticipate more stimulus from Beijing, it does not look likely there will be a major change in economic policy; Beijing will probably continue to focus on investment in new, developing industries rather than nurturing household consumption or bailing out property developers.
We question whether these privileged sectors will be able to generate growth for the whole economy at the rate the authorities would like. Without a stronger rebound in the property market, consumer sentiment is likely to remain depressed. Looking to exports to make up the slack may also prove insufficient due to rising global protectionism.
Chinese earnings should nonetheless rise, at more than 10% year-on-year if consensus estimates are correct, though this is not that much more than Europe at 9%. Valuations are low relative to history, but there may now be a permanent discount to multiples versus the past, meaning price-earnings ratios will not necessarily revert to the mean.
Fixed income – Opportunities and concerns
The risk to market expectations for short-term rates in the US comes from the potentially inflationary impact of the new Trump administration’s policies (tighter immigration, tariffs, tax cuts). At this point, however, one can only speculate on what will actually be implemented.
Longer-term Treasury yields could rise to reflect the uncertainty about the outlook for inflation, to say nothing of the US budget deficit. An extension or expansion of tax cuts would only lead to a further deterioration in the fiscal outlook.
As always, however, it is unclear if and when the market will decide to fully price in these risks. We would anticipate ongoing support for gold prices as investors look for alternative safe haven assets.
Investment-grade credit should provide superior returns relative to government bonds as spreads remain contained alongside steady economic growth.
While spreads are narrow – both in the US and in the eurozone, and both for investment-grade and high-yield – they are relatively better for eurozone investment-grade credit, and we see this asset class as offering the best risk-adjusted returns.
Daniel Morris, Chief Market Strategist at BNP Paribas AM
Photo courtesyFrom left to right: Willis Brucker, Paolo Vicinelli and Ralph Rocco, portfolio managers at Gabelli
Throughout the first three quarters of 2024, Global M&A activity totaled $2.3 trillion. The technology sector led in activity with a total volume of $375 billion, accounting for 16% of overall value, followed by Energy & Power at 16%/$374 billion and Financials at 12%/$308 billion. Drivers of M&A have recently been mixed, according to Gabelli Partners. Portfolio Managers Ralph Rocco, Willis Brucker and Paolo Vicinelli point out that there have been some headwinds in recent years, namely a hawkish regulatory environment fostered by aggressive anti-trust regulators in the US, who were suing deals based upon novel antitrust theories. “This aggression likely led to some management sitting on the M&A sideline. For those companies pursuing M&A, the aggressive regulators dissuaded some managements from pursuing deals after the deal deadline, caused spreads on other deals to widen, and were successful in blocking a few deals”. Nevertheless, the team points out that some tailwinds have emerged lately, leading to increased deal volumes, and have generally been positive drivers of performance.
Rocco, Brucker and Vicinelli are the portfolio managers leading the GAMCO Merger Arbitrage strategy, which has been in place since its launch in 1985 and has a UCTIS version, the GAMCO International Sicav GAMCO Merger Arbitrage UCTIS – Class I USD, launched in 2011. The investment process has remained unchanged over these 39 years, irrespective of whether the market environment was positive or negative. “We take what we believe is a conservative approach to M&A investing,” they say.
They tipically initiate deals with a small position size, which they may increase as deal hurdles and milestones are met. Position sizes are generally limited to ~5% of the total portfolio at cost, which contributes to the desired outcome of being diversified. Finally, they continuously monitor pending transactions for all the elements of potential risk, including: regulatory, terms, financing and shareholder approval. “We trust that our consistent approach will enable us to continue to earn positive risk-adjusted absolute returns for our clients”, PMs add.
Can you explain your approach to investing in M&A in the public markets?
The announcement of a deal is the beginning of our investment process. Simply stated, merger arbitrage is investing in a merger or acquisition target after the deal has been announced with the goal of generating a return from the spread between the trading price of the target company following the announcement and the deal price upon closing. This spread is usually relatively narrow, offering a modest nominal total return. Since deals generally close in much less than a year’s time, this modest total return translates into a much more attractive annualized return.
The objective of our merger arbitrage portfolios is to provide positive “absolute returns,” uncorrelated with the market. Returns are dependent on deal closures and are independent of the overall stock market movement. Deals complete in all types of market environments, including the recent 2022 market decline, which led to a +2.8% performance for the Merger Arbitrage strategy fund while the broader equity and fixed income markets were down double digits.
We have been managing dedicated merger arbitrage portfolios since 1985 as a natural extension of Gabelli’s Private Market Value with a CatalystTM methodology that is utilized in our value strategies. In 2011, we opened the strategy to European investors and have earned positive net returns for our clients in 13 consecutive years. The strategy is available in several currencies, including USD, EUR, GBP, and CHF.
We invest globally across a variety of listed, publicly announced merger transactions. Our portfolios are highly liquid, with low market correlation. Historically, the volatility is approximately 1/3 that of the S&P 500, and our beta is roughly 0.15. We watch and wait for transactions with high strategic and synergistic rationale in industries we know well, leveraging the fundamental research and collective knowledge of over 30 Gabelli industry analysts, who follow and analyze companies within our proprietary Private Market Value with a Catalyst investment methodology. They are experts in their areas of coverage. We comb through filings and merger agreements, and speak with management in order to outline a strong and clear path for deals to be completed.
You mentioned the aggressive anti-trust regulators impacted recent returns. Do you anticipate any changes in regulation under the Trump administration next year?
We believe the incoming Trump administration will usher in a much more deal friendly environment, with the expectation that there will be a change in leadership at both the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”). We have already seen an increase of new deals announced after President Trump’s successful election. With friendlier M&A regulators paired with lower interest rates, we anticipate a deal boom for 2025, which may continue over the next four years.
How is the Fed’s rate cutting cycle affecting M&A activity?
In 2023, the U.S. Federal Reserve ended its series of interest rate hikes. This helped provide acquiring company managements with certainty of financing cost, giving confidence to M&A. With rate cuts beginning in 2024 comes lower costs of financing, which further encourages managements. Additionally, the steep market decline in 2022 caused market price dislocations, which prompted targets and acquirers to come to new price understandings. This began to wear off in the second half of 2023 into 2024.
While we have no crystal ball into the Fed’s actions, its comments indicate, and the market anticipates, further rate cuts to follow in the new year. We believe that, with rate cuts, deal volume should increase, as acquirers will be able to take advantage of the lower costs to finance their acquisitions, and further bolster M&A activity in the year ahead.
How are you positioned into the near year?
Our process is sector agnostic. We approach each deal on a risk/reward basis, investing in deals that we believe have the highest likelihood of closing. Our sector exposure is generally indicative of where we see attractive deals.
We are fully invested and are bullish on the M&A environment in the coming year due to favorable tailwinds:
deal spreads are near the highest level in nearly a decade,
a more favorable anti-trust/regulatory environment,
prospect of further rate cuts, and
an expected increase in deal volume under the Trump administration
If you are interested in learning more about the potential benefits of investing in M&A in today’s markets, the Gabelli UCITS team is available at SICAVInfo@gabelli.com or by calling +1-914-921-5135. Please visit us at www.gabelli.com/sicav for more information on our UCITS funds.
Allfunds has announced the appointment of Luis Berruga as Senior Advisor. In this role, Berruga will support strategic initiatives and product development, with a special focus on exchange-traded products (ETPs).
As Allfunds progresses in developing its new ETP platform, set to launch in 2025, the company has enlisted Luis Berruga’s expertise to advise on creating strategic partnerships within the industry. The firm emphasizes that Berruga’s knowledge of the development and distribution of exchange-traded products, combined with his experience and network, will help ensure Allfunds’ vision aligns with market expectations.
Luis Berruga is the founder and managing partner of the boutique investment firm LBS Capital and formerly served as CEO of Global X, a New York-based ETF provider. A recognized leader in the asset management industry, Allfunds highlights his success in building and expanding ETF businesses, particularly in the U.S. and Europe. Berruga is an expert in strategic planning, cross-border regulation, and global distribution, making him “a valuable asset to support Allfunds’ continued growth and innovation,” according to the company.
Following the announcement, Juan Alcaraz, CEO and founder of Allfunds, stated:
“With his extensive experience and deep industry knowledge, we are thrilled to welcome Luis as we enter this new phase of growth. His appointment reflects Allfunds’ commitment to bringing in senior and specialized talent to evolve our solutions, address client needs, and continue delivering a sophisticated, first-class platform.”
For his part, Luis Berruga added: “I am delighted to join Allfunds at such a pivotal time as the company seeks to enhance and differentiate its offering with the launch of its ETP platform. ETPs are rapidly evolving, providing an attractive and diversified solution for investment portfolios. I look forward to collaborating with the team, applying my expertise to help Allfunds navigate the competitive ETP landscape, and supporting them as they solidify their position as a comprehensive distributor of innovative investment solutions.”
According to a new report by Ocorian, a specialized provider of services for high-net-worth individuals, family offices, financial institutions, asset managers, and corporations, the risk appetite of family offices is set to increase in the coming year, with improved regulation of riskier assets being the primary driver.
The study found that 82% of family office professionals, including those working in multi-family offices, believe their organizations’ investment appetite will grow, with one in eight (12%) expecting a significant increase. Among those anticipating heightened risk appetite, 62% point to the increase in regulation of riskier assets as the main reason, while 55% believe inflation has peaked or will do so soon, fostering greater risk tolerance. Additionally, 47% cite increased transparency around riskier assets as a key factor, and 44% see markets as poised for recovery.
Another conclusion of the study—which included 300 family office professionals collectively responsible for around $155 billion in assets under management—is that 99% of respondents agree that the transition toward investment in alternative assets among family offices is a long-term trend. Notably, 51% believe the Middle East is the jurisdiction likely to experience an increase in exposure to alternative assets, compared to 40% who selected the European Union and 38% who chose the United Kingdom. Another noteworthy finding is that 68% believe family offices are more likely to use funds as their preferred structure, compared to 66% who selected GPLP structures and 44% who opted for SPVs.
The survey estimates that alternative asset classes such as infrastructure and private debt will see the largest allocation increases in the next two years. About 26% of respondents predict that allocations to infrastructure will rise by 50% or more, while 23% expect the same level of increase in allocations to private debt.
The recent strong performance of alternative asset classes is seen as the main draw for family offices, surpassing the diversification benefits and greater transparency these asset classes offer. Their ability to provide income, the greater variety in the sector, and their qualities as inflation hedges also make them attractive.
“The risk appetite of family offices is increasing rapidly after many years of being highly focused on cash and taking a very cautious approach to investment. The long-term trend of family offices increasing their exposure to alternative asset classes is undoubtedly a factor in the growing risk appetite. It is clear that improvements in the regulation of riskier assets are being well-received by family offices. It remains essential that advisors and service providers deeply understand the unique risk appetite and governance needs of each family, ensuring transparency and trust in every decision,” said Annerien Hurter, Global Head of Private Clients at Ocorian.
Meanwhile, Mark Spiers, Partner at Bovill Newgate, added: “Regulation is playing an increasingly critical role in shaping family offices’ investment strategies. The findings presented in the Ocorian survey highlight how improvements in the regulatory landscape, particularly around riskier assets, are enabling family offices to explore new opportunities while ensuring robust governance frameworks. It is encouraging to see family offices feeling more comfortable with increased risk, especially in alternative asset classes like private debt and infrastructure, by recognizing the potential benefits of diversification and greater transparency. As regulatory oversight continues to evolve, it is essential that family offices work closely with their advisors to navigate this complex environment and ensure that all investment decisions align with both their long-term objectives and regulatory obligations.”
