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New Platforms, Altcoins, and Legislation Will Drive the Growth of Crypto Assets in 2025

Crypto growth in 2025 — Pixabay CC0 Public Domain

2024 was a year of transition for the cryptocurrency universe. According to Hashdex, this market went through a recovery cycle following a turbulent 2022 marked by bad actors and fraudulent activities. Reflecting on the past year, they believe crypto assets experienced a recovery phase and the beginning of a bull market. A key turning point was the U.S. election results and Donald Trump’s victory. Evidence of this is the Nasdaq Crypto Index, which has risen more than 57% since November 5, 2024, driven by widespread optimism about the future direction of U.S. digital asset policies.

“We believe the current investment case for bitcoin and other crypto assets remains strong. The steady demand from institutional investors, advancements in infrastructure, and a regulatory environment set to improve significantly in 2025 are positioning this asset class for what could be its strongest year on record,” said Samir Kerbage, CIO of Hashdex. In his opinion, crypto assets tend to follow a cycle of four years that includes a bullish phase lasting approximately 12 months, followed by a bear market lasting one year, and then a recovery period spanning two years. In the last two bull markets, altcoins (that is, everything except bitcoin) have significantly outperformed the largest crypto asset, according to Hashdex.

“I believe we have entered a bull market, reinforced by the macroeconomic environment and the U.S. election results. But another indicator of a bull market is the superior performance of the Nasdaq Crypto Index compared to bitcoin. Over the past three months, the index has outperformed bitcoin (78% vs. 76.5%) and, since the elections, the Nasdaq Crypto Index has outpaced bitcoin by 6.8%,” added Kerbage.

2024 was a year of transition for the cryptocurrency universe. According to Hashdex, this market went through a recovery cycle following a turbulent 2022 marked by bad actors and fraudulent activities. Reflecting on the past year, they believe crypto assets experienced a recovery phase and the beginning of a bull market. A key turning point was the U.S. election results and Donald Trump’s victory. Evidence of this is the Nasdaq Crypto Index, which has risen more than 57% since November 5, 2024, driven by widespread optimism about the future direction of U.S. digital asset policies.

A key area, according to the entity, is smart contract projects—platforms that will enable users to conduct transactions involving not only information but also value and ownership. Hashdex estimates that these platforms and applications will outperform bitcoin over the next 12 to 18 months, as they compete for users and lay the foundation for decentralized applications.

“Thanks to the infrastructure developments we have seen in this area in recent years, new applications are emerging in fields such as artificial intelligence, video games, and many others as tokenization continues to expand. We also believe that new regulatory advances in 2025 will be more beneficial to these applications than to bitcoin specifically, given that bitcoin already has regulatory clarity and a well-developed capital market structure, with the growth of ETFs, options, and futures,” Kerbage explained.

In the U.S. and Europe, this legislative and regulatory clarity benefiting altcoins may include market structure legislation, as proposals like FIT21 aim to eliminate ambiguities regarding crypto assets’ status as commodities or securities, while creating registration pathways that could drive adoption in the U.S.

According to the latest report from Sygnum, a global banking group specializing in digital assets, relatively small institutional investor inflows into bitcoin ETFs could have a disproportionate impact on the market due to limited liquid supply. Their analysis of recent ETF flows suggests that every $1 billion inflow (approximately 0.1% of Bitcoin’s market cap) corresponds to price movements of 3-6%, with larger inflows showing greater price sensitivity.

The report predicts that this multiplier effect could be amplified if major institutional investors—including sovereign wealth funds, endowments, and pension funds—begin making allocations. Some U.S. state pension funds have already invested in crypto assets, and several states have introduced bills encouraging pension funds to consider cryptocurrency allocations. With the size of assets managed by these investors, even conservative estimates represent a larger wave of inflows than experienced in 2024 with the launch of spot cryptocurrency ETFs in the U.S.

“Many traditional institutional investors, those with the largest volumes of assets under management, are just beginning their foray into cryptocurrencies. Our analysis shows how even relatively modest allocations from this segment could fundamentally alter the crypto asset ecosystem. With greater regulatory clarity in the U.S. and the potential for Bitcoin to be recognized as a reserve asset for central banks, 2025 could mark a significant acceleration in institutional participation in crypto assets,” said Martin Burgherr, Chief Clients Officer of Sygnum Bank.

Stablecoin legislation, particularly the implementation of MiCA, will also play an important role by driving stablecoin adoption in the U.S. and Europe, expanding their use beyond emerging markets.

The repeal of SAB121, allowing U.S. banks to hold cryptocurrencies for their clients, is expected to enable banks and brokerages to expand their cryptocurrency trading and custody offerings, benefiting altcoins in particular. Additionally, new ETF launches under the new SEC chair are raising hopes for more approvals, including ETFs for indices and individual assets like Solana and XRP. Although uncertainty persists, the availability of new assets with ETFs as access points is highly positive.

Altcoin Use Cases

According to Kerbage, in addition to bitcoin evolving as an emerging digital store of value and smart contract platforms becoming a new way to exchange information, value, and ownership, three other altcoin use cases are expected to benefit over the next year:

DeFi: Projects aimed at creating an internet-based financial system, operating on smart contract platforms, will establish a new global capital markets infrastructure for payments. Stablecoins and tokenized money market funds are the first major use cases.
Web3: A new iteration of the internet that will enable users to own their data and make the web decentralized and more useful for innovations like AI agents and other advancements.
Digital Culture: An emerging digitally native generation will drive greater demand for owning digital assets and collectibles, with video games as the first natural application.

“If we compare cryptocurrencies to the internet, this industry is like the internet in the 1990s, and bitcoin could be compared to email—the only application most people have heard of. However, if we fast-forward 20 years, although email remains very useful, it has not been the internet application that has created the most value for society. We believe this perspective could apply to how bitcoin is currently perceived in relation to cryptocurrencies,” Kerbage concluded.

Investment in Iberia and Latin America: Much More Than a Common Language

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The investment world is defined by nuances that reflect local preferences, regulations, and the cultural characteristics of each region. Latin America is no exception, and operating in a market with such specific idiosyncrasies often means that clients of asset managers see the coordination between Iberia and Latam as an added value.

This brings significant advantages, as it allows for high-quality service with a strategic focus in the various countries where operations take place. Moreover, we hold a competitive edge over our European neighbors: a common language and a cultural connection that enable us to provide tailored service to meet each client’s needs.

However, when comparing the investment dynamics between Latin America and Iberia, clear differences emerge in both the nature of investors and the regulatory frameworks governing the markets.

Retail Preferences in Mexico, Brazil, and Beyond

In Mexico and Brazil, retail investors—including banks, independent advisors, and platforms—tend to favor local products with a conservative focus. In contrast, elsewhere in the region, as well as in Iberia, such investors predominantly opt for UCITs-compliant funds and ETFs.

Institutional Strength in Latin America

In the institutional segment, which includes insurers, pension plans, and family offices, Latin America stands out as one of the most advanced regions in the world. A prime example is the pension plans in countries like Chile and Mexico, where mandatory worker contributions have created a robust and sophisticated institutional ecosystem. In this ecosystem, pension funds play a fundamental role in asset management.

Regulation and Distribution: A Study in Contrasts

Regarding distribution, Latin America is characterized by the autonomy of its markets. Each country has its own regulations defining how financial products are distributed among investors. This heterogeneity contrasts with the uniformity in Spain and Portugal, where MiFID regulations unify financial market oversight across the European Union. While this facilitates cross-border operations, it may limit the personalization offered by the fragmented markets of Latin America.

Investment Preferences: Diverging Trends

Investor preferences, whether retail or institutional, also reflect these structural differences:

In US Offshore and South America, excluding Brazil, a significant portion of portfolios is allocated to U.S. assets, including fixed income, equities, mixed assets, and alternatives. There is also growing interest in diversifying beyond traditional funds into vehicles like ETFs or separately managed accounts (SMAs).

In Mexico and Brazil, the focus remains on local fixed income, supported by high interest rates, making this asset class a cornerstone of their portfolios.

Iberia’s Changing Landscape

In Iberia, the recent shift in European Central Bank monetary policy has influenced investor behavior. Investors are moving away from money market funds toward options offering greater added value, particularly in European fixed income, which now presents better prospects due to interest rate adjustments and inflation stabilization.

In equities, there is a trend toward diversification to reduce dependence on national indices often dominated by a few large companies. This strategy aims to mitigate risks associated with high concentration and improve returns by targeting sectors or regions less represented in traditional indices.

Investors are increasingly exploring active management strategies that prioritize companies with quality and value profiles. Simultaneously, thematic investments—such as technological transformation driven by digitalization and AI, or energy transition—are gaining traction. Additionally, emerging markets like India, often underrepresented in traditional portfolios, have captured the interest of Iberian investors due to their significant potential.

Shared Pathways and Future Opportunities

Despite their differences, Latin America and Iberia share a common path in fund management, as both regions lean toward products offering risk diversification and new sources of profitability. A shared vision can provide fertile ground for innovative investment strategies, supported by the commitment of global asset managers with strong local components. This approach enables the advancement of each country’s strategic plans.

Adapting to the specific characteristics of each market is crucial. Only in this way can asset managers in Spain deliver tailor-made services suited to the needs of clients on both sides of the Atlantic.

Authored by Javier Villegas, Head of Iberia & Latam at Franklin Templeton.

Artificial Intelligence and Uranium ETFs: Investor Preferences in 2024

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AI and uranium ETFs — Photo courtesyRahul Bhushan, Managing Director in Europe at ARK Invest

Each month, Rahul Bhushan, Managing Director in Europe at ARK Invest, shares the standout data from the European thematic ETF market: key trends, changes in investor flows, and more. In his year-end 2024 edition, he chose to analyze November’s investment flows, uncovering several highly relevant insights.

The expert highlights three key areas of inflows:

1.- Artificial intelligence ETFs recorded inflows of $172 million in November, “highlighting investor enthusiasm as the AI boom shifts from hardware-driven infrastructure development to software applications that unlock real productivity gains,” says Bhushan.

2.- Uranium ETFs attracted $90 million, reflecting the anticipated growth of alternative energy sources. “Donald Trump’s reelection as U.S. president signals a return to pragmatic energy policies that position nuclear energy as a cornerstone of resilience and efficiency,” Bhushan explains.

3.- Infrastructure ETFs led inflows with $81 million in November, underscoring strong investor interest in domestic infrastructure. “Infrastructure stocks tend to perform well in election years and are bolstered by Trump’s plans to rebuild and reindustrialize America, signaling sustained growth in this sector,” the expert adds.

Bhushan also noted trends in the thematic ETFs that underperformed during the month:

1.- Clean energy ETFs recorded the largest outflows, with $152 million in redemptions. Investor appetite appears to be shifting beyond the capital-intensive renewable energy generation supply chain. “Instead, attention is increasingly focused on more profitable areas of the value chain, such as energy efficiency solutions and software-based grid infrastructure, where companies are better positioned to deliver short-term returns,” he notes.

2.- Cybersecurity ETFs saw outflows of $75 million, as investors took profits after a strong performance period. However, as cyber threats grow more sophisticated and AI transforms security environments, Bhushan explains that the need for robust digital defenses continues to drive long-term opportunities in the sector.

3.- China ETFs experienced redemptions of $64 million, “highlighting persistent investor concerns about geopolitical tensions and a shift toward more predictable growth opportunities in Western markets.”

Longer-Term Observations

The available data, covering nearly the entire year with only one month remaining, is sufficient to draw conclusions about investor preferences in 2024.

Among the highlights of the year are:

1.- Artificial intelligence ETFs, which have led investment inflows with $1.78 billion. AI continues to capture investor attention as a transformative force, with significant advancements and applications across all sectors bolstering confidence in this theme.

2.- Smart grid ETFs, with investment flows totaling $405 million, “highlighting the demand for infrastructure supporting energy efficiency and modernization of the power supply,” according to Bhushan, who adds that as digital infrastructure expands, “smart grids will be critical for managing energy effectively.”

3.- Uranium ETFs, which have accumulated $250 million in subscriptions, reflecting growing interest in nuclear energy within the broader energy transition. “Investors see nuclear energy as a reliable and scalable energy source for decarbonizing the energy mix.”

Key trends among the most lagging ETFs included:

1.- Robotics and automation ETFs have experienced the largest outflows, with a total of $996 million. As investors focus more on AI, interest in broader areas like pure industrial automation may be waning amid a shift in thematic preferences.

2.- Clean energy ETFs have recorded outflows of $834 million. This narrower focus within the energy transition theme appears to have seen cautious positioning, according to the expert, “especially ahead of the U.S. elections and potential regulatory changes.”

3.- Electric vehicle and battery technology ETFs have seen redemptions of $761 million, “likely reflecting caution in the lead-up to the U.S. elections.”

Ready, Set, Go…: 124 Trillion Dollars Will Change Generations by 2048

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$124 trillion generational wealth transfer — Image Developed Using AI

With trillions of dollars changing hands annually, the “Great Wealth Transfer” is in full swing. Amid the acceleration of wealth transfers, it is crucial for wealth managers, asset managers, and other industry participants to adopt best practices with their current relationships while also adjusting their service and product strategies to align with the future profile of the high-net-worth segment, according to the Cerulli report titled High-Net-Worth and Ultra-High-Net-Worth Markets in the U.S. 2024.

Cerulli estimates that wealth transferred by 2048 will reach $124 trillion, with $105 trillion expected to be inherited by descendants and $18 trillion directed to charitable causes. Specifically, nearly $100 trillion will be transferred by baby boomers and older generations, representing 81% of all transfers. More than 50% of the total transfer volume ($62 trillion) will come from high-net-worth and ultra-high-net-worth (HNW/UHNW) individuals, who collectively represent just 2% of all households.

“Projections for horizontal or intra-generational transfers indicate that $54 trillion will be transferred to spouses before eventually being inherited by descendants and charitable organizations. Nearly $40 trillion of these spousal transfers will go to widowed women from the baby boomer and older generations, creating a massive need and opportunity for providers in the wealth and asset management spaces,” the Cerulli report states.

Additionally, Millennials will inherit more than any other generation in the next 25 years ($46 trillion). However, Generation X will receive the majority of assets over the next 10 years, totaling $14 trillion compared to $8 trillion for Millennials. “Eventually, most of the wealth from older generations in the United States will be donated or transferred to Generation X or Millennial heirs. With $85 trillion earmarked for these generations collectively, providers who can establish relationships and adequately address the needs of these younger investors will be well-positioned for success,” explains Chayce Horton, senior analyst at Cerulli.

Considering these intergenerational and familial movements, Cerulli emphasizes that developing relationships with clients’ spouses or children is one of the primary long-term growth strategies among high-net-worth practices, as the urgency grows for wealth to transition from primary clients to their spouses and children. According to 89% of firms surveyed by Cerulli in 2024, holding family meetings and maintaining regular communication among family members is a key practice.

“Ultimately, there are notable differences in service and product preferences between women and next-generation clients compared to the current client demographic. As wealth transfers, these differences will likely shift market share in favor of firms best prepared to meet the needs of these recipients,” Horton concludes.

Lower Taxes and More Disclosure: How Luxembourg Supports the Growth of Active ETFs

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Luxembourg supports active ETFs growth — Photo courtesy

The Association of the Luxembourg Fund Industry (ALFI) believes that the European ETF market holds significant potential for growth and development. As the largest center for actively managed funds and the second-largest domicile for ETFs in Europe, Luxembourg is looking to capitalize on the rise of active ETFs and active ETF share classes. To achieve this, it has introduced several measures to make the creation of these vehicles more attractive.

According to ALFI, active ETF share classes offer managers the opportunity to expand their range of traditional products, enabling investors to access established strategies with the added benefits of the ETF format.

In recent months, Luxembourg’s investment fund industry has worked closely with lawmakers and regulators to develop various initiatives aimed at enhancing the country’s appeal for ETFs.

First, on December 11, 2024, the Luxembourg Parliament approved Bill 8414, which exempts active ETFs from the subscription tax, starting in 2025. “The new law extends the subscription tax exemption, which currently applies to passive ETFs, to active ETFs,” ALFI highlights.

Second, on December 19, 2024, the CSSF published an FAQ allowing the deferral of the disclosure of an active ETF’s portfolio composition. According to ALFI, this information must be disclosed at least monthly, with a maximum delay of one month. They consider this new transparency regime to provide a safe harbor for actively managed ETF strategies while implementing an efficient approval process for ETF products.

“The new transparency and tax regime for ETFs domiciled in Luxembourg provides asset managers with an exceptionally attractive framework in Europe. The active ETF market is growing rapidly, and Luxembourg, Europe’s largest cross-border investment fund domicile, is well-positioned to leverage this momentum,” says Jean-Marc Goy, ALFI President.

In the opinion of Corinne Lamesch, ALFI’s Deputy Director and General Counsel, “Luxembourg has a proven track record in launching active ETF share classes within existing UCITS funds. By incorporating active ETF share classes into already established active strategies in Luxembourg, asset managers can diversify their distribution channels and expand their reach in global markets.”

Julius Baer Announces Sale of Its Brazil Unit to BTG Pactual

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Julius Baer Group announced an agreement to sell its domestic Brazilian wealth management business, Julius Baer Brasil Gestão de Patrimônio e Consultoria de Valores Mobiliários Ltda. (Julius Baer Brasil), to Banco BTG Pactual S.A. (BTG).

Julius Baer will continue serving Brazilian clients from other locations, ensuring that its international Brazil business remains unaffected. In the Americas and Iberia region, Julius Baer has a presence in Mexico, Chile, Uruguay, Colombia, and Spain, according to the firm’s statement.

In addition to BTG Pactual, other financial institutions expressed interest in acquiring Julius Baer’s Brazilian operations. Competitors included Santander Brasil, Banco Safra, and XP Inc.

Julius Baer’s decision to sell its Brazil unit stems from challenges faced by this operation in recent years. Assets under management in the country declined from BRL 80 billion (USD 13.014 billion) to approximately BRL 50 billion (USD 8.134 billion), indicating a significant contraction, according to local media information.

Julius Baer Brasil, with offices in São Paulo, Belo Horizonte, and Rio de Janeiro, is a leading independent wealth manager in Brazil with a high-caliber client base focused on high-net-worth (HNW) and ultra-high-net-worth (UHNW) segments, as well as experienced relationship managers and investment professionals. As of November 30, 2024, it managed approximately BRL 61 billion in assets (nearly USD 10 billion).

The transaction is expected to enhance Julius Baer’s CET1 capital ratio by approximately 30 basis points upon closing, based on a total cash consideration of BRL 615 million (approximately USD 100 million), according to the firm’s statement accessed by Funds Society.

The deal is subject to customary regulatory approvals and is expected to close in the first quarter of 2025.

“After a thorough review of our domestic business in Brazil over the past 12 months, it was concluded that, in the best interest of our clients, it is important to preserve the multi-family office approach while enhancing investment capabilities and updating technology. The acquisition of our domestic Brazilian franchise by BTG, a leading national financial institution, makes this possible and enables a compelling and differentiated value proposition for our clients and employees,” said Carlos Recoder, Head Americas & Iberia, Julius Baer.

For the sale process, Julius Baer engaged Goldman Sachs as its financial advisor. The Brazilian operation, focused on the wealth management segment, has offices in São Paulo, Rio de Janeiro, and Belo Horizonte. The transaction is estimated to be valued between USD 130 million and USD 195 million, representing approximately 1.6% to 2.4% of the assets under management.

With this acquisition, BTG Pactual strengthens its position in the Brazilian wealth management market, expanding its client base and assets under management. The integration of Julius Baer Brasil’s operations could generate synergies and bolster BTG’s presence in the high-income segment, consolidating its expansion strategy in the national financial sector.

The Transition to Net Zero: An Investment Opportunity for the Private Sector

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Transición a cero emisiones y sector privado

Government action is key to unlocking private sector investment, according to Bain & Company in its report, “Business Breakthrough Barometer 2024.” This report gathers insights from leaders of some of the world’s largest companies on the current state of and need for government action to expedite private investment toward net-zero emissions. The survey was conducted following COP29, where the current state of sustainable investments was a central topic.

The report led Bain & Company to several conclusions about the current landscape of climate investment. For instance, they estimate that without long-term, investment-friendly policies, the next wave of large-scale investments is at risk. Additionally, 91% of business leaders surveyed view the transition to net-zero emissions as an investment opportunity. However, only 1% believe the transition is on track in the 11 sectors evaluated, which are responsible for 70% of global emissions. Two-thirds of companies cite the lack of strong investment arguments and the slow expansion of infrastructure as the most pressing obstacles to accelerating the transition.

The report also underscores the importance of collaboration between countries. 85% of respondents believe that international coordination among governments is critical to achieving a net-zero transition.

The report establishes the need for long-term industrial policies that include streamlining permits, mandating action, direct infrastructure investment, and enhanced international coordination to increase private sector investment. Nine out of ten companies indicate they are willing to invest more if governments implement policies that address sector-specific barriers.

Ibon García, partner at Bain & Company and leader of the firm’s sustainability practice in Spain, commented:
“This year’s barometer sends a clear message: it is essential to have a coordinated plan that includes tax incentives and emission reduction reports tailored to industrial realities. A common, transparent, adaptable, and financially viable regulatory framework will be critical to accelerating change.”

Pension Funds Will Increase Their Allocations to Private Assets and Asian Emerging Markets

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Western markets are reaching all-time highs, stock buybacks continue at a steady pace, and IPOs are becoming more irregular. This highlights the need for pension plans to find new growth drivers, according to a new report published by CREATE-Research and the European asset manager Amundi.

The survey is based on responses from 157 pension plans worldwide, managing assets worth €1.97 trillion. The study sheds light on the areas pension funds are targeting for sustained returns over the next three years. In this new regime, the two underinvested asset classes offering the most attractive opportunities are private markets and Asian emerging markets (MEA).

Currently, three-quarters (74%) of pension plans invest in private market assets, and just under two-thirds (62%) invest in MEA.

According to Vincent Mortier, Group Chief Investment Officer at Amundi, “Private markets and Asian emerging markets have had to adapt to a new era with sharp interest rate hikes and a new geopolitical landscape. However, both continue to offer diversification, attractive returns, and are well-positioned to capitalize on the more predictable sources of value creation from secular megatrends. It’s encouraging to see new allocations to historically underinvested areas.”

Private Markets’ Slower Growth Has Not Diminished Their Appeal

Private markets have faced scrutiny as the era of market-driven returns fueled by cheap money has ended, according to the Amundi survey. While returns in private markets are likely to be lower than in the recent past, their appeal remains strong, with 86% of respondents expecting to continue investing in them within three years.

This increased interest is driven by the search for risk-adjusted returns in a low real-yield environment (72%), potential interest rate cuts (54%), more growth companies in private markets (53%), and the fact that fast-growing firms are staying private longer (51%).

The survey indicates varying interest among respondents in different asset classes over the next three years. Private debt leads the list (55%), focusing on direct lending, real asset financing, and distressed debt. Key sectors include healthcare, real estate, renewable energy, carbon capture technology, and social infrastructure.

The second preferred asset class is private equity (49%), specifically growth equity, followed by leveraged buyouts to a lesser extent. Infrastructure ranks third (40%), bolstered by policy measures such as the U.S. Inflation Reduction Act and the European Green New Deal. Real estate (38%) comes next, where narrowing price expectation gaps between buyers and sellers is improving valuations and creating attractive opportunities.

Venture capital ranks last (28%), viewed as the riskiest option in the current private market environment.

Private Assets Seen as Ideal for Capturing Megatrends

The energy sector is undergoing a profound transformation, driven by four megatrends known as the “four Ds” (decarbonization, decoupling, digitalization, and demographics). This “4D revolution” is spotlighting businesses whose models focus exclusively on these transformative themes.

Such companies dominate private markets, providing the potential to outperform their public counterparts by investing directly in selected themes with a higher likelihood of positive impact. One respondent noted, “Our impact investments are primarily based on ‘pure play’ companies, which are often in private markets.”

To future-proof their portfolios, pension plans are focusing new private market investments on themes shaped by these transformative forces.

Opportunities for Growth in Asian Emerging Markets

Assets in Asian emerging markets remain underrepresented despite their collective 46% share of global GDP. Over a third (38%) of respondents currently have no exposure to MEA, half (51%) have allocations up to 10%, and only 11% have allocations above 10%. Geopolitical issues are cited as the primary reason for these limited allocations by 68% of respondents. Other factors include growing trade frictions (58%), high market volatility (53%), and governance opacity in these markets (51%).

However, the region’s growth prospects remain promising, with policymakers implementing reforms to attract foreign capital. As a result, 76% of respondents expect to invest in MEA within three years. Thematic investing will dominate MEA markets, with India, South Korea, and Taiwan being the primary beneficiaries.

Monica Defend, Head of the Amundi Investment Institute, stated, “As geopolitical rivalry between the U.S. and China intensifies and two rival trade and monetary blocs solidify, other Asian markets are becoming increasingly attractive to investors. Increased intraregional trade and connectivity have strengthened regional resilience, and we expect allocations across almost all asset classes to rise.”

Thematic investing will shape the next wave of investment in MEA, offering “good buffers in the era of geopolitical risk,” according to one respondent. Half of the respondents plan to increase allocations to thematic funds covering renewable energy and high technology over the next three years. On the ESG front, green, social, and sustainability-linked bonds (49%) are favored as the region seeks foreign capital to build greener, more inclusive economies and societies.

Bonds Now Seen as a Value Opportunity

Strong currency bonds are expected to be more attractive to 48% of respondents now that the U.S. has begun cutting rates. Local currency bonds appeal to 45% due to the robust anti-inflationary policies implemented by independent central banks across Asia and healthier public finances.

Professor Amin Rajan of CREATE Research, who led the project, remarked, “Private market assets and Asian emerging markets have long been underweighted in pension portfolios. Now, the winds of change are clear.”

Central and Eastern Europe, India, and LatAm: Why Do International Asset Managers Like These Regions?

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Regiones favoritas para gestores internacionales

The performance balance of emerging and frontier markets in 2024 is clear: they have reflected the heterogeneity of the countries comprising this category, showcasing different points in their cycles and diverse market drivers. Assets in these markets ended the year offering attractive returns, though not always outperforming their counterparts in developed markets.

“Both emerging market equities and local currency emerging market sovereign bonds are comfortably above their average annual returns over the past decade. It has been much more challenging for local emerging market assets due to the impact of exchange rates, although relatively low hedging costs have led to significantly better returns with currency hedging, surpassing those of U.S. Treasury bonds,” explain experts from Deutsche Bank.

According to the bank, the performance of emerging markets, to varying degrees, is driven by a combination of factors: growth and policy betas (often defining central bank decisions); correlations between bonds and equities in major markets (emerging markets perform better in a regime of higher equities/lower rates and worse in a regime of lower equities/higher rates); risk-adjusted returns; dollar liquidity conditions; and idiosyncratic factors such as fiscal dominance and political cycles.

For East Capital, “the standout market in 2024 was Taiwan, driven by the artificial intelligence theme, as it produces all the advanced AI chips for Nvidia, benefiting the largest position in our global emerging markets strategy, TSMC, as well as its suppliers. It may surprise many that China’s offshore market outperformed developed markets, with a return of 23.4%.”

Looking ahead to 2025

As we approach the new year, Deutsche Bank’s outlook suggests that 2025 will be less challenging but likely much more uncertain. “We anticipate a more negative tilt in the distribution of expected returns for emerging market assets, driven primarily by spillover effects from a regime change in U.S. policy, but also potentially by thicker tails based on the sequencing and speed of that change,” they warn.

They also acknowledge that emerging economies face negative exposure to threats such as disruptions or changes in global trade due to increased tariff use (more so in Asia, Central and Eastern Europe, and Mexico than in others), possible delays in their easing cycles as U.S. monetary conditions tighten, weaker local institutional dynamics (e.g., government-central bank relations), and shifts in U.S. geopolitical commitments to key emerging market regions.

Guillaume Tresca, Senior Emerging Markets Strategist at Generali AM, acknowledges their vulnerabilities but maintains that emerging markets will remain attractive in 2025, despite the risks posed by Trump. “Emerging markets are in better shape than in 2016-2017, with resilient growth, limited external vulnerabilities, larger foreign exchange reserves, and central banks ahead of the economic cycle,” he asserts.

Tresca adds that U.S. exceptionalism and robust growth are not necessarily negative for emerging markets. He notes that while tariff risks will affect these markets, their impact will be heterogeneous and likely delayed until the second half of 2025. “Moreover, it is crucial to separate the impact at the asset class level from the country level. We have a strong preference for external debt over local debt, expecting returns of about 7% in 2025,” he clarifies.

Daniel Graña, Portfolio Manager at Janus Henderson, emphasizes that the growth drivers of emerging markets have evolved. As a result, the adverse effects of tariffs and rising U.S. bond yields on these markets are less pronounced than in the past, thanks to their growing role in the global innovation revolution. “Innovation in emerging markets has a unique flavor, where entrepreneurs modify innovative products and business models to address the frictions specific to their regions,” Graña adds.

Positioning and Investment Ideas

When discussing investment preferences and opportunities, Tresca highlights, “We prefer interest rates in Central and Eastern Europe (CEE), which will benefit from lower base euro rates. Latin American rates will carry higher risk premiums, while in Asia, central banks have room to cut rates if needed. Emerging market currencies will weaken against the dollar but can hold up well against G9 currencies. We favor the South African rand, Turkish lira, and Brazilian real over the Mexican peso.”

From Federated Hermes, they argue that the external macroeconomic context in 2025 will be favorable for emerging market debt. They expect global moderation in growth and inflation, along with continued monetary policy easing by the U.S. Federal Reserve and other major central banks, to support the attractive yields offered by emerging markets. Despite heightened geopolitical risks, the unpredictability of the new U.S. administration, and China’s weak growth, they believe a combination of core and frontier emerging market assets is likely to perform well in 2025.

“Within frontier markets, we continue to like Sub-Saharan African credits such as Côte d’Ivoire and Kenya. Backed by improved credit profiles and attractive valuations, these also provide diversification benefits against potential macroeconomic headwinds,” say Mohammed Elmi and Jason DeVito, Senior Portfolio Managers of Emerging Market Debt at Federated Hermes.

In Latin America, the firm sees some compelling narratives. “In Argentina, significant inflation reduction and GDP growth resumption have caught the attention of foreign investors, amidst improvements in governance and regulatory frameworks. El Salvador has enjoyed healthy market access and could benefit as Trump seeks to increase investment in Western Hemisphere countries tough on drug-related crimes. More broadly, any boost to U.S. economic growth could benefit commodity exporters, many of which are in Latin America.”

At Janus Henderson, Graña focuses on India: “India’s favorable demographics are complemented by a reformist government agenda that understands the role of a thriving private sector. The country is also improving its infrastructure to boost growth and investing in innovation. India stands alone with medium-high single-digit growth potential over the next decade.”

“India’s market is highly valued relative to historical levels, with elevated margins and profit expectations. Increasing equity supply has increasingly countered strong domestic fund flows. Recently, nominal growth (not adjusted for inflation) has slowed, driven by tighter fiscal and monetary conditions, while market expectations of profits have come into question. This could present an opportunity,” adds Tom Wilson, Head of Emerging Market Equities at Schroders.

In fixed income, Jeremy Cunningham, Investment Director at Capital Group, sees opportunities in sovereign and corporate investment-grade debt issuers in dollars, despite narrow spreads. He believes limited exposure to distressed sovereign credits continues to offer attractive yield opportunities in their portfolios.

“The fundamental context for emerging market debt remains favorable. Growth is positive among major economies. Fiscal deficits have mostly stabilized and are nearing levels seen in developed markets. Foreign exchange reserves have also increased, partly due to rising commodity prices. Real yields remain positive in many markets,” Cunningham concludes.

This Is the Vision and the Investment Themes That Private Banks Will Prioritize in 2025

| For Amaya Uriarte | 0 Comentarios

We arrive at the final weeks of 2024 with the S&P 500 closing November with its largest gain of the year, markets immersed in a new interest rate cycle, central banks reaching their inflation targets, and strong expectations of sustainable growth—although slowed in some regions—for the major economies. Against this backdrop, the most prominent private banks in the industry share the vision and investment themes they will prioritize for 2025.

Investment ideas are closely aligned with their macro perspectives. For example, the central theme guiding UBP’s experts for 2025 is “fragmented resilience.” This refers to the fact that beneath the solid growth data anticipated for next year—an estimated 3.2% global GDP growth—there will be significant regional divergences. They estimate a 1.7% growth rate for developed countries and 4% for emerging markets, with stark differences among nations, particularly in Europe.

Focusing on individual countries, UBP anticipates that India will exhibit one of the strongest growth rates, at 6.5%, while China is projected to grow by 4.7% (assuming its government implements the announced stimulus measures). The United States is expected to grow between 2% and 2.5%. On the other hand, Japan is forecasted at 0.8%, and the eurozone at 1%. Within the eurozone, the Mediterranean countries (Spain, Italy, Greece, Portugal) are expected to drive growth, in contrast to the weaker performances of France and Germany.

In the U.S., Patrice Gautry, Chief Economist at UBP, highlights that the major challenge for Donald Trump will be implementing measures to accelerate growth without triggering a new wave of inflation. According to Gautry, if Trump reduces corporate taxes, implements further tax cuts, and reinstates certain measures from his first term, he could boost growth beyond its potential rate of 2%, possibly reaching 3% within two years by stimulating consumption and employment.

Vision and Investment Ideas

When it comes to investment ideas, private banks propose a variety of strategies. Julien Lafargue, Chief Market Strategist at Barclays Private Bank, suggests that whether it’s extending the equity market rebound or pursuing carry and relative value strategies in fixed-income markets, most of the action in 2025 will likely occur in specific sectors or companies rather than at the index level.

“Investors must remain agile, broaden their investment universe, and adopt diversification.” Regarding artificial intelligence (AI), the coming months will be crucial to meeting expectations and assessing its impact on corporate results. “In a typical emerging technology cycle like this, the peak of inflated expectations is often followed by a trough of disillusionment. To avoid this, companies must show clear signs that AI is delivering on its promises. Those that fail will face the consequences,” says Lafargue.

Another perspective comes from Christian Gattiker, Head of Research at Julius Baer, and Mathieu Racheter, Head of Equity Strategy Research at Julius Baer. They argue that 2025 supports a constructive investment approach. “With U.S. growth and persistently high inflation, the economic environment should present opportunities, albeit with greater volatility. A diversified approach to fixed income favors corporate bonds over sovereign ones and some exposure to U.S. high-yield bonds.”

They add that as the dollar remains stable and cash yields decline, it is wise to deploy liquidity more actively. In equities, investors should continue betting on the U.S. market but rotate into cyclical sectors such as industrials and financials or explore the mid-cap space. “China offers a tactical opportunity, while long-term investors prefer India, which presents the best secular growth story. Assets like gold and bitcoin should continue to thrive and provide diversification benefits,” they emphasize.

BNP Paribas Wealth Management sees opportunities in shifting from cash to other assets, including bonds, to benefit from carry and from a steeper yield curve, for example, by investing in banking sector stocks. They also highlight four additional ideas: industrial sectors due to a recovery in industrial activity with lower rates; small and mid-cap companies to benefit from rate cuts and a soft-landing scenario; gold, which will benefit from falling central bank rates; and leveraged asset classes such as real estate, private equity, infrastructure/utilities, and clean energy.

Lombard Odier focuses on alternative assets, which are deemed essential for investor portfolios. They highlight three key bets: real estate as an income alternative in low-yield markets; hedge funds and private assets to expand the investment universe; and gold as a safe asset to add value to portfolios.

“In private assets, we see venture capital as a tool to expand the set of investment opportunities in portfolios. The most innovative companies have tended to remain private for longer in recent years, and investment returns are higher during this period. These opportunities also provide diversification to portfolios as the number of listed companies has decreased in many markets,” Lombard Odier explains regarding alternative assets.