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The New Challenge for Asset Managers: Competing Internationally Without Multiplying Costs

market ahead of Argentina elections — Freepik

In an environment where international expansion demands complex structures and high regulatory costs, asset managers are seeking more agile ways to scale their strategies. Asset securitization, especially through listed and Euroclearable exchange-traded products (ETPs), has become an effective way to compete internationally without replicating corporate infrastructures across multiple jurisdictions, according to FlexFunds.

Launching a conventional investment fund involves establishing local management entities, complying with diverse regulatory frameworks, and undergoing lengthy registration and distribution processes. These requirements can take months and consume legal, tax, and operational resources that erode profitability.

Furthermore, custodian banks and institutional platforms require products with full operational compatibility — ISINs, automated reconciliations, standardized reporting, and recurring audits. When a vehicle does not meet these standards, its integration into private banking or wealth management networks becomes slow and costly.

Securitization and ETPs: A modern distribution architecture

Through securitization, a managed strategy is converted into a structured vehicle with an ISIN and international custody (Euroclear / Clearstream), without the manager losing control of the portfolio. This format enables the repackaging of specialized strategies — such as private credit, real estate, fixed income, or alternative assets — into instruments that are easily integrated into institutional systems, reducing entry barriers and improving transparency.

The III Annual Report of the Asset Securitization Sector 2025 – 2026, prepared by FlexFunds in collaboration with Funds Society, highlights the role of Ireland as a preferred jurisdiction for structuring securitized ETPs. Thanks to its Section 110 of the Taxes Consolidation Act, supervision by the Central Bank of Ireland, and connectivity with Euroclear, the country offers a robust and internationally recognized infrastructure.

FlexFunds’ ETPs leverage this framework by being structured through Irish Special Purpose Vehicles (SPVs), which combine tax efficiency, operational standardization, and global distribution. According to the report, over 70% of surveyed managers view this model as a key tool for internationalization, citing its low operational cost and fast launch timeline — 6 to 8 weeks, compared to several months for a conventional fund.

Additionally, the Irish SPV Report Q2-2025 confirms Ireland’s leadership in this field, with 3,724 active SPVs and total assets of €1.18 trillion, driven by structured debt vehicles such as CLOs and private securitizations. Financial Vehicle Corporations (FVCs) hold €689 billion in assets, while Other SPEs total €490.7 billion, reflecting the maturity of Ireland’s securitization ecosystem.

The growth of the securitized model is occurring alongside the record expansion of the global ETP market. According to ETFGI’s September 2025 report, assets under management in ETFs and ETPs reached $18.81 trillion, the highest level on record. This increase reflects a sustained trend towards institutionalization and standardization of listed structures, driving demand for efficient, transparent, and easily distributed products.

Advantages of ETPs for asset managers

International scalability: Access multiple jurisdictions without creating new subsidiaries.
Efficiency and speed: Standardized structures allow launches within weeks.
Institutional compatibility: ISINs and international custody ease integration with banks and platforms.
Control retention: Managers maintain decision-making over assets and risks.
Transparency and credibility: Independent valuation, auditing, and reporting enhance investor confidence.

The report by FlexFunds and Funds Society highlights securitization as a lever for innovation and diversification, particularly for strategies seeking institutional capital without losing operational flexibility.

Securitization has evolved into a strategic tool enabling portfolio managers to expand their global reach with efficiency and control. Far from being a product reserved for large institutions, these investment vehicles now offer a practical, regulated, and competitive path for internationalizing portfolios, improving governance, and connecting with investors worldwide.

For more information, please contact our specialists at info@flexfunds.com.

Brookfield to Acquire Remaining 26% of Oaktree for Approximately 3 Billion Dollars

| By Amaya Uriarte | 0 Comentarios

Brookfield to Acquire Remaining 26% of Oaktree Capital Management for $3 Billion

Brookfield has announced that it will acquire the remaining 26% of Oaktree Capital Management that it does not yet own for approximately 3 billion dollars, enabling it to take full ownership of the Los Angeles–based firm specializing in credit and distressed debt. The deal will also strengthen Brookfield’s position as a major force in the alternative credit space, according to a Bloomberg report.

The agreement, which values Oaktree at around 11.5 billion dollars, is set to close early next year and will contribute to Brookfield’s revenue. The company first acquired a majority stake in Oaktree six years ago, accelerating the growth of its credit business, which has since become one of its fastest-growing divisions. Once the transaction is completed, the United States will become Brookfield’s largest market, representing more than half of its 550 billion dollars in assets and revenue.

CEO Statements and Strategic Vision

Following the announcement, Brookfield CEO Bruce Flatt stated:
“When we partnered with Oaktree six years ago, we joined forces with one of the most respected credit investors in the world, and the results have exceeded our expectations. Our partnership has created significant value for both companies. It has fueled the rapid expansion of our private credit platform, supported the growth of our wealth solutions business, and contributed to a 75% increase in Oaktree’s assets under management. Taking this next step will allow us to expand our credit franchise, enhance collaboration across our businesses, and strengthen our ability to continue delivering long-term value to our investors.”

Howard Marks, Co-Chairman of Oaktree, commented:
“Our partnership with Brookfield has been a great success, built on shared values of disciplined investing, long-term thinking, and integrity. Together, we have proven our ability to work seamlessly and deliver the best of both firms to our clients. Becoming a full part of Brookfield is a natural evolution that will allow Oaktree to continue thriving as part of one of the world’s leading investment organizations. With this closer alignment, Oaktree will remain central to Brookfield’s credit strategy, and we see significant opportunities to grow the franchise and expand what we can offer together to our clients.”

Transaction Terms

According to the proposed terms, Brookfield Asset Management Ltd. (BAM) and Brookfield Corporation (BN) will acquire all remaining equity interests in Oaktree for a total consideration of approximately 3 billion dollars. Under the terms of the transaction, Oaktree shareholders will have the option to receive a cash consideration, shares of BAM, or, subject to certain limitations, shares of BN.

The BAM and BN shares issued as consideration will be subject to sale restrictions of two and five years, respectively. This structure provides Oaktree holders the opportunity to participate in the future growth and earnings of the combined business while further enhancing long-term alignment.

Both BAM and BN intend to repurchase an amount of their own shares equivalent to those issued under the transaction. These repurchases will be conducted in the open market or, in BAM’s case and subject to regulatory approvals, from BN, which has agreed to make such shares available. This ensures that the transaction will have minimal or no dilutive impact on current BAM and BN shareholders.

The deal marks a significant increase in Oaktree’s valuation, as its assets under management have grown by 75% since Brookfield’s initial investment. It also follows a broader wave of consolidation among alternative asset managers, including BlackRock’s acquisition of Global Infrastructure Partners for 12.5 billion dollars.

The Industry Confirms Its Formula for Growth: ETFs, Private Markets, Retail, and Pensions

| By Amaya Uriarte | 0 Comentarios

In 2024, assets under management reached a record 135 trillion dollars, representing a 13% year-over-year increase. However, according to the latest report by Morgan Stanley and Oliver Wyman, by 2029, global assets in the asset management industry could reach 200 trillion dollars, implying an annual growth rate of around 8% and a cumulative increase of 48%. In addition, they estimate that average annual net flows will be around 2.7% through 2029.

These projections are based on the assumption that markets will maintain strong performance and that we are in an environment with lower interest rates, which are redirecting funds from guaranteed deposits back into capital markets. They also consider a context in which there is an ongoing shift from collective pension plans (defined benefit) to individualized retirement plans (defined contribution). All of this, they argue, could further sustain flows in the future.

Passive Management and Private Markets

In this global overview of what asset growth will look like, the report identifies several trends that will shape the evolution of the industry and asset managers’ business models. First, it notes that, for the first time globally, passive equity will surpass active equity. “Passive equity management continues to expand, especially in established markets like U.S. retail and in underpenetrated regions such as Europe and Asia-Pacific. In contrast, active equity funds are facing persistent outflows at the industry level, sustained only by a few managers delivering top-quartile performance,” the report states.

Notably, the fixed income segment shows a similar trend: “Although passive fixed income assets are expected to grow twice as fast as active assets, they will remain a relatively small segment of the market by 2029.”

Regarding Private Markets, the report considers that we are currently in a “plateau” phase following the boom from 2019 to 2022 and the stagnation of 2024. “This plateau masks a growing disparity between leading firms and smaller players. The top 10 private asset funds by assets captured 14% of fundraising in 2024, compared to 10% in 2020, a figure that rises to 48% and 58% of the capital raised in 2024 for private debt and infrastructure, respectively,” the report notes.

Their interpretation is that larger firms, benefiting from proprietary capital and deal generation, continue to outperform their competitors, securing the bulk of new capital flows and charging premium fees. “Smaller managers face fundraising challenges and often compete by offering fee discounts—a divide that is likely to intensify as wealth distribution channels (where most of the growth is expected) increasingly favor larger and more recognized brands,” they argue. Looking ahead, however, they expect significant growth across all private markets, driven by their increasing penetration into retail client portfolios.

Growth Drivers

Regionally, the report identifies Asia-Pacific as standing out for its higher organic net flows into both retail and institutional markets, particularly in China. It explains that, despite recent slowdowns, a significant portion of household wealth remains in low-yield deposits, highlighting untapped potential—especially in Japan.

In addition, global retail channels are projected to grow at twice the rate of institutional segments, which are experiencing net outflows except in certain niches such as general insurance accounts and some defined benefit pension markets (e.g., Japan, Australia). “Asset growth in Europe is expected to benefit from regulatory efforts encouraging retail participation and from the ongoing shift toward individualized retirement plans, through new vehicles and incentives (France, Germany) or mandatory auto-enrollment in defined contribution plans (United Kingdom),” the report states.

In this context, asset managers have found a path to continued growth, specifically through solution-based offerings. “These are becoming a key growth area, with the segment expected to expand at an annual rate of 11% through 2029,” the report notes.

The document explains that asset managers are increasingly adopting solutions in the form of model portfolios, sub-advisory mandates, and retirement-focused products to differentiate themselves. According to the analysis, this growth is being driven by rising demand for retail retirement investment products (e.g., target-date funds, target-maturity funds, decumulation products), with average organic growth over the past three years of 12% in APAC, 15% in Europe, and 7% in the Americas, as well as by the expansion of institutional solutions in the Americas, particularly outsourced chief investment officer (OCIO) mandates, which have grown organically by 7% since 2021.

Margins and Business Sustainability

In terms of revenue, the report concludes that the asset management industry will generate more than 650 billion dollars by 2029, in line with the estimate that assets will grow at an annual rate of around 8%. According to the report, alternatives are expected to claim an increasingly larger share, representing 44% of total revenue, while the share of active equity and fixed income funds declines.

This positive news is accompanied by a very clear warning: fee compression persists, though it is being offset by the shift toward higher-margin private markets and retail growth. “Asset managers’ operating margins improved in 2024, particularly among alternatives, which reached a record 51%. However, traditional managers continue to face structural profitability challenges amid ongoing fee pressure and cost-control demands—especially those using hybrid operating models (combining traditional and alternative asset management) who struggle to efficiently integrate distribution and product development,” the report concludes.

Finally, the report notes that, in this growth context, asset managers must address four themes that are reshaping the industry and present both challenges and opportunities.

First, leaders are facing increasing pressure to demonstrate value for money in Europe and APAC. Second, they must organize their product and distribution forces to serve a growing retail market that increasingly demands institutional-quality coverage. Third, they need to deploy operating models capable of blurring liquidity boundaries to address the burgeoning semiliquid product space. Finally, they must think beyond the active/passive dichotomy and build investment engines suited to address the full spectrum of tracking error.

The Market Ahead of Pivotal Elections in Argentina

| By Amaya Uriarte | 0 Comentarios

The Spotlight Is More Than Ever on Argentina

The government led by Javier Milei heads into the midterm elections this Sunday, October 26, in a completely unprecedented situation: with the United States Treasury committed to providing financial assistance to the country of up to 40 billion dollars, intervening in the foreign exchange market to calm volatility, and promising trade agreements.

The U.S. aid became effective after the ruling party lost by 13 points in the early September elections in the province of Buenos Aires, which accounts for nearly 40% of the national electorate. Therefore, these upcoming national legislative elections will be key for the government, which needs to expand its parliamentary representation and build consensus with the opposition to pass structural reforms.

Funds Society consulted with experts from international asset managers. Most agreed that the U.S. economic rescue is a temporary relief rather than a structural solution and that it is not enough to define a credible medium-term investment framework. They also pointed out that after October 26, the exchange rate should float and that the country should accelerate the pace of reserve accumulation.

WSJ and FT: Critical Editorials

Under the suggestive title “Argentina: Right Country, Wrong Bailout,” the Wall Street Journal stated in an editorial that “dollarization is the right and now essential political alternative” for the South American country, after warning that “this bailout is likely to throw good dollars after bad pesos without monetary reform in Buenos Aires.”

The paper also emphasized that “no one is sure how long this era of reforms will last” and mentioned that Economy Minister Luis Caputo “is opposed, as are some funds that benefit from a currency carry trade that would disappear with dollarization.” The conclusion was damning: “The default remedy is always devaluation” for Argentina.

According to the WSJ, “after the elections, Scott Bessent will waste dollar assets on this bailout if he doesn’t pressure Milei to restore sound money through dollarization.”

The Financial Times also published a harsh editorial, describing the partnership between Bessent and Milei as a “risky venture,” suggesting that the U.S. official “should understand the madness of defending” the current dual-band exchange rate system in Argentina, and stating that the U.S. is “throwing money at a serial defaulter” that even threatens competition with soybean producers.

“If madness is repeating the same action and expecting a different result, then a central pillar of Argentina’s economic policy borders on insanity,” the British newspaper wrote. The South American country needs “less anarchy and more capitalism,” the article concluded, referencing the Argentine president’s self-description as an anarcho-capitalist.

The View of International Asset Managers

On October 9, the U.S. Treasury confirmed direct purchases of Argentine pesos and a 20-billion-dollar swap framework with the Central Bank of Argentina. Interventions in the foreign exchange market continued, and on October 15, Bessent said he was in talks with banks to coordinate a debt facility of 20 billion dollars (in addition to the swap), raising potential support to 40 billion dollars. The institutions involved would be JP Morgan, Bank of America, Goldman Sachs, and Citigroup, according to media reports.

“The size and scope of the U.S. Treasury’s financial assistance program are remarkable, but its legitimacy will depend on Milei maintaining veto power in the upcoming midterm elections,” assessed Jason DeVito, senior portfolio manager of emerging markets debt at Federated Hermes.

According to DeVito, if the result is favorable to the government, “we will see momentum toward further deregulation and additional fiscal discipline.” In that scenario, Federated Hermes expects a move toward a more flexible exchange rate and an improvement in current account indicators.

Carlos Carranza, senior manager of emerging markets debt funds at M&G Investments, pointed out that after the elections, volatility will likely decrease “as the focus returns to fundamentals.”

The expert logically noted that President Milei will remain in office for at least two more years, “regardless of the electoral outcome. Meanwhile, it is worth noting that Argentina’s macroeconomic outlook remains largely constructive.”

On the fiscal front, the government continues to maintain a balanced budget (that is, with no primary fiscal deficit), “which is an uncommon achievement in both emerging and developed markets,” he indicated. Moreover, inflation remains largely anchored and, although monthly figures have persistently hovered around 2–3%, year-on-year measurements still show a slowdown.

Among the fundamentals, Carranza also highlighted that the South American country’s GDP growth “remains on track to register a solid 4.3% in 2025, even despite some downward revisions in recent months.”

Short-Term Support

Meanwhile, Alejo Czerwonko and Pedro Quintanilla-Dieck, from the Chief Investment Office at UBS, emphasized in a special report dedicated to Argentina that the U.S. intervention acts as a short-term “circuit breaker,” by strengthening the Central Bank’s reserves and reducing the risk of uncontrolled inflation.

The report highlights that this maneuver improves the chances of Javier Milei’s government regaining some political capital in the elections, although doubts persist regarding the sustainability of the exchange rate system and the pace of reserve accumulation.

UBS considers the package a temporary relief rather than a structural solution and maintains a neutral view on Argentine bonds, awaiting greater clarity on stabilization policies.

From the asset manager Payden & Rygel, Alexis Roach, emerging markets analyst, stated that “a landslide victory does not seem necessary to guarantee the country’s governability: a balanced outcome, in which the ruling party outperforms the Peronists, would be enough.”

Roach considered that “the financial support from the United States, although significant, is not enough to define a credible medium-term investment framework. After the elections, the market’s attention will focus on the government’s ability to reach agreements with centrist forces to secure a parliamentary majority, as well as on the strategy to regain access to markets.”

The fact is that the Argentine president showed a shift after being defeated in the Buenos Aires provincial elections. In addition to the U.S. economic bailout, he added a more moderate tone to his rhetoric, attempted to begin a dialogue with the more rational opposition, and showed an effort to connect with voters who have been enduring an adjustment that, although it helped reduce inflation, has yet to translate into improvements in the microeconomy.

Household delinquency in the South American country rose for the tenth consecutive month in August, reaching 6.6% of total credit—marking a new record in at least 15 years, according to the Central Bank’s banking report. Meanwhile, interest rates for overdrafts—one of the most common ways for small and medium-sized enterprises to finance working capital—increased from around 80% to 190% nominal annual last week, reaching the highest level in at least 17 years.

On top of all this, the dollar—the eternal social barometer of pre-election Argentina—recorded its biggest daily increase in nearly six weeks on Friday, October 17, while financial dollars (MEP and CCL) surpassed 1,500 pesos, despite the firepower implied by the interventions from the U.S. Treasury.

BlackRock, Fidelity Investments, and Capital Group: The Asset Managers With the Best Brand Building

| By Amaya Uriarte | 0 Comentarios

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Brand building has become a valuable factor for the competitiveness of international asset managers. According to the annual Global 100 Asset Management Marketing Report, prepared by BCG, BlackRock, Fidelity Investments, and Capital Group are the top three investment firms with the strongest brands, followed by T. Rowe Price and Aviva Investors.

Brand Building Becomes a Key Competitive Factor for Asset Managers

Brand building has become a key asset for international asset managers seeking to strengthen their competitiveness. According to the annual Global 100 Asset Management Marketing Report, published by BCG, BlackRock, Fidelity Investments, and Capital Group are the top three investment firms in brand strength, followed by T. Rowe Price and Aviva Investors.

“The Global 100 2025 shows that the asset management sector continues to go through a period of profound change. It’s clear that many managers are facing existential questions. How can we scale? Should we consider inorganic growth? How do we incorporate artificial intelligence into our business practices and marketing without losing what makes us unique? How do we breathe new life into a stagnant brand? It has never been more important for senior marketing leaders to make data-driven decisions in executive-level conversations,” the report’s authors state.

The report finds that 45% of firms are experiencing stagnation or decline in brand recognition, a figure that, while not as high as in previous years, still indicates that nearly half of executives are failing to create brand value. “This is clearly a challenge for a sector that relies on visibility and whose strategy, for many firms, is focused on reaching new audiences—especially retail clients and wealth groups,” the report notes. The global share of voice (SOV) has also declined by 5% compared to two years ago, signaling increased competition for media coverage.

Among firms focused exclusively on private markets, 88% had below-average media perception, and over 75% received clearly negative sentiment. “Among major players, Blackstone and Apollo scored only 4/10 in media perception. Top private market players like Blackstone appear to have become ‘lightning rods’ for the sector, attracting ten times more search interest than similarly sized firms outside the private equity space,” the report says.

The report also highlights slow progress in paid media strategies. 39% of firms still lack a permanent paid search strategy, only a slight improvement from 43% in 2023. 85% of firms had no sustained presence in paid media in 2025, compared to 80% in 2023, indicating stagnation in paid media adoption.

Using the Peregrine Frame analysis model, the report finds that most firms cluster around 16 recurring key message areas, with client focus, ESG criteria, and research-based investing being the most common. Over 90% of firms list client focus among their top three core messages, suggesting that messaging often gravitates toward consensus rather than differentiation. “In a sector where consolidation is accelerating and the competitive landscape remains intense, brands need to be bolder in their positioning,” the report warns.

The report emphasizes that brand positioning is not superficial; it is material and deeply linked to bottom-line outcomes. “Peregrine’s analysis shows a strong correlation between high category authority (message distinction and niche dominance) and AUM growth, and the reward is exponential.” Firms with low authority are not only less likely to achieve significant AUM gains but are also more prone to AUM losses. 27% of firms with low scores saw their AUM decrease, compared to less than 10% among firms with high scores.

The combined forces of retailization and the rise of active ETFs are reshaping the asset management landscape, making visibility among emerging audience segments a key driver of competitiveness. At the same time, margin pressure is intensifying, placing cost control at the top of the corporate strategic agenda, according to BCG’s analysis.

However, the impact on decision-making varies by firm type and market niche. Alpha generators—such as alternative asset managers and active firms—are focusing on talent attraction and retention while strengthening their corporate narrative around the uniqueness of their human capital. This trend is particularly visible in large multi-strategy managers. In contrast, beta factories—large managers with heavy exposure to passive strategies—are emphasizing operational efficiency, scale, and technology as the core of their value proposition. For distribution powerhouses and solution providers, brand is becoming an increasingly important factor at the decision-making level.

The central challenge, BCG concludes, is to transform marketing leadership into AUM leadership, thereby solidifying a firm’s position in an increasingly competitive and diversified market.

Goldman Sachs Acquires Venture Capital Firm Industry Ventures

| By Amaya Uriarte | 0 Comentarios

Goldman Sachs Group Announces Agreement to Acquire Industry Ventures, a Leading Venture Capital Platform Investing Across All Stages of the VC Lifecycle

Goldman Sachs Group has announced an agreement to acquire Industry Ventures, a leading venture capital platform that invests across all stages of the venture capital lifecycle. Currently, Industry Ventures manages $7 billion in assets under supervision and, since its founding in 2000, has made more than 1,000 primary and secondary investments.

According to David Solomon, Chairman and CEO of Goldman Sachs, Industry Ventures was a pioneer in secondary venture capital investments and early-stage hybrid funds—areas that, in his view, are growing rapidly as companies remain private longer and investors seek new forms of liquidity.

“Industry Ventures’ trusted relationships and venture capital expertise complement our existing investment franchises and expand opportunities for our clients to access the world’s fastest-growing companies and sectors,” stated Solomon.

For his part, Hans Swildens, founder and CEO of Industry Ventures, added:

“We believe the venture capital market is at a key inflection point, as technology and artificial intelligence transform the world. By combining Goldman Sachs’ global resources with Industry Ventures’ venture capital expertise, we are uniquely positioned to meet the growing needs of entrepreneurs, private tech companies, limited partners, and fund managers, while driving the growth of this essential economic engine.”

As part of the agreement, all 45 employees of Industry Ventures are expected to join Goldman Sachs. Hans Swildens, along with senior executives Justin Burden and Roland Reynolds, will be named partners of Goldman Sachs Asset Management. The transaction will include an initial payment of $665 million in cash and stock at closing, as well as additional contingent compensation of up to $300 million, also in cash and stock, subject to Industry Ventures’ future performance through 2030. The deal is expected to close in the first quarter of 2026, pending regulatory approval and customary conditions.

Key Details of the Transaction

According to both companies, Industry Ventures will be integrated into Goldman Sachs’ external manager platform, the External Investing Group (XIG), which manages more than $450 billion in AUS across traditional and alternative strategies. In private markets, XIG is a leading player in co-investments, alternative manager strategies, its secondaries platform Vintage Strategies, and its GP stakes business Petershill GP Stakes.

This acquisition brings attractive technology investment capabilities to benefit Goldman Sachs’ global client base and diversifies its $540 billion alternatives investment platform, which spans growth equity, buyouts, real estate, infrastructure, life sciences, sustainability, and private credit.

To understand this transaction, it is worth noting that Goldman Sachs AM has been a limited partner in Industry Ventures’ funds for over two decades, offering its strategies to clients for more than ten years. In addition, Petershill Partners has held a minority stake in the firm since 2019. With this deal, Goldman Sachs will acquire 100% ownership of Industry Ventures. As highlighted, the acquisition will strengthen the bank’s ability to offer comprehensive solutions to entrepreneurs in the tech sector, supported by its leading position in TMT (technology, media, and telecommunications) investment banking and its strong global wealth management platform.

Industry Ventures Profile

Industry Ventures has been a pioneer in various segments of venture capital, from offering secondary liquidity solutions and seeding emerging VC funds to co-investing in high-growth early-stage companies and participating at the intersection of venture capital and tech buyouts.

The firm holds one of the broadest portfolios of venture capital partnerships in the U.S., with investments in over 800 venture capital and technology funds and collaborations with more than 325 managers as a limited partner, liquidity provider, and strategic co-investor.

The Fed’s Structure Under Review: What Are the Implications for Investment?

| By Amaya Uriarte | 0 Comentarios

President Trump’s Pressure to Cut Interest Rates in 2025 Has Dominated Headlines. However, in My View, There Are Several Reasons to Anticipate a Significant Shift in the Structure, Responsibilities, and Processes of the Federal Reserve Next Year. These changes could affect the central bank’s independence and its ability to set effective monetary and supervisory policy, ultimately influencing the value of the dollar, long-term bond term premiums, and the multiples at which equities trade.

Personnel Policy

Moderation in the Fed’s interest rate decisions will only be viewed positively if data supports it; otherwise, the dollar could depreciate and long-end yields could rise, as the market would price in higher inflation and less confidence in monetary policy. In other words, government pressure to cut rates in the short term may come at a cost if the Fed deviates from its usual playbook.

That playbook, moreover, only works if those implementing it are equally effective. A change in the Fed chair was already expected in May 2026, but now, with the president’s attempt to remove Lisa Cook, a member of the Board of Governors, it is likely that most of the seven members will be Trump appointees: a possible replacement for Cook, in addition to Michelle Bowman, Christopher Waller, and the newly added Stephen Miran. The governors are part of the 12-member FOMC (Federal Open Market Committee — responsible for setting interest rates), along with the president of the Federal Reserve Bank of New York and four other rotating regional Fed presidents who serve one-year terms. Although there are 12 regional presidents, only the New York Fed president holds a permanent seat on the FOMC.

The composition of the Board in 2026 will matter for three key reasons:

The terms of the 12 regional presidents expire on the last day of February 2026, and the Board will decide who fills those posts for the next five years. It is plausible that a Board aligned with Trump could block the reappointment of a more hawkish regional president, or at minimum, influence the thinking of those seeking reappointment.
The Board, not the FOMC, is responsible for banking regulation, although this responsibility could change, as explained below. Therefore, Trump’s ideas about deregulation could gain traction in a newly configured Board.
The Board has the final say over the discount rate, the rate at which financial institutions can borrow directly from a Federal Reserve Bank; this rate acts as the ceiling for the federal funds rate.

Potential Interference in Fed Tools

As appointments unfold in the coming months, several areas should be monitored where the Fed’s authorities and tools could change:

Interest on Excess Reserves: One area of bipartisan agreement is the desire for the Fed to stop paying interest on excess reserves that banks are required to hold. Could we see a tiering of these payments starting next year, as scrutiny of the Fed increases? This would bring the Fed closer to the practices of other central banks and eliminate controversy around payments to commercial banks — including foreign ones — instead of to the Treasury.

Quantitative Tightening (QT): QT may conclude in 2026 when reserves reach a level that begins to affect market liquidity. So far, the Fed has reduced its balance sheet through QT, initially by trimming repo operations and more recently the Treasury General Account, without affecting bank reserves. It is worth recalling that earlier this year, the Fed significantly slowed its reduction of Treasury securities to prolong the process and ease the impact on liquidity. An independent Fed would likely consider equating the Treasury General Account with Treasury bill holdings and may be interested in shortening the duration of its fixed-income portfolio over time. But this is another area where personnel changes could be decisive, with implications for the composition and size of the Fed’s balance sheet.

Supervisory Powers: Treasury Secretary Scott Bessent recently highlighted the need to reduce the Fed’s role as the “chief regulator of U.S. finance,” a role he believes has yielded disappointing results since it was expanded under the Dodd-Frank Act. Specifically, Bessent has advocated transferring banking supervision to the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC).

Implications for the Dollar, Fixed Income, and Equity Markets

Any change in the Fed’s powers and policies can have wide-ranging consequences, particularly in the following areas:

U.S. Dollar Liquidity: Currency swap lines — agreements in which the Fed exchanges dollars for foreign currencies with other central banks — are gaining importance globally. While the Fed has been a reliable source of dollar liquidity during times of global stress, the upcoming appointment of a new chair has raised concerns among other central banks about a potential shift. The Trump administration argues that such liquidity is a favor to allies, not an obligation. In response, proposals have emerged to allow central banks with large dollar reserves to lend to each other instead of relying on the Fed. If this materializes, in a crisis, those banks might liquidate their dollar reserves — invested in U.S. Treasury securities — destabilizing the debt market and forcing the Fed to act as buyer of last resort or to cap repo rates.

Yield Suppression: Bessent and other administration members have repeatedly emphasized the need for Treasury and the Fed to “row in the same direction” to redirect the economy. The implicit message is that it may be necessary to lower yields at some point to boost domestic production and reduce reliance on China — a strategy that would require continued fiscal spending and higher federal debt. Fiscal discipline can only come from the bond market and an independent Fed that bases its policies on the economy, not the Treasury’s needs. But if the Fed’s independence is constrained by those promoting more spending, bond markets may demand higher term premiums. Over time, in the event of a recession, a compliant Fed would likely be called upon to step in and cap interest rates to reduce the cost of public debt.

Higher term premiums could also weigh on equity valuation multiples, by increasing uncertainty around the institutional framework of U.S. monetary and fiscal policy. The possible outcome: Fixed income and equity market participants could react negatively to any signs of a diminished Fed ability to fight inflation. Greater inflation volatility is typically negative for long-term asset returns.

Beyond Interest Rates: A Question of Institutional Control and Long-Term Efficiency

If the administration increases its influence over the Fed, scrutiny over resource allocation, research agendas, and staffing decisions at the central bank is likely to rise. Criticism over staff size and daily operations could also lead to higher turnover at the institution. Additionally, efforts to audit the Fed may resurface, reinforcing demands for accountability. If realized, all these factors could significantly impact the Fed’s decision-making process and its ability to act independently and swiftly in times of crisis.

While markets tend to focus on short-term interest rate decisions, a broader issue is at play related to the regulation, supervision, and operation — the architecture — of central banks, with much wider implications, which I will continue to monitor closely in the coming months.

Opinion Column by Juhi Dhawan, Macro Strategist at Wellington Management

Thornburg Partners With Capital Strategies Partners to Expand Its Distribution in Italy and the Middle East

| By Amaya Uriarte | 0 Comentarios

Thornburg CSP distribution alliance — Photo courtesy

Thornburg Investment Management has announced a new strategic partnership with Capital Strategies Partners to serve institutional and wholesale investors in Italy and the Middle East. Through this collaboration, Thornburg IM will expand its international presence and offer investors in both regions access to its range of UCITS funds, including its flagship strategies: Equity Income Builder Fund, Global Opportunities Fund, and Strategic Income Fund.

“The partnership with Capital Strategies Partners represents an important milestone in our ongoing international expansion. Italy and the Middle East are important and growing markets for Thornburg IM, and we believe that Capital Strategies’ deep local knowledge, established relationships, and proven expertise make them the ideal partner to connect investors with Thornburg’s differentiated investment solutions,” said Jonathan Schuman, Head of International at Thornburg IM.

In this regard, Thornburg IM continues to strengthen its distribution network across Europe, Asia, and Latin America. The addition of Capital Strategies also reinforces the firm’s commitment to providing exemplary service to its clients. This agreement broadens Thornburg IM’s global reach and reflects the firm’s mission to deliver independent, research-driven, and disciplined investment solutions that help investors achieve their long-term financial goals.

“We are excited to partner with Thornburg IM. Their track record in managing high-conviction global equity and multi-sector credit strategies complements the evolving needs of institutional and professional investors in our regions. We look forward to bringing Thornburg’s expertise to our clients in Italy and the Middle East,” added Daniel Rubio, Founder and CEO of Capital Strategies.

According to Riccardo Milan, Head of Italy at Capital Strategies, the country continues to show strong demand for research-based global strategies. “Thornburg IM’s disciplined investment approach and ability to combine performance with risk management will be highly relevant for institutional and wholesale clients in Italy,” he noted.

Finally, Paolo Svetlich, Head of Sales at local Middle Eastern partner FMP Capital, added: “The Middle East is experiencing growing interest in high-quality international strategies. By partnering with Thornburg, we can offer our professional clients differentiated solutions aligned with their long-term objectives.”

“The Obesity Market Could Exceed $150 Billion in Size”

| By Amaya Uriarte | 0 Comentarios

While technology stocks continue to attract investor interest, there is one sector that continues to deliver positive returns yet remains overlooked: healthcare. “It’s a sector that has been out of favor for several years now, and this situation became even more pronounced over the past twelve months,” explains Dan Lyons, co-manager of the Global Life Sciences strategy at Janus Henderson. Lyons notes that the sector is currently trading at its lowest level in the past 25 years.

Funds Society sat down with Lyons in October 2024 to discuss the team’s outlook at the time, when the U.S. presidential election was still a month away. Since last November, the manager acknowledges that concerns around regulation and drug pricing have weighed on a “substantial portion” of the sector. On top of that, tariff announcements have added another layer of complexity for these companies, many of which operate multinational businesses. All of this has led to outflows from the sector, putting pressure on valuations. “We could call it a perfect storm of negativity for our sector,” concludes Lyons.

Throughout the conversation, the manager repeatedly emphasizes that the core of their investment process lies in identifying the most innovative companies in the health segment and then determining whether they are trading at attractive valuations. Within the sector, biotech firms are generally the innovation leaders: “Two-thirds of the industry’s pipeline comes from biotech. Last year, over 80% of new launches came from the biotech industry,” Lyons illustrates, explaining why the Global Life Sciences strategy typically has a structural overweight in this segment. The manager anticipates further innovation in 2026, citing medical advances in early treatment of Alzheimer’s disease, cardiovascular conditions, and new therapies for pancreatic cancer.

It is worth noting, however, that due to the inherently riskier nature of their business, biotech companies also tend to suffer the most in uncertain markets. This has happened again: the sector plunged 50% between November 2025 and April 2024, although it has since rebounded sharply. “It has been a challenging environment for our portfolios,” the manager admits. Still, he prefers to see the glass as half full, interpreting the sector’s recovery as a sign that the market may be starting to believe “the regulatory environment might not be that bad after all.”

How Has the Portfolio Rotated in 2025?

It’s been a year of two halves. In the first half, we rotated toward companies in earlier commercial stages and, to some extent, scaled back our enthusiasm for early-stage development firms that weren’t being properly rewarded for taking on risk.

As we enter the second half of the year, we’re seeing that the market is more willing to take on risk. The context of interest rates has also helped, with the first rate cuts. As a result, we are now slowly increasing our exposure again to early-stage development companies. We’re also excited about companies in the late-stage development phase with solid access to capital. These are firms developing new drugs for rare diseases, such as Avidity or Dyne.

Last Year You Were Very Bullish on Obesity Treatments. Do You Still Hold That View?

We remain very bullish on the potential size of this market opportunity. We believe the obesity market could exceed $150 billion. There is more than enough room to capture even a 10% market share.

We’ve seen leadership, particularly from companies like Eli Lilly, consolidate even further. The next-generation product it launched last year, ZepFound, is capturing three-quarters of new patients—it has become the preferred choice for people starting obesity treatment. And we believe the market could open up even more now that they’re able to launch the drug both in the U.S. and globally, making it more accessible.

Last year, Eli Lilly also reported positive phase 3 data for an oral drug using the same mechanism, called Orfoglipron. So during 2026, we’ll see the launch of an oral option, which will help expand access and somewhat democratize the market, as it won’t require cold chain storage.

We are playing this theme both through large companies like Eli Lilly and smaller biotechs, such as Medcera, which we hold in the portfolio. They were in early-stage development of a similar drug to Eli Lilly’s, and they were acquired by Pfizer, which will now lead the remaining trials.

Innovation Is the Compass of Your Research Process. Where Is It Pointing in 2025?

It’s truly been a year of tremendous breakthroughs. In this uncertain environment, we’ve focused heavily on companies that have recently received drug approvals and have successfully delivered those treatments to patients despite the regulatory noise. Many of these companies are seeing spectacular new drug launches. One example is Madrigal, which launched a drug called Rosdifra (also known as MASH) for fatty liver disease. It’s the first of its kind, and it’s on track to become a blockbuster, since many patients in the U.S. suffer from this condition, which is a major cause of liver transplants. If this disease can be treated early and transplants avoided, it results in huge savings for the healthcare system and better outcomes for patients.

Another example is Verona (VRNA), a UK-based biotech that developed a new type of medication for COPD, a nebulized therapy that’s gaining strong market traction. It’s a new area meeting an unmet need. The company was just acquired by Merck for over $10 billion. In the case of Verona and Madrigal, we’re talking about market opportunities between $5 billion and $10 billion.

Another emerging market is autoimmune diseases, where companies like Argenx are active. It already has a drug with $4 billion revenue potential. But this is on a different scale—it’s like the NVIDIA of the healthcare sector.

So, Do You Anticipate More M&A in the Healthcare Market?

Yes, because big pharma needs additional revenue and is looking to biotech companies to get it. Firms like Pfizer or Bristol-Myers are losing patent exclusivity and seeing sales fall. They need to bring in these new products. Across the industry, we estimate they have around $1 trillion in spending power, which allows them to engage in many deals to build their product pipelines.

We are already seeing this reflected in our portfolios, with more big pharmaceutical companies becoming comfortable with the regulatory and pricing environment, as they are starting to deploy capital. We’ve seen over five of the companies in our portfolio involved in M&A activity in the second half of the year.

What Impact Could the Big Beautiful Bill Have on the Pharmaceutical Sector?

We’ve come from several years of expanding healthcare coverage, with more people gaining access to healthcare services. This law has started a period of contraction, reducing access to some of those services. There’s a lot of work to be done in Congress to avoid that, because it’s extremely unpopular to remove a benefit people already enjoy. But in percentage terms, the contraction is relatively small, and I believe it’s very manageable.

The law also includes some positive aspects that have helped the sector. For example, for companies developing orphan drugs for rare diseases: under the previous IRA law, these producers faced the risk of future price caps, and the current legislation has corrected that.

You Have Kept Some Underperforming Companies in the Portfolio. Why?

When we hold companies going through challenges, as we have with United Healthcare, we always assess whether the valuation still looks attractive and whether the original compelling element of their business model remains. We also evaluate if they can return to more normalized margins. In United Healthcare’s case, we believe the return of the former management team can fix the situation, which is why we not only held the position but slightly increased it.

We’ve had similar experiences with another portfolio name—a company developing a vaccine for a market estimated at $7 billion that we believe will become the market leader. But due to controversy around vaccines and the anti-vaccine stance of Robert F. Kennedy, the company’s valuation is heavily depressed. We’ve held onto our investment because we don’t believe that market is going away.

Asia-Pacific: The Largest UCITS-Holding Region After Europe

| By Amaya Uriarte | 0 Comentarios

Asia Pacific largest UCITS holder — Canva

Within the European fund industry, the acronym UCITS enjoys great popularity and trust—but what about beyond Europe’s borders? The reality is that, according to aggregated data from the ECB, it is estimated that out of the €21.5 trillion held in UCITS and AIFs domiciled in the EU, €9.7 trillion corresponded to domestic funds. This means that €11.8 trillion are in the hands of investors outside the EU member states.

According to the latest report published by the European Fund and Asset Management Association (Efama) and prepared with exclusive data from Broadridge’s Global Market Intelligence (GMI) to analyze international UCITS distribution trends, thanks to the European passport regime, those €11.8 trillion are divided into two segments. On one hand, there are funds domiciled in EU countries and held by investors located in another member state, which reached €6.1 trillion at the end of 2024. On the other hand, there are those funds domiciled in the EU and held by investors located outside the EU, which reached €5.7 trillion.

“Over the past decade, the net assets of cross-border funds have grown considerably faster than those of domestic funds. While the assets of domestic funds increased by 83%, the assets of cross-border funds held in another EU country grew by 145%, and cross-border funds held outside the EU grew by 133%. Interestingly, in the past two years, the growth rate of cross-border funds outside the EU has outpaced that of intra-European cross-border funds, underscoring their increasing relevance on a global scale,” the report reveals.

According to the report, one of the main drivers behind this growth has been the increase in net sales. As the figures show, cross-border funds—especially those marketed outside the EU—have consistently attracted greater investment flows compared to domestic funds and cross-border funds within the EU.

Asia-Pacific: Largest Holder

One of the conclusions presented in the report is that, as of the end of June 2025, the Asia-Pacific region accounted for 8.7% of cross-border UCITS holdings. Specifically, net UCITS assets in the region grew by 18% during 2024, although they declined slightly in the first half of 2025 (-4%).

“Over the past five years, cumulative asset growth has been 22%. This relatively moderate long-term growth reflects the impact of the sharp decline recorded in 2022, after which net assets took two years to fully recover. Net sales have generally been positive in recent years, with 2022 as the only exception,” the report explains.

Specifically, Hong Kong, Singapore, Japan, and Taiwan are the main Asian markets for cross-border UCITS. According to the report, following widespread redemptions in 2022, Singapore and Taiwan drove the regional recovery in 2023, recording net inflows of €9 billion and €4 billion, respectively.

In 2024, total net inflows into Asia-Pacific rose significantly to €34 billion, supported by continued strong demand in Singapore (€12 billion) and Taiwan (€6 billion), as well as a notable recovery in Hong Kong, where investors contributed €11 billion in new net investments. During the first six months of 2025, this positive momentum continued, with significant net inflows into Singapore and Hong Kong totaling €7 billion.

Geographic Overview

Looking at other regions, it is notable that the countries of South America and Central America accounted for approximately 3.3% of cross-border UCITS holdings at the end of the first half of 2025. According to the report’s data, as of the end of June 2025, Latin American investors held €246 billion in cross-border UCITS, excluding ETFs, and net assets fell by approximately 8.5% in the first half of 2025, after growing by 15% the previous year and 24% over the past five years.

“Total holdings remain below their 2021 peak. Net sales have been relatively weak in recent years, with two consecutive years of net outflows in 2022 and 2023. The market returned to positive territory in 2024, with net inflows of €4 billion, but so far in 2025, it has once again recorded net redemptions of €5 billion,” the document states.

Regarding the Middle East and Africa (MEA), the countries in this region accounted for approximately 1.2% of cross-border UCITS holdings at the end of June 2025. In the case of North America, the United States and Canada account for only 0.2% of cross-border UCITS holdings. “All of these are concentrated in Canada, since, although the United States is the largest fund market in the world—with total net assets exceeding €40 trillion in 2024—regulatory barriers effectively prevent the distribution of non-U.S. funds in that country,” the report explains.

It also highlights that U.S. fund managers widely use UCITS to market funds to investors outside the U.S., given that funds domiciled in that country cannot easily be marketed to international investors for tax and regulatory reasons. According to the report, it is also important to note that U.S. investors residing outside the U.S. do invest in UCITS, mainly through wealth managers in Latin America, offshore jurisdictions, or international regions.

Lastly, the offshore region represents 0.8% of European cross-border UCITS and includes several Caribbean countries and the Channel Islands, commonly defined as offshore financial centers, such as Bermuda, Curaçao, Guernsey, and Jersey. There is also an “unassigned international” region, as referred to in the report, which represents approximately 17.6% of cross-border UCITS assets that cannot be linked to a specific end-investor location.