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BlackRock Expands Its Range of Active ETFs With Two Enhanced Fixed Income Funds

BlackRock active fixed income ETFs — Pixabay CC0 Public Domain

BlackRock Expands Its Range of Active iShares Enhanced ETFs With the Launch of Two Enhanced Fixed Income Funds: the iShares $ Corp Bond Enhanced Active UCITS ETF and the iShares € Corp Bond Enhanced Active UCITS ETF. Under the UCITS format, these vehicles offer investors access to “low-cost key asset allocation components that have consistent potential to generate alpha at the core of their portfolios.”

The asset manager explains that both strategies leverage the expertise of its systematic investment platform, with over $300 billion and 40 years of experience, to uncover the insights that drive future returns. The investment team’s process combines the power of big data and advanced technologies with human expertise to deliver predictable and repeatable alpha.

In the opinion of Jeffrey Rosenberg, Senior Portfolio Manager of Systematic Fixed Income at BlackRock, the current market environment has led investors to reconsider the role of fixed income in their portfolios to capture the attractive income opportunity we see today. “Our robust investment process allows us to identify and target bonds with attractive spreads to deliver more attractive risk-adjusted returns than investment-grade indices and active managers, while our quality selection approach helps to reduce downside risks,” says Rosenberg.

In this regard, the asset manager highlights that the new funds are designed to offer the most efficient use of the risk budget by taking hundreds of small evidence-based positions, in order to minimize unwanted risks (sector, duration) and achieve high information ratios. This disciplined approach can be used to complement existing core indexed strategies or to diversify investment styles in a volatile market context. Specifically, the enhanced fixed income investment methodology is based on a technology-driven process that analyzes more than 3,000 issuers daily, focusing on high-credit-quality companies trading at attractive valuations, with the goal of achieving superior total and risk-adjusted returns.

“Investors continue to turn to iShares in their search for innovative ETF solutions and can now access an efficient tool in both indexed and active strategies to achieve their financial objectives. Using active ETFs as core components of an active portfolio allows investors to allocate to proven sources of alpha over time to drive their asset allocation,” concludes Jane Sloan, Head of iShares and Global Product Solutions for EMEA at BlackRock.

From Reacting to Headlines to Possible Tariff Negotiations: Caution Reaches Investment Portfolios

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Tariff negotiations impact investment portfolios

The week began in a frenzy. After a day of widespread declines in global stock markets, as well as in commodities and fixed income, and significant movements in major currencies—especially Latin American ones—the Fed called an extraordinary closed-door meeting. In addition, U.S. President Donald Trump threatened China with an additional 50% tax if it did not withdraw its 34% retaliatory tariffs, while the European Union offered Trump 0% tariffs on industrial products.

Volatility, declines, and uncertainty mixed all in one day—but calm has returned. Today, the sun has risen again and the word most often heard is “negotiation.” “Today’s session opens with optimism given the conciliatory tone of U.S. authorities toward the Land of the Rising Sun. In Europe, Monday’s Trade Ministers Summit resulted in a lukewarm response of intentions and proposals to negotiate with the United States. Meanwhile, China, aware that it is the main economic rival, remains firm in its stance to increase tariffs on U.S. products by 34% starting April 10, despite U.S. threats,” explain analysts at Banca March in their daily report.

According to experts, all attention is now focused on the countries’ ability to negotiate to limit the impact of tariffs. “Negotiations on trade agreements could be complicated and include retaliation and additional tariffs, but will ultimately culminate in agreements with lower trade barriers than those announced last week,” says David Kohl, Chief Economist at Julius Baer. In the opinion of Aline Goupil-Raguénès, strategist at Ostrum AM (Natixis IM), “it is unlikely that these tariffs will be reduced quickly, as Donald Trump seems determined to keep them high long enough to encourage foreign investors to invest in the United States.”

Trump, Tariffs, and the Fed

Andy Chorlton, CIO of Fixed Income at M&G Investments, reminds us that the major unknown of the tariff policy is its impact on inflation, which directly affects the Fed. According to Chorlton, the best example is in the Fed Chair’s comments at the beginning of April, when he stated that he considered the inflation impact of any tariff increase to be transitory—a temporary spike in prices. “Just a few days later, on Friday, he acknowledged that the impact of tariffs on both inflation and employment is uncertain and that he is taking a wait-and-see approach. With so much uncertainty about the final outlook for tariffs, the Fed’s determination to fight any rise in inflation expectations is clear. It’s worth remembering that its commonly known ‘dual mandate’ refers to employment and inflation, not to market stability or stock market rises. Nonetheless, investors clearly feel that the risk to growth is such that this mandate could be tested, and the market now expects five rate cuts by the Fed in 2025,” adds the expert from M&G.

What to Do With Portfolios

The latest weekly market commentary from the BlackRock Investment Institute notes that risk assets will face greater pressure in the short term given the significant escalation of global trade tensions. Therefore, the asset manager has shortened its tactical horizon and reduced risk-taking. “The sharp increase in global trade tensions and the extreme uncertainty surrounding trade policy have triggered widespread sell-offs of risk assets. It is unclear whether the uncertainty will cloud the outlook temporarily or for longer, so we chose to reduce our tactical horizon to three months. This means giving more weight to our initial view that risk assets could come under greater pressure in the short term. For now, we are reducing equity exposure and allocating more to short-term U.S. Treasury debt, which could benefit from investors’ desire to seek shelter amid volatility,” BlackRock notes.

According to Michael Walsh, Solutions Strategist at T. Rowe Price, from a multi-asset perspective, making significant asset allocation changes during periods of intense market turbulence leaves the portfolio exposed to missing improvements in investor sentiment. “The market may respond positively to any news related to resolving the current trade uncertainty. While we remain cautious and have moved away from U.S. equities in particular in recent weeks, we have maintained risk levels close to benchmarks within our multi-asset portfolios. As markets attempt to reassess this heightened level of uncertainty, we seek potential opportunities amid the dislocation,” says Walsh.

He explains that they remain cautious, as the rise in political uncertainty affects global growth, which has so far been solid, and reverses inflation trends. “As always, holding cash during times of turbulence provides liquidity to take advantage of market opportunities amid volatility. Cash interest rates are declining but remain attractive, and we have increased our holdings since the beginning of the year, mainly at the expense of another major defensive asset, high-quality government bonds. Tariffs and other trade barriers could push prices higher, which would drive up yields on fixed income instruments as we move closer to 2025. Where we hold government debt, our bias has leaned toward inflation-linked securities,” adds the strategist at T. Rowe Price.

In fixed income, Banca March reaffirms its view: “Last week we felt it was important to shed any overexposure to longer-duration bonds in the United States after our target of a 4% yield on the 10-year U.S. Treasury was reached.” Meanwhile, the fixed income teams at M&G have been concerned for months that credit spreads had priced in too much optimism, leaving little room for negative surprises, with spreads around the most expensive levels seen since the global financial crisis.

“This optimistic view also spread to government debt markets, where almost no possibility of a slowdown was priced in, and as a result, we considered they offered attractive valuations. In short, the market was fairly complacent, so the starting point of this correction certainly contributed to the size of the moves seen in just a few days. Our value-based fixed income investment approach allowed us to position our strategies defensively heading into Liberation Day, putting us in a good position to face these volatile times,” argues Chorlton.

Vanguard argues that fixed income ETFs can be a good cushion for portfolios in these times of uncertainty. “In this environment, marked by episodes of volatility and the prospect of market downturns, broad diversified exposure to fixed income is one of the most effective tools for investors to insulate their portfolios and mitigate losses. Global bonds with currency hedging, in particular, can be a good example,” argues Joao Saraiva, Senior Investment Analyst at Vanguard Europe.

A Calm Look at What Happened

Monday’s session was marked by very high volatility in both equities and fixed income, with the VIX—the S&P 500’s implied volatility indicator—at levels not seen since COVID-19. “In this environment, markets moved based on headlines. A rumor about a potential 90-day delay in implementing tariffs caused an intraday rally of 7% in the S&P 500, worth $2.5 trillion, which evaporated in just over 15 minutes after the rumor was officially denied. Beyond the volatility, open talks with Japan helped curb the sudden setbacks that marked the start of the session, even allowing the Nasdaq to close in positive territory,” summarize analysts at Banca March.

A key point was the Fed’s emergency meeting, which put on the table the option of intervention. “In this regard, short-term rate futures indicate that the U.S. central bank will cut official rates four times this year. In our view, this reaction seems unlikely, as the Fed will not be able to take such an active role in the face of inflation that could exceed 4%, due to the tariff effect,” add the experts at the Spanish firm.

According to the MFS Market Insights team, global markets had not experienced a level of stress and volatility like this since the early days of the pandemic in 2020. “Government bond yields have dropped significantly, reflecting strong demand for safe-haven assets. U.S. 10-year Treasury yields are now around 4%, after falling about 20 basis points since April 2. Similarly, 10-year German bund yields have fallen by the same margin. Meanwhile, credit markets have begun to show signs of stress, particularly in high-yield spreads, which have widened about 85 basis points in the U.S. and 60 in Europe since last Wednesday. In currency markets, the Japanese yen and the Swiss franc have performed better in recent days, thanks to their defensive nature. Finally, in commodities, oil prices have suffered a significant correction, falling to low $60 levels due to their vulnerability to a global risk aversion shock,” summarize analysts at MFS IM.

Another striking aspect in recent days is that, as noted by Bloomberg, more and more billionaires are breaking ranks with President Donald Trump—or at least with his tariff policy. “Ken Griffin, better known outside the financial world as the man who paid $45 million for a dinosaur, stated that the latest tariffs are a ‘huge policy mistake’ and amount to a heavy tax on American families. And Larry Fink, CEO of BlackRock, was equally direct, saying that most business leaders assure him that the U.S. is already in a recession,” they mention as key examples.

Stablecoins or a Risky Business: The SEC Is Concerned About How Investors Access Them

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SEC concerns about stablecoins — Pixabay CC0 Public Domain

The SEC’s Division of Corporation Finance is publishing a series of releases dedicated to jurisdictional exemptions for the crypto space. Although the Trump Administration seems more willing to support this growing universe, the literature published by the SEC maintains that certain so-called “stablecoins” are not securities. For Caroline A. Crenshaw, Commissioner of the U.S. regulator, the most striking part of this statement is not so much its final conclusion, but the analysis the staff relies on to reach it. “The legal and factual errors in the statement present a distorted view of the market for U.S. dollar-pegged stablecoins, drastically underestimating their risks,” she says.

As she explains, much of the staff’s analysis is based on the actions of issuers who supposedly stabilize the price, guarantee redemption capability, and generally reduce risk. SEC experts acknowledge, albeit briefly, that some dollar stablecoins are only available to retail buyers through an intermediary and not directly from the issuer. In reality, they acknowledge that it is common—not the exception—for these coins to be available to the retail public only through intermediaries who sell them on the secondary market, such as cryptocurrency trading platforms.

Specifically, more than 90% of stablecoins in circulation are distributed in this way. “Holders of these coins can only redeem them through the intermediary. If the intermediary cannot or will not redeem the stablecoin, the holder has no contractual recourse against the issuer. The role of intermediaries—particularly unregistered trading platforms—as primary distributors of dollar-backed stablecoins poses a series of additional significant risks that the staff does not consider,” says Crenshaw.

Consequences for the Investor

In the Commissioner’s opinion, people are not thoroughly analyzing the consequences of this market structure or how it affects risk, and she argues that the fact that intermediaries handle most of the distribution and redemption of retail dollar stablecoins significantly diminishes the value of the issuer actions on which the staff relies as “risk-reducing features.”

“One of these key features is the issuer’s reserve of assets, which the staff describes as designed to fully meet its redemption obligations—that is, to have enough assets to pay $1 for every coin in circulation. But, as mentioned, issuers generally have no redemption obligations to retail coin holders. These holders have no interest in or right to access the issuer’s reserve. If they redeem coins through an intermediary, the payment comes from the intermediary, not from the issuer’s reserve. The intermediary is not obligated to redeem a coin for $1 and will pay the holder the market price. Therefore, retail holders do not have, as the staff claims, a right to dollar-for-dollar redemption,” she argues.

On the other hand, she considers it inaccurate for the staff to suggest that just because an issuer’s reserve is valued at some point above the face value of its coins in circulation, the issuer has sufficient reserves to meet unlimited redemption requests (whether from intermediaries or holders) in the future.

“The staff also exaggerates the value of the issuer’s reserves as collateral by claiming that some issuers publish reports, called proof-of-reserves, showing that a stablecoin is backed by sufficient reserves. As the SEC and PCAOB have warned, proof-of-reserves reports do not prove such a thing,” she adds.

The SEC’s Conclusion

For the Commissioner, these legal and factual errors in the staff’s statement severely harm holders of dollar stablecoins and, given the central role of these coins in crypto markets, also harm crypto investors in general. Moreover, she highlights that they feed into a dangerous industry narrative about the supposed stability and safety of these products.

“This is especially evident with the staff’s choice to repeat a highly misleading marketing term: digital dollar, to describe U.S. dollar stablecoins. Make no mistake: there is nothing equivalent between the U.S. dollar and privately issued, unregulated, opaque (even clearly opaque to the staff itself), uncollateralized, uninsured cryptoassets loaded with risk at every stage of their multi-level distribution chain. They are a risky business,” she argues.

What Is Happening in Other Parts of the World?

Interestingly, in Latin America, interest in stablecoins has grown over recent years as a tool against inflation—as seen in countries like Argentina and Venezuela—as well as an alternative for facilitating international transactions (Mexico being a prime example) and promoting financial inclusion.

In terms of regulation, the situation varies widely by region. However, Brazil stands out, where a significant increase in stablecoin use has been observed, accounting for around 90% of cryptoasset transactions in the country. According to experts, this growth has led authorities to consider specific regulations to address challenges related to oversight and enforcement.

Across the Atlantic, the European Central Bank (ECB) continues its efforts to ensure that the digital euro meets the Eurosystem’s objectives and aligns with legislative developments within the European Union. In this regard, two major steps were taken last year. First, the ECB published its first progress report on the preparation phase of the digital euro. It highlighted the design of high privacy standards so that digital payments, both online and offline, closely resemble cash transactions. In addition, work began on a methodology to calibrate holding limits for the digital euro.

Second, in December 2024, the ECB published its second progress report, covering progress made between May and October 2024. During this period, the Regulation Development Group completed a review of the initial draft regulation, addressing approximately 2,500 comments. Furthermore, seven new working groups were launched focusing on critical areas such as minimum user experience standards, risk management, and implementation specifications.

Flows Tell the Story: Credit Investors Seek Hedges Rather Than Opportunities

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During the last week of March, high-quality credit continued to attract money, but it was the inflows into government bonds that really stood out. According to Bank of America (BofA), the good news on the macroeconomic front is that the rotation into European equities has continued, although at a slower pace.

However, the BofA report clarifies that the recent price action in credit in recent days points to a market that is seeking hedges rather than taking advantage of declines to buy. “We are watching closely for any emerging signs of outflows in high-quality credit, which would be a clear catalyst for a more negative price trend across the corporate bond market. With volatility on the rise, we highlight that fixed income investors are starting to show a preference for buying government debt again,” they indicate.

Main Trends

The BofA report shows that high-quality funds recorded significant inflows, with short-term investment-grade funds continuing to attract flows. Specifically, medium-term funds registered outflows, while long-term funds also recorded some inflows. “We continue to highlight our preference for the short end of the credit market. High-yield funds have now suffered four consecutive weeks of outflows after seven weeks of inflows,” the report states.

Similarly, high-yield ETFs also posted outflows last week, marking four consecutive weeks. Regionally, globally focused funds underperformed significantly for the second consecutive week, recording the majority of outflows, while U.S.- and Europe-focused high-yield funds saw similar levels of outflows.

Another interesting point is that government bond funds recorded another week of notable inflows after two weeks of outflows—the largest since June of last year. In addition, money market funds also saw inflows during the past week, and global emerging markets (EM) debt funds also attracted inflows. “Overall, fixed income funds recorded inflows over the past week, driven by inflows into government bonds and investment-grade funds,” BofA notes.

Finally, equity funds posted another inflow, making it eight consecutive weeks of inflows. “However, it is worth noting that, for the second consecutive week, the pace of inflows has slowed to nearly half compared to the previous week,” the experts at the firm conclude.

The Dollar Moves From Doubts to Recovery: Are We Heading Toward a Tripolar World?

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The Fed gave the dollar a lift last week by keeping its monetary policy unchanged and signaling that it is in no rush to cut interest rates in upcoming meetings. According to experts, from January to March 25, 2025, the U.S. dollar has shown a weakening trend against the euro. Specifically, the exchange rate moved from 1.0352 dollars/euro to 1.0942 dollars/euro on March 18. Will the dollar be able to maintain its historic leadership?

“In this world, the dollar reigns because it is perceived as the least risky currency. Internationally, there’s an anti-Gresham’s law whereby good money drives out bad money, and the good one is the dollar. In this context, the euro has tried in vain to compete with it, and the BRICs’ attempt to create another currency has been inconclusive,” says Philippe Waechter, Chief Economist at Ostrum Asset Management, an affiliate of Natixis IM.

In his view, the world is changing, and the imbalances that now characterize it no longer point toward an expansion of globalization, but rather toward a more localized refocus. “The U.S. is adopting a more isolationist policy with China and Europe, which are not considered allies on the international stage. This new approach, forced by Washington, could translate into a form of distrust toward U.S. values and the dollar. A more vertical world, reinforced borders, and reduced trust in the greenback are ingredients that favor the formation of a kind of tripolar world. A long time ago, economists envisioned such a tripolar framework. Each pole would focus on a country (the United States and China) and a geographic region (the eurozone), but also on a currency. Countries tied to the reference country would have a fixed exchange rate with the reference currency, which would fluctuate against the other two,” theorizes Waechter.

A Weak Dollar: A Risky Bet

The dollar is the cornerstone of the global financial system, and its strength has historically been a stabilizing factor for international markets and a safe haven in times of crisis. However, according to José Manuel Marín, economist and founder of Fortuna SFP, the new devaluation strategy aimed at making U.S. exports more competitive could undermine global confidence in the currency.

“Lower confidence in the dollar could trigger capital flight and inflationary pressures in the United States. In addition, countries holding dollar reserves could begin to diversify them, further weakening its position as the global reference currency. This would create an environment of instability in international financial markets, where the dollar would cease to be the ultimate safe asset,” explains Marín.

The economist recalls that historically, dollar weakness has been a tool used by the U.S. during times of crisis, but it has also brought unintended consequences, such as more expensive imports and an increase in the cost of living for Americans. “It could also encourage other nations to strengthen their currencies or seek alternatives to the dollar-based system, weakening U.S. financial hegemony in the long term,” he adds.

The Fed Breathes Life Into a Recovering Dollar

Leaving theory aside, what we’ve seen is that last week, the dollar regained ground against major currencies, driven by the Fed’s hawkish stance and some fairly encouraging U.S. data. “Investors’ main fear lately has been that Trump’s unpredictable tariff statements could send the U.S. economy into a sharp and uncontrolled downturn. So far, at least, this hasn’t shown up in the data, as last week’s labor and housing market reports surprised to the upside. Preliminary March PMI figures could go a long way toward easing recession fears. However, all eyes will be on the presentation of reciprocal tariffs scheduled for next week, which is the next major risk event for financial markets,” explains Ebury in its latest report.

This recovery seems to be continuing. “The dollar continues to advance against the common currency as investors digest last week’s Fed meeting. Likewise, comments from Atlanta Fed President Raphael Bostic encouraged greenback buying, as he noted yesterday that he expects only one rate cut this year. With all this, the euro/dollar pair, already down for four consecutive sessions, fell another -0.1% on Tuesday morning, settling at 1.079 euro/dollar. Meanwhile, the euro/pound pair is currently flat. After falling -0.2% yesterday, the euro/pound remains steady at 0.836 euro/pound,” notes Banca March in its daily report.

A New Era for the Euro?

According to experts, the U.S. dollar is one of the victims of Trump’s erratic policy, which also jeopardizes its role as a safe-haven asset. “At the same time, the new European context has created room for improved sentiment toward the euro. For this reason, we have revised our euro/dollar exchange rate forecast upward to 1.05 for both the 3- and 12-month horizons. As long as Trump maintains his aggressive tariff strategy and is willing to endure economic pain, the dollar will remain constrained, even if the U.S. retains its interest rate advantage and cyclical strength,” explains David A. Meier, economist at Julius Baer.

In this regard, the euro seems to have taken a constructive turn. According to Claudio Wewel, currency strategist at J. Safra Sarasin Sustainable AM, Germany’s historic fiscal shift has significantly improved the euro’s growth outlook and challenges their previously negative view of the currency. “The sharp rise in Bund yields has significantly strengthened support for the euro against the U.S. dollar, though to a lesser extent against the Swiss franc, in our view. However, markets continue to overlook the risk of political setbacks, including a potential repeal by the German Constitutional Court. In addition, Vladimir Putin has expressed reservations about Ukraine’s proposal for a temporary ceasefire, reducing hopes for a near-term peace deal. Finally, the euro’s tariff risk premium remains relatively low, making it vulnerable to a possible escalation of the trade war between the U.S. and the EU,” he concludes.

Madrid Becomes the Epicenter of Alternative Investment: DDC Global Investor Summit 2025

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Next week, Madrid will host a new edition of the DDC Global Investor Summit 2025, a key event for Servicers and Asset Managers in Spain, who are at a crucial moment of evolution and consolidation. With a more mature and sophisticated market, connecting with alternative investment investors from across Europe is more relevant than ever.

An Agenda Designed for Industry Transformation

The event will bring together top financial specialists and feature a strategic agenda addressing the key challenges and opportunities in the sector. Some of the key topics to be covered include:

Trends in the debt and real estate markets in Spain and Europe Investment strategies in alternative assets and distressed assets.
The impact of digitalization and artificial intelligence in portfolio management.
Regulation and new financial regulatory frameworks.

Additionally, the DDC Global Investor Summit 2025 will provide a unique
opportunity to strengthen relationships with investment funds, banks, servicers, and asset managers from across the continent.

A Key Moment for Servicers and Asset Managers in Spain

Spain has reached a high level of maturity in asset and debt management, positioning it as a highly attractive market for international investors. In this context, the DDC Global Investor Summit 2025 will connect the sector’s key players with strategic investors in an exclusive space for high-level networking and debate.

A High-Profile Lineup: The Leading Banks and Investors in Attendance

The event will feature participation from some of the most influential financial institutions, including Banco Sabadell, Caixabank, Banco Santander, BBVA, Kutxabank, BNP Paribas, Oney, Ibercaja, among other financial entities. Additionally, confirmed investment funds and asset managers include Cerberus, Carval, Tilden Park, Monte Bianco Fund, Pygmalion Capital, Deutsche Bank, Davidson Kempner, Goldman Sachs, Cabot, Hoist Finance, Impar Capital, among others. These key players will share their insights on investment opportunities in Spain and Europe, offering an unparalleled framework for strategic decision-making.

With top-tier expert panels and an agenda tailored for strategic decision-making, the event promises to be a milestone in the evolution of the sector in Spain and Europe.

When it comes to investment, time is money, and therefore, events should not be massive but rather exclusive meetings with the right people to foster business generation and create value for all parties," said Paola Ortega Andrade, Managing Partner of DDC Financial Group.

30% discount off the standard registration fee, Code: VIPMADRID30

Registration: Directly with Helena Noskova, Marketing Director at helena.noskova@ddc-financial.com

Uncertainty Over the Evolution of the Trade War Has Set the Stage for Potential Volatility in the Future

| For Patricio Tesei | 0 Comentarios

U.S. stocks were lower in February, primarily driven by underperformance in the Nasdaq and Russell 2000. The month was characterized by a shift from growth to value, as rising concerns over the sustainability of the AI secular growth narrative nudged several of the “Magnificent 7” stocks into correction territory.

Political dynamics remained a dominant theme as President Trump, now a full month into his second term, continued to push his deregulation and pro-growth policies. Yet, market sentiment was tempered by persistent concerns over the impact of his tariff policies on both domestic and international companies. The month began with President Trump announcing 25% tariffs on Canada & Mexico and 10% on China*. While those tariffs were ultimately delayed as negotiations were ongoing, the uncertainty of trade war developments has set the stage for potential volatility ahead.

Economists worry that expectations of higher growth under President Trump’s administration could keep inflation elevated for longer, potentially complicating the Federal Reserve’s policy path. In Fed Chair Powell’s semiannual monetary policy report to Congress, he noted that recent indicators suggest economic activity has continued to expand at a solid pace, with GDP rising 2.5% in 2024. He added that as the economy evolves, the Fed will adjust its policy stance to best promote maximum employment and stable prices.

Small-cap value stocks underperformed their large-cap value counterparts during the month, as concerns over “higher for longer” interest rates have continued to be a near-term headwind. However, as rates trend lower, we believe small- and mid-sized companies are well-positioned to benefit through 2025/2026 from stronger domestic growth and pro-business policies.

New deal activity remains healthy at $862 billion globally, an increase of 15% compared to 2024 levels. M&A advisers remain upbeat about corporate appetite to make acquisitions due to a return to a more traditional regulatory framework. Some acquirers are choosing to wait for greater certainty and/or clarity on tariffs and the Trump Administrations priorities.

Opinion by Michael Gabelli, managing director of Gabelli & Partners

* This article was written prior to U.S. President Donald Trump’s recent announcements on tariffs.

Venture’s appeal

| For Rocío Martínez | 0 Comentarios

Last week, Google announced that it would acquire Wiz for $32 billion, marking its largest acquisition ever. Wiz, which offers cloud security solutions, was founded in 2020 and by the end of 2022 was already valued at $6 billion. By 2023 the company had achieved $100 million in recurrent revenue “ARR”, and by YE-2024 the company was reported to reach a stunning $500 million in ARR, demonstrating a unique capacity to grow sales at an impressive pace. Wiz received venture backing from its onset. Its first institutional round was for $20 million. Those early investors, which included the famous Sequoia Capital may reap close to a 100X gross over their original investment.

Venture is the one category within the private assets world that it is not actively raising capital from the wealth industry, yet certainly exploring options on how to. It’s also the riskiest and probably least understood space of private investing, although nowadays there’s a never-ending sleuth of podcasts and articles to learn about it.

Accessing and selecting VC funds is also complicated. The one easy path for retail investors is to participate in venture-backed companies when these become public through an IPO. Once publicly traded, VC funds will typically maintain their position until they find the right moment to exit, potentially generating better outcomes for investors, keeping their board seats and therefore their influence. Not all VC-backed companies go public though, many exits occur through strategic acquisitions as in the case of Wiz.

VC-backed companies raise money through capital rounds, starting with seed and all the way to growth capital. At the seed stage, a particular technology or service may still be a project in paper and the funds would be used by the founders to kickstart the company. Once the growth stage is reached, the company typically has proven sales and customers. Capital would be employed for expansion projects through marketing, hiring top performing sales professionals or developers, amongst other initiatives. From seed to growth to a potential IPO, an average VC-backed company would have raised capital about 6 to 8 times throughout a cycle of 10 years or more, although the amount of capital and number of rounds required varies.

The VC industry has historically been recognized for being able to generate exponential results over relatively small investments. A good example is Amazon: it took only two rounds of outside investor funding (the second by a venture fund) for a total of $9 million to help it achieve self-sustainability and its future valuation.

However, cases like Amazon and Wiz are true outliers, even within the VC universe: they resulted in outsized returns for institutional backers. Double or even triple digit multiples are quite rare yet are targeted by all VC funds as they represent a fundamental element of the industry: the power-law.

You will hear that VC is a power-law industry meaning in practical terms that for any number of investments, it is only a very limited number of those that explain the returns of a venture fund. Imagine for instance a seed fund that made a series of investments and 10% of capital returned 100X. No matter what happens to the rest of the portfolio, that fund would have achieved at least a 10X gross (10% times 100).

As mentioned above, very high returns (in the order of 50X or above) are extremely rare (less than 1% of all seed investments made) whereas capital loss due to projects failing can exceed 50% in any given seed fund. Devoid of power-law results, seed funds would likely provide poor returns for investors.

Alas, not all VC investing relies solely on a model where a very small fraction of invested capital drives all returns. Growth-venture is a more accessible space as funds that focus on this category tend to be much larger than early stage ones and typically invest in companies that have a proven track record, reducing the probability of capital loss. Entry points and prices though can be substantially higher than at the seed stage and therefore return expectations for specific investments tend to be lower. Wiz for instance was valued at about $70M when it got its institutional seed checks back in 2020 but it raised a growth round at the end of 2021 at the aforesaid $6B valuation. Compared to its destined exit value of $32B, that is more than a 5X growth multiple in value achieved in only 3-4 years, which is still impressive.

The message: growth venture can still produce very attractive returns, relying on a model in which investment periods are expected to be somewhat shorter and capital losses lower relative to seed investing. The table below compares some characteristics between these two categories.

Typical characteristics of seed and growth funds (using data for Vintages 2012 to 2022)

Source: produced with Grok Artificial Intelligence application. Carta Q2 2024 (fund sizes), PitchBook Q3 2024 (fund sizes up to $2B investments, rounds for 2012– 2022), Cambridge Associates (2024) (stage definitions for 2012– 2022).

Can I invest in venture?

This article covers a limited scope of the VC industry and some of its characteristics. Note that VC fund styles can vary and be more flexible in terms of investing strategy. Multistage funds, for instance, can invest in seed, core venture (which we did not touch upon in this article) and growth. Some of the most recognized VC funds actually fall under the multi-stage category.

VC funds are generally limited to qualified purchasers through traditional drawdown funds. Achieving top quartile returns in venture requires investing with the most recognized managers of the industry. To begin with, access to startup funding varies across VC funds: it is not a plain level field. It is widely recognized that founders tend to favor the most reputable funds and their partners, who often are invited first to invest in top-tier projects. However, accessing these partnerships is a time-consuming exercise. Typically, it is the purview of institutional investors and teams who focus on manager selection and nurturing relations with GP’s. In some cases, being invited to a capacity-constrained venture fund can take years of insistence.

Given this condition, an adequate allocation strategy for qualified retail investors is to commit to a fund of funds “FoFs” with demonstrated access to some of the top names. Interestingly, FoF’s nowadays may even accept capital commitments as low as $100K, providing proper diversification. Some of these may even incorporate co-investments in their approach to have direct exposure to companies like Wiz.

UBS AM Launches Its First Two Nasdaq-100 ETFs

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UBS Asset Management (UBS AM) has announced the launch of two new UCITS ETFs that offer exposure to the Nasdaq-100 Notional and Nasdaq-100 Sustainable ESG Select Notional indices. According to Clemens Reuter, Head ETF & Index Fund Client Coverage, UBS Asset Management, “these are the first two Nasdaq-100 ETFs we are launching, giving clients the option to choose between the iconic index and the sustainable version of the same benchmark.”

Regarding the funds, they state that the UBS ETF (IE) Nasdaq-100 UCITS ETF passively replicates the Nasdaq-100 Notional Index, which is composed of the 100 largest U.S. and international non-financial companies listed on the Nasdaq Stock Market, based on market capitalization. The index includes companies from various sectors such as computer hardware and software, telecommunications, retail/wholesale, and biotechnology. The manager clarifies that the fund is aligned with Art. 6 under SFDR and is physically replicated.

Meanwhile, the UBS ETF (IE) Nasdaq-100 ESG Enhanced UCITS ETF passively replicates the Nasdaq-100 Sustainable ESG Select Notional Index, which is derived from the Nasdaq-100 Notional Index. Companies are evaluated and weighted based on their business activities, controversies, and ESG risk ratings. Companies identified by Morningstar Sustainalytics as having an ESG risk rating score of 40 or higher, or as involved in specific business activities, are not eligible for inclusion in the index. The ESG risk rating score indicates the company’s total unmanaged risk and is classified into five risk levels: negligible (0–10); low (10–20); medium (20–30); high (30–40); and severe (40+).

In addition, the ESG risk score of the index must be 10% lower than that of the parent index at each semi-annual review. A lower index-weighted ESG risk score means lower ESG risk. The fund is physically replicated and aligned with Art. 8 under SFDR.

According to the manager, the UBS ETF (IE) Nasdaq-100 UCITS ETF will be listed on SIX Swiss Exchange, XETRA, and London Stock Exchange, while the UBS ETF (IE) Nasdaq-100 ESG Enhanced UCITS ETF will be listed on SIX Swiss Exchange and XETRA.

Wealth Managers Turn to AI and Private Assets to Boost Their Business

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For wealth managers, growth has been strong over the past five years, with a global increase of 20% in assets under management (AuM). According to the Wealth Industry Survey by Natixis IM, the pursuit of growth is even greater this year, as firms project an average increase of 13.7% in wealth just in 2025. However, given geopolitical changes, economic uncertainty, and accelerated technological advances, investment leaders know that meeting these expectations will not be an easy task.

Geopolitics and Inflation: Key Concerns

The results show that while 73% are optimistic about market prospects in 2025, macroeconomic volatility remains a major concern. 38% of respondents cite new geopolitical conflicts as their main economic concern, closely followed by inflation, with 37% of respondents fearing that it may resurge under Trump’s policies. Additionally, 66% anticipate only moderate interest rate cuts in their regions.

Despite these concerns, 68% of analysts state that they will not adjust their return expectations for 2025, as wealth managers are implementing strategies for their businesses, the market, and most importantly, their clients’ portfolios, with the aim of delivering results.

In addition to new geopolitical conflicts and inflation, respondents also identified other concerns for 2025. 34% point to the escalation of current wars, and another 34% highlight U.S.-China relations. Lastly, 27% underscore the tech bubble as another factor to consider.

With this in mind, wealth managers are carefully considering how geopolitical turbulence and persistent inflation will impact the macroeconomic environment. Half of the respondents forecast a soft landing for their region’s economy, with the strongest sentiment in Asia (68%) and the U.S. (58%). However, this drops to 46% in Europe and just 37% in the U.K. Additionally, 61% are concerned about stagflation prospects in Europe.

Regarding the specific impacts of the U.S. elections on the economic outlook, two-thirds globally are concerned about the possibility of a trade war. However, wealth managers also see opportunities on the horizon, as 64% believe that the regulatory changes proposed by the Trump administration will drive the development of innovative investment products.

In addition, two-thirds believe that the proposed tax cuts will drive a sustained market rally. Taking all of this into account, 57% globally say that, in light of the U.S. election outcome, clients are more willing to take on risk, with the potential to disrupt the cash accumulation pattern investors have maintained since central banks began raising rates.

The Investment Potential of AI

After witnessing the rapid development of generative AI models, 79% of surveyed wealth managers say that AI has the potential to accelerate profit growth over the next 10 years. With this in mind, firms are looking to leverage the benefits of the new technology in three key areas: tapping into the investment potential of AI, implementing AI to improve their internal investment process, and using AI to optimize business operations and customer service.

69% of respondents say that AI will improve the investment process by helping them uncover hidden opportunities, and another 62% say that AI is becoming an essential tool for assessing market risks. In fact, the potential is so significant that 58% say that companies that do not integrate AI will become obsolete.

With this in mind, 58% say their company has already implemented AI tools in their investment process. The highest concentration of early adopters is found among wealth management firms in Germany (72%), France (69%), and Switzerland (64%).

Beyond investment opportunities and portfolio management applications, wealth managers also anticipate that AI will impact the service side of the business. Overall, 77% say that AI will help them meet their growth goals by integrating a wider range of services. However, the technology can be a double-edged sword, as 52% also fear that AI is helping turn automated advice into a real competitive threat.

“Wealth managers face a wide range of challenges in 2025, from educating their clients on the benefits of holding private investments to finding the best ways to integrate AI into their investment and business processes. However, despite potential obstacles, wealth managers are confident that they can harness disruptive forces to unlock new opportunities and meet the AUM growth goals they need to achieve in 2025,” says Cecile Mariani, Head of Global Financial Institutions at Natixis IM.

Appetite for Private Assets Continues to Grow

Technology may have the potential to transform the industry, but firms face more immediate challenges in meeting clients’ investment preferences and return expectations.

Wealth managers are exploring a wider range of vehicles and asset classes to meet their clients’ needs. Globally, portfolios now consist of 88% public assets and 12% private assets, a ratio that is likely to shift as focus on private assets increases. Additionally, 48% state that meeting the demand for unlisted assets will be a critical factor in their growth plans.

However, private asset allocation is not without its challenges. 26% of respondents consider access to these assets—or lack thereof—a threat to their business. Despite this, new product structures are helping to ease this pressure, with 66% noting that private asset vehicles accessible to retail investors improve diversification.

The next challenge will be financial education, as 42% believe that a lack of understanding about liquidity is a barrier to incorporating private assets into client portfolios. Nevertheless, the lack of liquidity can also work in favor of some investors, given that 75% of wealth managers globally say that the long-term nature of retirement savings makes investment in private assets a sound strategy.

Overall, 92% plan to increase (50%) or maintain (42%) their private credit offerings, and similarly, 91% plan to increase (50%) or maintain (41%) their private equity investments on their platforms. Few among the respondents see this changing, as 63% say that there is still a significant difference in returns between private and public markets. Additionally, 69% say that despite high valuations, they believe private assets offer good long-term value.

The 2025 Wealth Management Industry Survey by Natixis Investment Managers gathers the views of 520 investment professionals responsible for managing investment platforms and client assets across 20 countries.