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Peace Talks in Ukraine: A Boost for European Risk Assets and Pressure on Gold

Throughout August, markets have observed various meetings between the United States, Russia, and the EU aimed at ending the war in Ukraine. This peace negotiation process on the Ukrainian front is expected to carry both economic and financial consequences.

Kim Catechis, Chief Strategist at the Franklin Templeton Institute, explains that for Europe, these negotiations are possibly “the last chance to avoid a war for the survival of the European model,” while for the United States, “it seems that policy direction is solely in the president’s hands and, as such, is not clearly defined for the external observer.”

On this point, Catechis has the impression that, for U.S. President Donald Trump, “reaching a peace agreement is more important than the structure of that agreement, which implies that the sustainability of any peace may not be a priority.” He even considers that “it could be that the President of the United States loses interest and decides to withdraw.”

Still, he notes a few clear considerations. First, that a clear resolution is unlikely in the short term—within six months—and that “an unstable truce” is more probable, along with “little clarity about the outcome of this process.”

On the economic front, Catechis states that the European defense sector is in the early stages of a multi-decade investment boom that will not be affected by any peace agreement in Ukraine. He also believes that Europe’s focus on electrification will continue “regardless of the circumstances, purely for security reasons.” Even in a potential peace scenario where Ukraine does not become another Belarus, it is likely that Europeans will launch a “mini Marshall Plan to rebuild the country,” which would mean “a significant opportunity for local and European companies.”

As for the United States, Catechis does not see clearly how companies will be affected throughout this process. The expert recalls already known figures: $600 billion over three years from the EU, $100 billion from Ukraine—plus revenues from critical mineral extraction. “It’s likely that the majority of these sums will go toward purchasing Patriot missile batteries, but there is a production capacity issue: Raytheon plans to increase production to 12 per year,” the expert notes.

Nicolás Laroche, Global Head of Advisory and Asset Allocation at Union Bancaire Privée (UBP), is clear that a possible peace agreement in Ukraine could have significant implications for various asset classes and sectors, “though this will depend on the details.”

The expert focuses on the future of sanctions on Russian energy. He believes that any easing of sanctions “would further accelerate and expand” the global oil and gas oversupply scenario, which would put downward pressure on energy prices and “benefit European economies such as Germany.”

Among the side effects of a new energy landscape would be a continuation of the disinflationary trend in Europe, which would improve consumer confidence and corporate margins, and trigger “a sector rotation from defensive sectors to more cyclical ones.” Additionally, Laroche believes that since a peace deal would also be an additional catalyst for further dollar weakness, “domestic and cyclical companies in Europe would likely find a catalyst for a revaluation, given their undemanding valuations.”

In summary, “Europe may be tactically attractive,” but Laroche acknowledges that long-term structural growth and political challenges persist, which makes U.S. equities more appealing to him for generating sustained returns.

Lastly, a peace agreement could tilt the European yield curve upward, according to the UBP expert, due to expectations of higher fiscal spending, “a positive environment for the European financial sector.”

Nicolas Bickel, Head of Investment at Edmond de Rothschild Private Banking, also sees opportunities in Europe in the event of a ceasefire in Ukraine. “While caution must prevail, if peace is achieved, it would act as a catalyst for stock markets, particularly for European equities,” the expert states, adding that a definitive ceasefire would result in lower energy prices, which would support European manufacturing activity and industrial company stocks.

However, Bickel does not rule out that the prospects of de-escalation in Ukraine could affect the European defense sector, “as a reduction in deliveries of ammunition and combat vehicles to Ukrainian forces is expected.” Additionally, a more favorable geopolitical context could also put downward pressure on gold prices.

Nonetheless, he believes the correction in both assets would be short-lived, as they benefit from long-term supportive factors: European defense is backed by the €500 billion ReArmEU program, while gold is supported by increased demand from emerging market central banks, which are reducing their exposure to the U.S. dollar in favor of the precious metal.

“At Edmond de Rothschild, we believe that the ongoing negotiations could act as an additional catalyst for European equities, alongside existing factors such as lower ECB interest rates, Germany’s infrastructure plan, and the stabilization of confidence in Europe,” says Bickel, who nonetheless prefers to be cautious. He advises against “drawing hasty conclusions, especially regarding the reconstruction of Ukraine.”

Thomas Hempell, Head of Macro and Market Research at Generali AM (part of Generali Investments), takes a more cautious stance. He acknowledges that hopes for a ceasefire or peace agreement between Russia and Ukraine could provide moderate support for the euro/dollar exchange rate, “as falling oil and gas prices would reduce Europe’s energy import bill.”

However, he points out that energy costs have already moderated and supply has not been disrupted, so he sees it as “unlikely that the negotiations will have a significant impact on the currency market, as they will be overshadowed by the Federal Reserve’s monetary policy.”

On the other hand, he believes that the prospects of reconstruction efforts, to be carried out in the event of a peace agreement, could to some extent benefit the eurozone economy, thereby strengthening European risk assets. However, he observes that the path to a peace deal “remains fraught with significant obstacles,” and given that Russian President Vladimir Putin still holds the advantage on the battlefield, “he has many incentives to keep buying time.”

The euro features prominently in the outlook of François Rimeu, Senior Strategist at Crédit Mutuel Asset Management, in the event of a peace agreement in Ukraine. The expert expects the euro to appreciate. He recalls that at the time of the invasion of Ukraine in February 2022, the euro was trading around $1.15, before falling below parity in October of that year. “A reversal, probably not of the same magnitude, seems to be the most likely scenario,” forecasts the expert, who also considers that the prospect of peace may have already partly contributed to the single currency’s rebound over the past six months.

Global Defined Contribution Pension Plans Warn of Insufficient Retirement Savings

| By Amaya Uriarte | 0 Comentarios

Many defined contribution pension plans are not convinced that their participants are on the right path to securing sufficient income during retirement and believe that reversing this situation will take several decades, according to a new report by the Thinking Ahead Institute, a global organization dedicated to investment analysis and innovation at WTW.

The Global DC Peer Study 2025, conducted by the Thinking Ahead Institute, brought together 20 of the leading defined contribution pension plans from the APAC, Americas, and EMEA regions. Collectively, these funds manage more than $2.2 trillion in assets, including both public pension funds and private retirement systems.

According to its findings, 60% of the experts surveyed indicated that the main concern for defined contribution pension plans over the next decade is ensuring adequate income during retirement.

These concerns are particularly evident in regions where minimum contribution levels are low or where auto-enrolment systems lead participants to believe they are saving enough without making additional contributions. Some respondents emphasized the need to focus on the adequacy of retirement savings—beyond just coverage or participation—as a key issue for future government reforms.

Although many plans already offer gradual retirement transition paths, many members in the retirement phase continue to make late decisions with a tactical rather than strategic approach. Some of them are exploring collective defined contribution schemes or hybrid models that combine flexibility with sustainable income, though such cases remain rare.

The study also revealed that alternative investments now represent, on average, 20% of pension plan allocations, equaling for the first time the allocation to bonds. Equities, meanwhile, make up the remaining 60%. This shift, though quiet, reflects a significant evolution in the investment strategies of defined contribution plans, especially in mature markets such as Australia. Despite the challenges that private markets pose in terms of governance and communication, this move reflects the growing conviction that long-term returns must be maximized, given the limited effectiveness of traditionally bond-heavy portfolios.

A recurring issue among the plans analyzed is the concern that current lifecycle designs are underperforming, especially due to overly conservative asset allocation in the early stages of accumulation. Some plans are considering dynamic risk budgets that adjust over time or the use of leveraged equities for younger cohorts to improve long-term outcomes.

Others are reevaluating decumulation strategies altogether, seeking to better align them with members’ evolving capacity to take on risk. Additionally, the concept of liability-driven defined contribution, similar to defined benefit schemes, has been proposed as a potential future design alternative.

“In many parts of the world, defined contribution systems are now the dominant pension model. However, they remain relatively young and have not reached full maturity, which presents challenges such as income adequacy in retirement, participation rates, and contribution levels,” says Tim Hodgson, co-founder of the Thinking Ahead Institute.

In his view, as the defined contribution system matures, there is a growing focus on the decumulation phase and on lifelong, integrated solutions. “Some countries are further along in this process than others. Most defined contribution plan participants have several decades to secure an adequate pension. However, there are only two fundamental ways to improve retirement adequacy: increasing contributions and generating higher long-term investment returns,” he adds.

According to his analysis of the report, there is a growing consensus that current lifecycle designs in defined contribution plans may be missing out on return opportunities, particularly due to insufficient risk-taking in the early accumulation phase. “However, in the most essential aspect of retirement saving, further progress is needed. Maximizing returns is crucial, but it has limits.

In many markets, most savers need to increase their contributions during the accumulation phase. While financial education may help, it will ultimately be up to governments to determine whether contributions to defined contribution plans are truly sufficient to ensure a dignified retirement for all future pensioners,” Hodgson notes.

In conclusion, Oriol Ramírez–Monsonis, Head of Investments at WTW, emphasized that “Spain is at a crucial moment to consolidate its defined contribution pension plans, considering that only about 25% of workers participate in complementary private systems—approximately 15% in individual plans and 10% in collective plans. We have the opportunity to incorporate best practices observed globally to design a system that ensures long-term sustainable pensions, focusing on strengthening savings capacity and optimizing risk management.”

Trump Dismisses Fed Governor Lisa Cook With “Immediate Effect”

| By Amaya Uriarte | 0 Comentarios

U.S. President Donald Trump announced the dismissal of Federal Reserve Governor Lisa Cook over alleged irregularities in obtaining mortgage loans. This unprecedented decision could test the limits of presidential power over the independent monetary policy body if challenged in court, according to Reuters.

Trump stated in a letter addressed to Cook—the first African American woman to serve on the Fed’s governing board—that he had “sufficient grounds to remove her from office” due to Cook’s declaration in 2021, in documents related to separate mortgage loans on properties in Michigan and Georgia, that both properties were primary residences in which she intended to live.

The U.S. president accused Cook in the letter of having engaged in “deceptive and criminal conduct in a financial matter” and said he no longer trusted her “integrity.”

“At a minimum, the conduct in question demonstrates the kind of negligence in financial transactions that calls into question her competence and reliability as a financial regulator,” he said, asserting his authority to dismiss Cook under Article 2 of the U.S. Constitution and the Federal Reserve Act of 1913.

Cook’s Response

Cook responded in a statement emailed to journalists via attorney Abbe Lowell’s law firm, saying that Trump “has no legal grounds or authority” to remove her from the post to which she was appointed by former president Joe Biden in 2022. “I will continue performing my duties to support the U.S. economy,” the statement from Cook read.

Lowell, for his part, stated that Trump’s “demands lack any proper process, basis, or legal authority. We will take all necessary steps to prevent this attempted legal action.”

Questions about Cook’s mortgages were first raised last week by the director of the U.S. Federal Housing Finance Agency, William Pulte, who referred the matter to Attorney General Pamela Bondi for investigation.

Although Fed governors’ terms are structured to outlast any given president’s term—and Cook’s runs until 2038—the Federal Reserve Act allows for the removal of a sitting governor “for cause.”

This provision has never been tested by presidents who, particularly since the 1970s, have largely taken a hands-off approach to the Fed in order to preserve confidence in U.S. monetary policy.

Legal scholars and historians say the web of issues that could arise in a court challenge would include questions related to executive power, the Fed’s unique and quasi-private nature and history, and whether Cook’s actions constituted grounds for removal.

Trump’s Pressure

Trump has repeatedly criticized Powell for not lowering interest rates, although he has stopped short of threatening to fire him from a post that, in any case, ends in just under nine months.

Last week, his attention turned to Cook, whose removal would allow Trump to select his fourth nominee to the Fed’s seven-member board, including Governor Christopher Waller, Vice Chair for Supervision appointed during his first term, and the pending nomination of Council of Economic Advisers chair Stephen Miran to a currently vacant seat.

Cook took out the mortgages in question in 2021, when she was an academic. A 2024 official financial disclosure form lists three mortgages in Cook’s name, two of them for personal residences. Loans for primary residences may carry lower interest rates than mortgages for investment properties, which banks consider riskier.

Reaction

The U.S. president accused Cook in the letter of having engaged in “deceptive and criminal conduct in a financial matter” and said he no longer trusted her “integrity.”

Cook’s Response

Lowell, for his part, stated that Trump’s “demands lack any proper process, basis, or legal authority. We will take all necessary steps to prevent this attempted legal action.”

This provision has never been tested by presidents who, particularly since the 1970s, have largely taken a hands-off approach to the Fed in order to preserve confidence in U.S. monetary policy.

Trump’s Pressure

Trump has repeatedly criticized Powell for not lowering interest rates, although he has stopped short of threatening to fire him from a post that, in any case, ends in just under nine months.

Reactions

It remains unclear how events will unfold from here, as Trump has stated the dismissal is effective immediately and the Federal Reserve’s next meeting is scheduled for September 16–17.

President Trump’s decision caused a movement in the U.S. fixed income yield curve, as yields on two-year bonds—sensitive to short-term monetary policy expectations—fell sharply, while yields on ten-year bonds—sensitive to inflation risks—rose significantly.

The market reaction reflects expectations that the Fed could lower interest rates, but at the cost of its commitment to control inflation.

Some firms have already weighed in on Trump’s decision to fire Cook. For example, economist and Fortuna SFP founder José Manuel Marín Cebrián commented that Trump is establishing “true state capitalism” in the U.S., “with a focus against the central bank.” He stated that “Powell’s days are numbered,” adding that Trump has refrained from dismissing him before his term ends but is “actively preparing his replacement” and even “plans to announce the next Fed chair before Powell’s term ends in May to gain time.”

It remains unclear how events will unfold from here, as Trump has stated the dismissal is effective immediately and the Federal Reserve’s next meeting is scheduled for September 16–17.

Powell Follows the Script in Jackson Hole by Opening the Door to a Rate Cut in September

| By Amaya Uriarte | 0 Comentarios

Powell Jackson Hole rate cut — United States Federal Reserve

The most anticipated event of the week, the central bank symposium held this weekend in Jackson Hole (Wyoming), did not disappoint. In the most highly awaited speech, Jerome Powell, Chair of the Federal Reserve, signaled a potential interest rate cut, which would be the first under the Trump administration.

Commenting on Powell’s remarks, Richard Clarida, Global Economic Advisor at PIMCO, noted that the presentation of the revised monetary policy framework “did not disappoint markets, nor did it surprise Fed watchers,” as the U.S. central bank “appears to be on track to lower short-term interest rates, albeit with a cautious approach.” He considers the changes to the policy framework “sensible and well communicated,” while also highlighting “the Fed’s unwavering commitment to its mandate.”

For his part, Nabil Milali, Multi-Asset and Overlay Manager at Edmond de Rothschild AM, emphasized that before the conference, Powell faced the dual risk of disappointing investors hoping for a shift toward more accommodative policy and undermining the central bank’s credibility by appearing to yield to political pressure from U.S. President Donald Trump. However, the expert believes Powell struck “the difficult balance of opening the door to a rate cut at the September meeting, without at the same time fueling doubts about the Fed’s independence,” through two actions: generally well-measured communication and clear reasoning for future moves.

Milali pointed out that Powell stated that despite recent statistics suggesting an acceleration of inflation in both goods and services, he still considers tariff-related inflationary pressures to be only temporary. Additionally, he noted that the labor market is in a “particular situation,” marked by a decline in business demand as well as a drop in the supply of workers, meaning the unemployment rate “is not yet at alarming levels.”

Even so, the expert highlighted that although Powell’s remarks sparked strong risk appetite across asset classes—as evidenced by the narrowing of high-yield spreads and gains in U.S. equity prices—“the Fed’s decision remains heavily dependent on upcoming inflation data and, above all, employment figures, the latter being more than ever the true arbiter of U.S. monetary policy.”

Meanwhile, Bret Kenwell, U.S. investment analyst at eToro, acknowledged that prior to the symposium, markets were pricing in roughly a 75% probability of a U.S. interest rate cut in September. “Those odds should rise significantly following Chair Powell’s comments in Jackson Hole,” he said, explaining that investors got the response they were hoping for when Powell stated that current conditions “could justify an adjustment to our [restrictive] stance.”

However, Kenwell is also aware that the Fed is in a “difficult position,” with rising inflation and signs of deterioration in the labor market. “As economists have observed in the most recent data, the labor market can change quickly—a risk the Fed is highly aware of,” he noted.

Kenwell explained that if the Fed cuts rates too much or too soon, “it risks stoking the fire of inflation.” Conversely, if it moves too late or too mildly, “it risks deeper deterioration in the labor market and, consequently, the economy.” He concluded that “this delicate balance is precisely why the Fed finds itself in a difficult position.” That said, he has no doubt that once inflationary pressure affects employment, “the Fed is likely to step in to prevent further weakness in the labor market,” and that “it is unlikely the committee will stand by idly if we see further labor market weakness.”

The issue of Federal Reserve independence loomed in the background. In fact, Luke Bartholomew, Deputy Chief Economist at Aberdeen, believes that “the elephant in the room in Jackson Hole was the Trump administration’s attacks on the Federal Reserve.” At this point, he recalled that Powell emphasized the importance of monetary policy independence, but the expert is convinced that “Trump’s influence over central bank decisions is likely to increase from here.”

According to Bartholomew, “all signs point to the Senate attempting to appoint Stephen Miran to the Fed before September, where he would likely vote in favor of even more aggressive stimulus than the currently expected 25 basis points.” He also considers it possible that if the administration succeeds in removing Lisa Cook from her post, “another seat would open up.” Consequently, the Aberdeen economist stated, “Powell’s authority could begin to erode in the coming months, with markets paying increasing attention to the preferences of his potential successor. This could make it harder to anchor inflation expectations in a context of rising prices and add pressure on long-term Treasury yields.”

The Taylor Rule Under Debate

Beyond Powell, the most relevant contribution to the conference came from a presentation by Emi Nakamura, professor at the University of California, Berkeley, according to Karsten Junius, Chief Economist at J. Safra Sarasin Sustainable AM. In her speech, Nakamura explained why the Taylor Rule has performed poorly since 2008 and why it should not be strictly applied going forward—the Taylor Rule suggests that interest rates should rise more than proportionally to inflation.

Nakamura explained why and under what circumstances that is not necessary, allowing central banks to disregard certain potentially temporary shocks. A key factor, as the expert recalled, is how well-anchored inflation expectations are, “which in turn depends on the credibility of the central bank.” In her remarks, she warned that “the high degree of credibility is due in part to the Fed’s strong track record, but also to institutions such as central bank independence. These are valuable assets that can be destroyed much faster than they were built.”

What Does the Historic Rise in Public Debt Mean for the Dollar and Bonds?

| By Amaya Uriarte | 0 Comentarios

Public debt impact dollar bonds — Photo courtesyPeder Beck-Friis, economist at PIMCO

In a recent analysis, Peder Beck-Friis, economist at investment management firm PIMCO, warned about the sustained rise in public debt in G7 countries, highlighting its implications for the U.S. dollar and long-term Treasury yields. According to Beck-Friis, current debt levels are approaching historic highs last seen at the end of World War II.

In his view, these surges have been driven by recent crises such as the 2008 global financial recession and the COVID-19 pandemic, which forced governments to implement extraordinary fiscal measures. “Public debt in advanced economies has followed an upward trajectory for more than a decade, and in the case of the United States, projections from the Congressional Budget Office (CBO) suggest a potential rise to 200% of GDP by 2050 if no changes are made to current fiscal policy,” the analyst warned.

The Dollar Remains Firm, for Now

Despite the concerning trajectory of U.S. debt, Beck-Friis believes the dollar will maintain its status as the dominant reserve currency in the coming years, thanks to its central role in global trade and finance. Currently, nearly 88% of foreign exchange transactions worldwide involve the dollar. “The lack of viable alternatives strengthens the dollar’s position, although the sustainability of this advantage will depend on how the U.S. fiscal outlook evolves,” the economist noted.

Another key point of the analysis is the growing weight of interest payments within the U.S. federal budget. Historically, this type of pressure has led to episodes of fiscal consolidation, as occurred after World War II and again in the 1980s and 1990s. Beck-Friis believes a similar scenario could repeat if financing costs continue to rise.

Finally, the analysis suggests that there is a (though weak) relationship between the rise in public debt (excluding debt held by the Federal Reserve) and a higher term premium on 10-year Treasury bonds. This could result in a steeper yield curve, which would have significant implications for asset managers and the valuation of fixed-income instruments. “The accumulation of public debt could lead investors to demand higher yields on long-term bonds as compensation for future fiscal risk,” Beck-Friis concluded.

Stablecoins Could Become the Largest Offshore Market, Surpassing the Eurodollar

| By Amaya Uriarte | 0 Comentarios

Stablecoins, cryptocurrencies generally pegged to the U.S. dollar and designed to maintain a stable value, are establishing themselves as a key player in the global financial system. According to an analysis by Jeffrey Cleveland, Chief Economist at Payden & Rygel, this type of digital asset could become the world’s largest offshore market, even surpassing the historic eurodollar market.

In his latest report, Cleveland draws a parallel between the rise of stablecoins in the 21st century and the expansion of eurodollars after World War II. While eurodollars (offshore dollar deposits) helped consolidate the dollar’s dominance internationally, stablecoins could amplify that hegemony in the digital environment. “Could stablecoins further reinforce the dollar’s status as the world’s leading currency? History suggests they could,” the economist posits.

Evolution of Offshore Dollars

He explains that the eurodollar phenomenon dates back to the mid-20th century, when various regulatory and geopolitical conditions led to a growing accumulation of dollars outside the U.S. In the 1970s, the market quintupled, and by the late 1980s, it already totaled $1.7 trillion in offshore deposits. Today, the eurodollar market is estimated to reach $16 trillion.

In his view, stablecoins follow a similar logic, though with a radically different infrastructure. Instead of being managed by banks outside the U.S., they are stored and transferred via public blockchains. Their market value is already approaching $250 billion, with daily trading volumes exceeding $24 billion, nearing that of Bitcoin and surpassing Ether.

“Unlike traditional cryptocurrencies, stablecoins aim to minimize volatility and are mostly backed by real assets. Currently, more than 95% of them are secured by financial instruments such as cash, Treasury bills, or money market assets. Issuing companies like Tether and USD Coin already rank among the top holders of U.S. Treasury debt, with more than $120 billion in sovereign bonds,” Cleveland notes.

Transforming the Global Payment System

Cleveland’s analysis highlights that stablecoins not only replicate many of the functionalities of eurodollars, but also offer competitive advantages that could accelerate their global adoption. These advantages include the ability to conduct transactions with immediate settlement, available 24 hours a day, seven days a week, independent of traditional banking hours. They also offer significantly lower transfer costs, often below three percent and, in some cases, even below one percent of the amount sent.

Added to this is a high level of transparency, as all transactions are recorded in real time on the blockchain, allowing traceability for both users and regulatory authorities. Furthermore, their accessibility far exceeds that of traditional financial systems: anyone with internet access can use stablecoins without intermediaries or bank accounts, opening the door to broader and more global financial inclusion.

These features have already been adopted by the private sector. For example, SpaceX uses stablecoins to collect payments for its Starlink satellite network services. In the past year, the average monthly transaction volume in stablecoins exceeded $100 billion, even surpassing the volume processed by the Visa payments network.

In addition, stablecoins are being used in the decentralized finance (DeFi) market to generate interest, often higher than what traditional banks offer.

Into the Unknown

Cleveland warns that, like eurodollars, stablecoins could pose macroeconomic challenges in the event of liquidity strains or crises of confidence. In 2008, the eurodollar system was one of the focal points of the global financial crisis, due to the pressure to quickly convert offshore deposits into “onshore” dollars.

However, the rise of stablecoins also represents a historic opportunity to strengthen the dollar’s dominance in the digital economy. Despite past efforts by governments to reduce the global influence of the dollar, Cleveland argues that these digital currencies could further deepen its global presence.

“We’ve seen this movie before. Eurodollars cemented the dollar as the hegemonic currency in the 20th century. Today, stablecoins may be writing a new chapter in that same story,” the economist concludes.

From Attitude to Aptitude: Why Risk Tolerance Alone Cannot Determine the Appropriate Risk

| By Amaya Uriarte | 0 Comentarios

The Difference Between the Risk an Investor Is Willing to Take and the Risk They Should Take Is Not Academic—It’s the Difference Between Checking Boxes and Delivering Truly Suitable Solutions

According to Oxford Risk, for many years, advisers and firms have relied on some version of what is often called Attitude to Risk (ATR) as the main— and in many cases, the only—criterion for portfolio selection. However, they believe that ATR was never truly fit for purpose. “It provided an easy number to anchor to, but not a complete picture. It only captures part of what we need to know about an investor, and often not even that particularly well,” the firm argues.

Oxford Risk’s approach begins with a simple premise: the amount of investment risk an investor should take—their Suitable Risk Level (SRL)—must be based on a more complete understanding of who they are and how they relate to their investments. This requires moving beyond a narrow focus on a single attitude and instead considering a combination of key factors:

Risk tolerance, understood as a long-term psychological trait that reflects how much risk an investor is willing to take in relation to their total wealth;
Risk capacity, representing their financial ability to take on risk, considering time horizon, dependency on assets, income stability, and liquidity needs;
Behavioral capacity, referring to their emotional strength to tolerate market volatility, expressed in traits like composure; and finally,
Knowledge and experience, which help assess the investor’s familiarity with the investment world and may temporarily limit their exposure to risk.

Each of these components plays a distinct and complementary role in constructing the investor’s SRL.

The Limits of “Attitude” Toward Risk

The term attitude to risk conceals significant complexity. Each investor has multiple attitudes toward risk: long-term and short-term; rational and emotional; domain-specific and general. What matters is not how a person feels about risk today or in response to recent events, but their stable, long-term willingness to balance risk and return across their total wealth over time.

This is precisely what a well-designed risk tolerance assessment should measure. But market RTA tools often fall short: they confuse risk tolerance with optimism, confidence, or knowledge; they fail to isolate the core trait; and they produce unstable results that may change drastically with the markets.

Moreover, ATR—even when well-measured—is only part of the story. Most tools that use ATR completely ignore risk capacity, and with it, the dynamic life context of the investor’s financial situation. In their view, risk tolerance tells us how much risk people are willing to take; risk capacity, how much they can afford to take. “Ignoring the latter can cost decades of compounded growth and lead to very unsuitable long-term outcomes. Suitable risk isn’t what feels safe today, but what supports financial security over time,” they note.

From Investor to Portfolio

At Oxford Risk, they believe that understanding the investor is only half of the equation. “Assigning them the right portfolio also requires knowing the long-term risk level of that portfolio. This is where another mismatch often arises. Too often, portfolio risk is assessed using short-term historical volatility—a highly unstable and context-dependent measure. This leads to inadequate risk labels and poor long-term alignment,” they state.

In their view, what’s needed is stability on both sides: a stable measure of the investor’s SRL, based on proven traits and models over time; and a stable measure of portfolio risk, based on expectations of long-term outcome uncertainty. “Only if both conditions are met can we ensure that the risk match is accurate at the time of recommendation and remains appropriate as both markets and personal circumstances evolve,” they affirm.

Their key conclusion is that attitude to risk was a useful stepping stone, but it is no longer sufficient (indeed, it never truly was). “A truly suitable level of risk must combine: a precise, psychometric measure of risk tolerance; a forward-looking, situational awareness of risk capacity; a behavioral understanding of composure and its effect on behavior; and an appreciation of knowledge and experience and their role in informed decision-making,” they argue.

In their view, only in this way can we deliver investment solutions that align not only with what an investor says or feels, but with who they are, where they are in life, and the best way to support their long-term goals. “Suitability is not a number. It is a relationship (between investor and investment) based on understanding, adapted over time, and empowered by technology that embeds science into every recommendation,” they conclude.

AI: The Formula to Convert “At-Risk Customers” Into “Loyal Customers”

| By Amaya Uriarte | 0 Comentarios

Despite the imminent arrival of the so-called “generational wealth transfer,” which will bring a larger number of high-net-worth individuals (HNWIs) and fewer advisors to serve them, many wealth management firms are simply not prepared for success. According to the report “Capturing HNWI Loyalty Across Generations,” published by Capgemini, to ensure that private bankers can interact effectively with this new generation, firms must evolve rapidly on an organizational level but, above all, technologically.

“Wealth management executives who delay will face significant risk of losing both investors and talent to more agile competitors. The leading wealth management firms are adopting AI-based, industry-focused relationship management tools, as well as omnichannel experiences that eliminate manual processes, provide real-time guidance, and autonomously perform predefined tasks. By supporting their advisors and building loyalty among the next generation of HNWIs, these firms are positioning themselves to ensure long-term engagement and sustained business benefits,” the report’s authors state.

Signs of Impending Disruption in the Sector

With the global increase in the population of high-net-worth individuals (HNWIs), many wealth management firms are optimistic about expanding the population they aim to serve. In this context, the report asserts that “the great wealth transfer is also set to disrupt the wealth management sector by significantly straining, or even breaking, well-established loyalty ties.”

According to its analysis, private bankers now face the convergence of three significant trends related to HNWI loyalty. The first is a shift in investment preferences among the next generation of HNWIs. “Comprising Generation X, millennials, and Generation Z, this group expects hyper-personalized engagement. In fact, 81% of next-generation HNWIs plan to quickly leave their parents’ wealth management firm, driven by factors such as the lack of preferred digital channels (46%), lack of alternative investments (33%), and insufficient value-added services (25%),” it states.

Secondly, there will be an increase in the volume and diversity of HNWIs. The report indicates that as family wealth passes down through multiple successive generations, the number of clients to serve grows exponentially. Moreover, more than half (56%) of total wealth is expected to be transferred to women, who may have investment goals, styles, and priorities significantly different from those of men.

And thirdly, firms will face a changing landscape due to the imminent wave of retirements, which will leave an increasingly smaller number of experienced bankers. “Who will take their place? A stream of young, digital-native professionals who expect the workplace to evolve both technologically and culturally. In fact, they are already expressing such significant discontent that approximately one-fourth plan to switch wealth management firms or start their own in the near future,” the document states.

In other words, in the very short term, there will be more high-net-worth clients to serve, with a broader range of expectations for hyper-personalized services, while the supply of senior bankers will drastically decline.

The Value of Private Bankers

As for the importance of the banker in the loyalty-building process, our research also revealed that two-thirds of next-generation HNWIs consider the strength of a firm’s private banker team a key factor when choosing a wealth management provider. Sixty-two percent of next-generation HNWIs state they would follow their relationship manager if they moved to another firm, meaning loyalty is no longer based on the institutional ties felt by previous generations.

However, 56% state that their firms lack the necessary tools to meet the needs of next-generation HNWIs—namely: proactive information, personalized recommendations, and seamless communication across different channels. In light of the report’s findings, it is clear that to build loyalty among next-generation HNWIs, wealth management firms must strengthen their relationship management stance. This includes modernizing live and self-service technologies required to meet client expectations.

The Right Technology at the Right Time

The report notes that, as in many current situations, leveraging automation strategically is not about adopting technology for its own sake. According to its assessment, the key lies in understanding what next-generation HNWI clients expect from their wealth management firm and what tools private bankers need to earn their loyalty.

For example, despite the ubiquity of mobile apps, a surprising finding in the report was the greater interest of next-generation HNWIs in video calls and website interactions over mobile apps. In some types of interactions—such as making inquiries or addressing a concern—even traditional phone calls prevailed over apps.

“Less surprising was the decline in interest in face-to-face meetings, which generally received the lowest rating across all interaction types. The only exception was seeking expert advice, where face-to-face meetings ranked second to last—although only by a small margin,” the report concludes.

Developing an Approach That Fosters Loyalty

To address the imminent shortage of private bankers and ensure that advisors have the tools they need, start by developing a strategic approach to guide the technological transformation for next-generation HNWIs. According to the report, critical aspects include:

Assessing Digital Capabilities.

Since next-generation HNWIs expect seamless, convenient digital channels that allow them real-time access to personalized and relevant information, it is necessary to determine whether the service offering requires any updates. Similarly, the report advises that the platform should enable advisors to deliver hyper-personalized and omnichannel experiences quickly and efficiently.

Adopting Artificial Intelligence.

Ensure that bankers have access to the latest AI tools, including generative AI (GenAI) and agentic AI technologies. “Advanced solutions integrate multiple internal and external sources to eliminate manual tasks, provide actionable insights, and generate real-time recommendations on next steps—allowing advisors to focus their expertise on strengthening client relationships,” the document states.

Incorporating Behavioral Dynamics Technologies.

“It’s no secret that emotions and biases can lead to irrational financial decisions that deeply affect client portfolios and the profitability of wealth management. By adopting modern AI-based behavioral dynamics tools, wealth management firms can empower bankers to quickly identify and navigate clients’ behavioral investment patterns. These types of solutions can also dramatically enhance and hyper-personalize the firm’s communications to help influence how clients invest,” it adds.

Ensuring Readiness for AI Technology.

To get the most out of AI-based solutions, the document notes that it is essential “to be comfortable, confident, and skilled in using the tools.” In its view, only by providing private bankers with sufficient training and peer mentoring will investments in artificial intelligence achieve the desired outcomes.

“Monitor and refine the implementation of technology based on feedback from the firm’s private bankers and next-generation HNWIs. Continuously evaluating your digital tools ensures that your firm can make quick and timely adjustments,” the report concludes.

Who Is Stephen Miran and Why Should Investors Know His Ideas?

| By Amaya Uriarte | 0 Comentarios

Just Weeks Ago, Through the Truth Social Platform, U.S. President Donald Trump Announced the Appointment of Stephen Miran as a New Member of the Federal Reserve Board of Governors (Fed) Following the Resignation of Adriana Kugler

Miran will temporarily assume this position only until January 31, 2026. This appointment covers the period while a successor is selected for Jerome Powell, whose term as Fed Chair ends in May 2026.

So, who is Stephen Miran? Until now, Miran held the position of Director of the Council of Economic Advisers (CEA), to which he was appointed by Trump in December 2024. According to analysts, he is considered the architect of Trump’s reciprocal tariff policy and the promoter of a plan called the “Mar‑a‑Lago Accord,” aimed at countering the overvaluation of the dollar and restructuring the global trade system. Additionally, he has been one of the most vocal critics of the Fed’s independence and has made numerous proposals, such as shortening the terms of Fed governors or changing the way they are appointed.

Key Ideas: Dollar and Bonds

Regarding Miran, Gilles Moëc, Chief Economist at AXA, notes that his essay on how to distort the global monetary system to better serve U.S. economic interests is highly insightful for understanding his views. “In it, he outlines several ways to provoke a depreciation of the dollar without causing a drop in demand for U.S. assets, which would otherwise lead to rising interest rates in the U.S. and, eventually, an economic slowdown, further complicating the already complex budget equation,” he states.

In this context, Moëc summarizes that Miran’s idea is that, under a “Mar‑a‑Lago Accord”—inspired by the Louvre and Plaza Agreements of the 1980s, when Europe and Japan coordinated efforts to devalue the dollar—foreign central banks would agree to shift their reserves into very long-term or even perpetual U.S. Treasury bonds. This would limit long-term interest rates, while private investors would exit the U.S. market in anticipation of the dollar’s depreciation.

“Miran himself emphasizes how unlikely it would be for Europeans to accept such a measure and therefore introduces a coercive dimension: long-term investment in U.S. debt would be the ‘compensation’ Europeans pay to avoid tariffs and benefit from Washington’s continued military protection. However, and this is a point Miran raises without resolving, a significant problem is that European investments in the U.S. are mainly the result of countless decentralized decisions made by private actors: real-economy companies for direct investment, and asset managers and institutional investors for portfolio flows.”

According to Moëc, Miran’s essay proposes another “worrisome” idea: the possibility of taxing the interest paid on Treasury securities to non-resident investors. In his view, this would likely drive them away from the U.S. bond market, but given the difference between the amount of central bank reserves and the U.S. assets held by private investors, “the net effect on the overall cost of U.S. financing could be dramatic for the health of the U.S. economy.”

“In short, the current U.S. approach to its trade and financial relations with Europe aims to improve a situation already highly favorable to the United States. There is a limit to how far American interests can be pursued through coercion. Europeans may come to see the macroeconomic cost of maintaining a close political and defense relationship with the U.S. at all costs as too high, making other geopolitical options more acceptable,” he concludes.

The Fed and the FOMC

The second assessment from experts is that Miran’s arrival at the FOMC will generate some conflict due to his view that the dollar is overvalued and that the U.S. trade balance cannot be rebalanced as a result. “He believes that, to secure the financing of U.S. public finances, other countries could be made to purchase very long-term Treasury bonds. This likely came up during tariff negotiations. I’m thinking, for example, of the $600 billion from the European Union and $550 billion from Japan, which Trump wants to use at his discretion,” says Philippe Waechter, Chief Economist at Ostrum AM (a Natixis IM affiliate).

According to his analysis, for the Fed, a fall in the dollar would trigger an inflation shock that would add to the impact of tariffs and, in such a case, the Fed would need to raise its policy rate. Moreover, if a “Mar‑a‑Lago Accord” were perceived by investors as credible, it could trigger significant capital outflows from U.S. markets; if not, any drop in the dollar would be seen as an opportunity. For Waechter, “the power struggle between Powell and Miran will be crucial for everyone. The risk is that U.S. monetary policy becomes subject to White House directives. That would be a disaster.”

A similar warning comes from Muzinich & Co: “Personnel changes matter less for the short-term path of official interest rates—which markets still expect to trend lower—than for the issue of institutional independence. Trump’s repeated public criticisms of Powell, calling him ‘too slow’ and an ‘idiot,’ among other insults, keep alive the possibility of a leadership transition at the Fed aligned with the administration’s more interventionist economic stance.”

In this context, Enguerrand Artaz, strategist at La Financière de l’Échiquier (LFDE), adds that “the Fed’s independence has come under attack, and the central bank’s communication is going to be complicated over the coming months.” For Artaz, this situation is part of a broader institutional dynamic: “The functioning of U.S. institutions has been weakened during the early months of Trump’s term.” This structural weakening is accompanied by “enormous uncertainty regarding its impact on growth and inflation.”

The outcome of Powell’s succession will mark a dividing line between two conceptions of the Federal Reserve’s role: as a technical guarantor of macroeconomic stability or as a political tool serving the presidential agenda, he concludes.

Portfolios Facing Tariff Walls: Is Asset Securitization the New Path?

| By Romina López | 0 Comentarios

Asset securitization tariff walls — Unsplash

In recent years, international trade has been marked by a shift toward protectionism and fragmentation. Geopolitical tensions, coupled with unilateral tariff decisions, have triggered a wave of measures impacting countries, sectors, and supply chains in uneven ways. In this new environment, where trade policy increasingly influences financial flows, markets have responded with volatility and uncertainty, according to FlexFunds.

The imposition of selective tariffs, the redesign of trade agreements, and the growing regionalization of production are reshaping the global economic map. Sectors such as technology, manufacturing, and consumer goods—highly exposed to international flows—have been the most affected, while inflation expectations and monetary policy decisions add further pressure on portfolio returns.

The trade dispute between the United States and China marked a turning point in the international trade system. Protectionist measures imposed by both countries—such as increased tariffs on key products and the enforcement of technological restrictions—set off a chain reaction in other economies that also opted for protectionist approaches in their trade policies. The European Union, India, and even some Latin American nations have tightened foreign trade regulations to protect their domestic industries.

For institutional managers, these changes demand far more than tactical adjustments: they require a deep reassessment of diversification and asset allocation strategies. In this context, asset securitization emerges as a key tool to mitigate risks, preserve value, and capture new opportunities in an increasingly uncertain and fragmented environment.

How Tariff Pressures Are Reshaping the Role of Portfolio Managers

Widespread tariffs and growing trade uncertainty impose new challenges for asset managers:

Faced with this scenario, many managers are rethinking traditional exposures and adopting more flexible and resilient solutions. Among these, one strategic tool is gaining prominence: asset securitization.

Asset Securitization: Tactical Flexibility and Macro Alignment

Asset securitization enables the transformation of illiquid assets—such as real estate cash flows, invoices, corporate revenues, or loan portfolios—into structured, efficient, and tradable vehicles. This practice offers institutional managers significant advantages in the new environment:

1. Structural flexibility and improved liquidity
Converting private assets into listed or transferable instruments—such as structured notes or asset-backed funds—allows for quick adjustments to exposure without sacrificing diversification or efficiency.

2.- Ease of portfolio rebalancing
In an environment of geopolitical fragmentation and frequent regulatory changes, having structured vehicles allows for rapid portfolio adjustments, dynamically adapting to new trade restrictions, regional opportunities, or shifts in sector outlooks.

3. Targeted geographic diversification
Through securitization, managers can gain exposure to assets in regions less affected by tariff policies. For example, economies such as Mexico or India could benefit from supply chain shifts driven by nearshoring.

4. Inflation protection
Structures indexed to real cash flows—such as rents or adjustable fees—help preserve portfolio purchasing power, offering alternatives to traditional bonds currently under pressure from high interest rates.

5. Efficient access to defensive sectors
Securitization facilitates the inclusion in investment strategies of sectors less sensitive to international trade, such as infrastructure, energy, healthcare, or logistics, through structures tailored to institutional appetite.

6. Tax optimization and regulatory compliance
Structuring these vehicles from efficient jurisdictions, such as Ireland, maximizes tax and regulatory benefits, particularly in contexts where domestic rules may tighten.

Redefining Portfolios, Anticipating Scenarios

Portfolio managers who integrate securitization as a strategic tool can:

Reduce exposure to regions under tariff pressure or sanctions
Access assets in areas with more stable or industry-friendly policies
Capitalize on structural trends such as reshoring and nearshoring, which are reshaping global investment flows

And beyond mitigating geopolitical risks, they can:

Align their portfolios with the new global value chains
Position capital in regions and sectors with growth potential
Design investment vehicles that respond to global macrostrategy, beyond mere asset selection

In an environment defined by volatility, trade polarization, and constant rule changes, asset securitization moves from being an operational technique to a strategic positioning tool. For institutional managers, it represents a way to preserve value, gain agility, and build portfolios aligned with the new global economic order.

Moreover, the ability to facilitate dynamic portfolio rebalancing—amid shifts in trade policies, regulatory risks, or macroeconomic adjustments—makes securitization a key mechanism for keeping investment strategies relevant and resilient in real time.

In this context, FlexFunds offers asset securitization solutions—a process that converts different types of financial assets into tradable securities. FlexFunds’ solutions can repackage multiple asset types into an investment vehicle, enabling managers or financial advisors to distribute their strategies more easily and cost-efficiently to a broader client base.

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