Sefian Kasem (HSBC AM): “In the Face of Uncertainty, ETFs Can Be Used to Quickly Adjust Risk or Access Specific Markets or Strategies”

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After liberation day, we saw a sharp market correction and a wave of new ETFs with more balanced weighting and improved exposure to certain U.S. stocks and this is because, in the opinion of Sefian Kasem, Global Head of ETF & Indexing Investments Specialists at HSBC AM, the appeal of ETFs lies precisely in their dynamic nature—ideal for these times of uncertainty. We spoke with him about the role of these vehicles in portfolios and about the ETF phenomenon in our latest interview.

How is all this market instability and uncertainty affecting the creation of new ETF products and strategies?


They can be used to quickly increase or decrease risk by investors or to gain access to specific markets or strategies. There is now much more innovation. Active ETFs, for example, offer investors access to asset classes for those seeking the beta of a specific market with an additional alpha component and low tracking error. As markets become increasingly volatile and fragmented, we are more frequently seeing tactical adjustments within portfolios. The great flexibility they provide is precisely what is driving much of the current innovation in the sector, by incorporating new strategies that allow investors to access different sources of risk and return. In the realm of traditional ETFs, concern about concentration in certain stocks within U.S. benchmark indices has also driven innovation around capping methodologies (such as equal weighting) to mitigate concentration risk in the indices.

In this regard, where are ETFs and index strategies heading? How is innovation achieved in this part of the business?


The major shift has been the transition toward increasingly offering exposure to asset classes and access to specific investment strategies. Within the ETF space, you now have the opportunity to invest in strategies that use active stock selection from a bottom-up perspective, whether in a discretionary sense or in a quantitative and systematic sense, where a rule-based methodology is used for stock selection—as is the case with our active ETF range. We’ve spoken in terms of investment strategies, but we also need to consider the evolution of product features, as it is increasingly common for traditional index funds to provide access to strategies through the launch of ETF share classes that operate under the same umbrella. ETF issuers are showing dynamism in this regard, and we are increasingly seeing these hybrid structures in the market, which allow investors to access specific markets or strategies in the usual way through index funds, while also offering access to investors who wish to invest in ETFs, perhaps with a shorter time horizon. They can do this because there is a class that is an ETF, and it is available alongside the traditional non-listed share classes. In short, we are seeing ETF product providers increasingly offer market access to a broader range of asset classes and strategies through more innovative methods.

In the ETF market, we’re seeing strong growth in active ETFs in Europe, but in the U.S., this market is already more developed. What can the European industry learn from how the active ETF segment has grown in the U.S.?


I believe the key lesson from the U.S. experience is the innovation and infrastructure that have been developed there. Historically, they have been pioneers in the creation and growth of the ETF market, including the variety of asset classes offered and the strategies embedded within the structures. The U.S. has gone through a trial phase that proves active investment strategies can be successfully integrated within an ETF. This shows there is enormous potential for growth in Europe, but that doesn’t necessarily mean the same types of strategies will appeal to European investors in the same way they do to Americans. The needs of European investors are different, due to the nature of the investor base. Europe will naturally develop its own range of products demanded by clients, depending on their needs at any given time and tailored to the different jurisdictions.

Considering that active ETFs in the U.S. enjoy a number of advantages not present in Europe, what growth prospects do you see for the active ETF market in Europe? What opportunities could this offer asset managers and, in particular, your firm?


From the U.S. perspective, there are some advantages in that sense, such as a regulatory framework that is a bit more open to innovation, but I believe that mindset is changing in Europe. There is increasing innovation happening in Europe, so there is plenty of room for ETF issuers to develop products that are relevant to their target market. We fully understand that certain concepts are especially relevant to the European public, such as capital-protected solutions, sustainable investing, etc. The creation of products that meet the needs of European investors is something that will likely accelerate from now on, so there may be some divergence from the U.S. as more local innovation takes place. In many respects, I believe much of the innovation is transferable, so we will see many concepts that have taken root in the U.S.—for example, options-based ETFs, such as buffer ETFs, and other types of structured solutions—gradually become more prevalent in Europe.

In which other markets do you see growth potential for the ETF business, both traditional and active?


There is enormous potential for ETFs to become tools used for asset allocation across a wide variety of jurisdictions, in both developed and emerging markets, given how easily they can be used to build and manage portfolios. And this is not only for short-term investors looking for quick access to liquid markets, but also for long-term investors building strategic asset allocations with a 10- to 15-year investment horizon. ETFs can offer them access to different sources of risk premia in both public and private markets, as well as sectoral, factor-based, and thematic strategies. ETFs are becoming a much more important part of portfolios not only in the U.S. and Europe, but also in other jurisdictions—emerging markets, the Far East, the Middle East, Latin America, etc. They are highly relevant tools being used by virtually all types of investors.

HSBC Asset Management has strengthened its presence in the ETF business in recent years. What role do these vehicles play within the firm’s overall strategy?


They play a very important role, as our passive and quantitative equity business is under the same investment leadership (CIO), which greatly helps from an innovation standpoint. In that sense, there is a lot of collaboration and knowledge transfer between the two. The active ETF strategies we’ve launched in the market are considered a natural complement to the range of traditional ETF investment strategies we offer to investors. We will continue to innovate and explore how to use the ETF structure to provide investors with access to selected asset class exposures and strategies—and we have a few more surprises in store for them this year.

Chips, Semiconductors, Medications, and India: Trump Maintains Tension With More Threats

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The new tariffs from the Trump Administration have come into effect, with a general minimum of 10%, amid renewed social media messages, threats, and moves that add noise to the current context of uncertainty. Markets are absorbing these fluctuations with relative calm, and European stock markets opened the day in positive territory—for example, futures on the STOXX Europe 50 index are pointing to an increase of approximately 0.3%, while in Asian markets, the main indices closed the session with gains.

What does the new “tariff map” look like? According to the summary from Banca March, three main groups can be identified. “On one hand, there are countries in a sort of truce with the U.S., such as Mexico and China, awaiting the outcome of negotiations. Secondly, we have countries like Japan, the United Kingdom, Vietnam, the EU, among others, that have already reached preliminary agreements with the American giant, although in many cases, key details of those pacts are unknown, and in cases like Japan or the EU, negotiations are ongoing. Lastly, there is the rest of the countries which, starting today, will face a tariff ranging from 10%—if they have a trade deficit with the U.S.—up to levels of 50%, in cases like Brazil and India,” they explain.

In this new tariff environment, central banks have become more cautious. “Both the Fed and the ECB have kept official interest rates unchanged. The apparent stability of labor markets and the potential inflationary pressures caused by U.S. tariffs are leading central banks to act with caution. In July, the U.S. administration concluded several tariff agreements with key trading partners (Japan, Eurozone). Although not all details have been negotiated, tariffs around 15% are lower than feared, which has supported risk assets. In the process, equities have once again outperformed fixed income,” highlights Alex Rohner, Fixed Income Strategist at J. Safra Sarasin Sustainable AM.

Chips and Semiconductors


In the past 48 hours, several announcements have come from Trump, adding more percentages and tension to the tariffs that are now in force. In particular, he has announced that he will impose a 100% tariff on chip and semiconductor imports to force their production within the country. “We are going to apply a very high tariff on chips and semiconductors. But the good news for companies like Apple is that if they manufacture in the United States or are fully committed to manufacturing in the United States, no charges will apply to them,” the president stated during an event in the Oval Office.

The Republican, who this week indicated his intention to announce tariffs on these high-tech components, said that “a 100% tariff will be applied to all chips and semiconductors entering the United States.”

According to the analysis by Amadeo Alentorn, Head of Investments in the Systematic Equity area at Jupiter AM, “U.S. technology continues to rely heavily on international supply chains,” as “most advanced semiconductor manufacturing is concentrated in East Asia, especially in Taiwan and South Korea.” Alentorn explains that major U.S. companies like Apple and Nvidia rely heavily on Taiwan for chip manufacturing, even though they design them domestically.

For some experts, this is a clear message to China. U.S. and Chinese delegations concluded a third round of negotiations in Stockholm at the end of July without reaching a definitive agreement, but with a joint intention to extend the tariff truce set to expire on August 12. “Tensions between the U.S. and China are escalating into a full-scale trade war, with technology at its core. President Trump demands that all chips used in critical industries be Made in America. In response to Washington’s tightening of export controls and domestic origin requirements, China is intensifying audits, fines, and new data localization rules. It is suspending licensing and slowing down customs clearance for goods related to semiconductors. Supply chain bottlenecks are multiplying,” adds the expert from Jupiter AM.

Meanwhile, according to experts, the Asian giant is designing a new trade map to diversify its exports within Asia. Its main targets are Southeast Asian countries with friendlier ties to the U.S., such as Vietnam, Thailand, and Indonesia, where results are already visible.

In fact, according to analysis by Crédito y Caución, Chinese exports to the U.S. plummeted in April, when the American tariffs came into effect, with a drop of $9.3 billion in goods exports compared to the previous year. At the same time, Chinese exports to Asia increased by $14.8 billion. This is a trade strategy that aims not only to minimize the impact of tariffs. As Bert Burger, economist at Atradius, explains, “Chinese manufacturers are also setting up production facilities in Southeast Asia to take advantage of local benefits.” These advantages include lower wages and tax incentives.

Pharmaceutical Sector


“We will initially impose a small tariff on pharmaceutical products, but within a year—a year and a half at most—it will rise to 150%, and then to 250%, because we want pharmaceutical products to be made in our country,” stated Trump just 48 hours ago. According to experts, companies in this sector face dual pressure: on one hand, tariffs; on the other, the restructuring of the healthcare system in their largest and most profitable market, the United States. “Pharmaceuticals are included in the trade agreement between the EU and the U.S., which has mitigated some concerns in the sector. However, they were excluded from the recent 39% tariff imposed by the U.S. on Swiss imports. A specific update on pharmaceutical product tariffs is still pending,” say Alexandra Ralli and Simon Lutier, Equity Analysts for the Healthcare Sector at Lombard Odier.

According to Lombard Odier experts, it is important to put this into context: the U.S. healthcare system is undergoing a phase of political reform, with expected changes in production, regulation, and pricing. Furthermore, President Trump has urged major pharmaceutical companies to lower prices, adding pressure to an already strained sector. “Global pharmaceutical giants are trading at a discount compared to their historical averages, reflecting investor caution amid regulatory and political uncertainty.

While the healthcare sector is not among our top picks, we see potential in certain pharmaceutical or biotech companies with strong product pipelines. Swiss pharmaceutical companies could rebound if the tariff framework becomes clearer. In the view of Marie de Mestier, Head of Large-Cap Equity Fund Management at Crédit Mutuel AM, this sector—traditionally considered a safe haven in times of instability—is now in a volatile situation and clearly exposed to political risk. “Donald Trump’s policies will have cross-border repercussions. Possible changes in pricing, regulation, and supply chains, along with increased competition, will force European companies to adapt in order to remain competitive despite U.S. policies. In fact, European pharmaceutical companies generate nearly 50% of their sales in the United States, but not all the drugs they sell are manufactured there. With rising protectionism, the challenge will be to produce more locally, which is why many European pharmaceutical firms have already announced massive investments in the United States,” they emphasize.

India: Energy and Geopolitics

The other major announcement from Trump was the imposition of additional 25% tariffs on India in retaliation for its purchase of Russian oil, bringing the total tariff on Indian imports to 50%. According to analysts, India, the third-largest oil importer in the world, has taken a neutral and pragmatic stance on the war in Ukraine, shifting from importing less than 2% of its oil from Russia to more than one-third, making Moscow its main supplier.

“One of the additional factors negatively impacting the market was President Donald Trump’s decision to impose a 25% tariff on products from India. The measure responds to accusations that the Asian country continues to buy Russian oil, sparking new trade tensions amid an already fragile international relationship,” point out the Financial Markets Analysts for LATAM at XS.com.

In their opinion, despite downward pressures, physical market data offered a bullish signal. “The market is closely watching details on the implementation of U.S. sanctions. Traders are looking to understand which sectors will be affected and whether the measures will have a real effect on global oil supply. At the same time, there is growing concern over a potential production increase by the OPEC+ alliance—which includes Russia—which could offset any supply loss caused by the sanctions,” they add.

The Reasons Why Jerome Powell Will Complete His Term at the Head of the Fed

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Photo courtesyJerome Powell, president of the Fed

Since his arrival at the White House, Donald Trump, President of the United States, has made numerous remarks against Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), as well as the work he is doing. Trump has hinted that he would be willing to remove Powell from his position, while also making indirect suggestions about his desire for lower interest rates. For his part, the Fed Chair remains on the sidelines of such comments and holds firmly to his usual argument: his decisions depend on the data.

In a recent development, Fed Governor Adriana Kugler will leave her post on Friday, August 8, and President Donald Trump is seriously considering naming her successor as the next Fed Chair. “Trump said he will decide on the Fed governor before the end of the week, and that the shortlist for Fed Chair is down to four names: ‘two Kevins and two others’; the odds that White House economic advisor Kevin Hassett becomes the next Fed Chair are rising to 36%, according to Kalshi,” notes Felipe Mendoza, financial markets analyst at ATFX LATAM.

Bloomberg warns that Trump’s advisors may be encouraging the president to appoint a temporary Fed governor to fill the soon-to-be-vacant seat on the central bank’s board. “The departure of Fed Governor Adriana Kugler gives the Republican an early opportunity to appoint a governor more aligned with his preferences. However, market concern about potential passivity from the U.S. central bank—which has been growing since Trump returned to the White House—could worsen depending on whom he selects,” they explain.

According to Tiffany Wilding, economist at PIMCO, and Libby Cantrill, Head of Public Policy at PIMCO, in the short term, while it is likely that Trump will continue criticizing the Fed and advocating for lower rates, it is unlikely that he will try to fire Powell. Instead, they assert, Trump will begin to shape the Fed through upcoming appointments, starting with the expiration of Adriana Kugler’s term in January and Powell’s chairmanship in May — Powell’s term as a Fed governor, distinct from his role as chair, extends until January 2028.

“Whoever Trump selects as the next chair, like any Fed leader, will have to present a credible case for monetary policy decisions, first to gain Senate confirmation and then to secure majority support from the FOMC. As with other U.S. government institutions, the Fed is structured with built-in checks and balances that limit any one individual’s ability to drastically change its policy course,” these two PIMCO experts remind us.

When it comes to candidates or potential successors to Powell, the most frequently mentioned names are: Lael Brainard, Philip Jefferson, Michelle Bowman, and Lisa Cook. “The issue of Powell’s succession crystallizes more than just an institutional debate: it reflects the tension between independent monetary policy and increasing political pressure. In a context where every word spoken by a Fed Chair can influence interest rates and shake markets, the choice of successor will be interpreted as a strong signal of either continuity or change. For investors, the important thing will not be the name, but the direction it takes,” state sources at Mirabaud Wealth Management.

Barriers to Removing Powell


Now then, how realistic is the possibility that Trump could remove Powell? According to Wilding and Cantrill, there are four compelling reasons why Powell will complete his full term. “Despite persistent rumors and occasional threats from the president, we continue to believe that it is highly unlikely that Trump will move to fire Powell before his term ends in May 2026. There are strong legal, political, and practical reasons for this view,” they state.

First, they explain that the most significant barrier to removing Powell is legal: earlier this year, the Supreme Court affirmed the Fed’s special status as a quasi-private institution, whose governors can only be removed “for cause,” a high threshold generally reserved for serious misconduct such as fraud.

“While some Republican lawmakers have attempted to build a case by pointing to cost overruns in Fed building renovations, the Federal Reserve Board has responded quickly with reasonable rebuttals. Powell has also requested an independent review by the Inspector General and has privately indicated that he would challenge any attempt to remove him, likely remaining in his post while the matter is litigated,” note Wilding and Cantrill.

Second, PIMCO experts refer to “political realities.” That is, even if Trump could legally remove Powell, doing so would be politically risky and likely counterproductive. It’s worth remembering that all Fed nominees require Senate confirmation, starting with the Senate Banking Committee. Given the current political landscape, it could be difficult for Trump to gain unanimous support from Republican committee members, especially if the move is perceived as an attack on the Fed’s independence.

Third, as has already been seen, firing Powell could entail significant market risks. “Past speculation about his possible removal has led to higher long-term interest rates and declines in stock markets—outcomes contrary to the administration’s goals. Prominent economists and former Fed officials have warned that such a move could undermine confidence in the central bank, raise inflation expectations, and call into question the unique global standing of U.S. capital markets. The likely consequences: steeper yield curves, higher rates, and a weaker dollar,” both argue.

Finally, PIMCO experts point out that there are a series of institutional checks. They note, “The Fed Chair holds just one of 12 votes on the FOMC, which sets monetary policy. Even if Trump were to install a politically partisan chair, it is far from certain that the rest of the committee would support a dramatic policy shift. It is worth noting that of the current seven members of the Federal Reserve Board of Governors, all of whom vote on the FOMC, only two were nominated during Trump’s first term, while the others were nominated by President Joe Biden.”

Genius Act: This Is How the U.S. Innovates in the Field of Stablecoins

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The new U.S. legislation—particularly the Genius Act passed in July—is consolidating the role of stablecoins as a method of payment in the future of finance, one of the five megatrends that experts believe will enhance profitability. At BlackRock, they emphasize that stablecoins are linked to major currencies, mainly the U.S. dollar, and could consolidate the greenback’s dominance in global markets, although other countries are exploring alternatives.

Specifically, they are digital tokens tied to a fiat currency and backed by reserve assets. They combine the frictionless transfer inherent to cryptocurrencies with the perceived stability of a traditional currency. Although stablecoins represent only 7% of the crypto universe, their adoption has grown rapidly since 2020, reaching a volume close to 250 billion dollars.

“We believe that the growing demand for stablecoins will have little impact on short-term Treasury yields. We continue to view Bitcoin as a prominent catalyst for profitability,” argues BlackRock in its latest report. In this regard, 2025 has been an exceptional year for Bitcoin, which has risen 25% so far, while the U.S. advances in approving several key laws aimed at integrating digital payments and assets into the traditional financial system—and turning the country into the world capital of cryptocurrencies.

Implications of the Genius Act


In BlackRock’s analysis, there are two main implications of the Genius Act for the U.S. dollar and Treasury bonds. The first is that the law defines stablecoins as a method of payment, not as an investment product; prohibits issuers from paying interest; and restricts their issuance to federally regulated banks, certain registered non-bank entities, and state-licensed companies.

“This regulation could reinforce the dollar’s dominance by facilitating a tokenized digital ecosystem based on the dollar for international payments. In emerging markets, this could provide easier access to the dollar compared to volatile local currencies. However, in advanced economies, adoption could be limited by the prohibition on interest payments, designed to prevent competition with bank deposits and protect the traditional credit system,” they note.

Secondly, they consider that the law also establishes which assets stablecoin issuers can hold as reserves: primarily repurchase agreements (repos), money market funds, and U.S. Treasury bonds with maturities of 93 days or less. “The main issuers — Tether and Circle — together hold at least 120 billion dollars in Treasury bills, representing only about 2% of the total approximately 6 trillion in circulation. This demand could grow as the stablecoin market expands and drive further purchases of short-term bonds. But the impact on yields is likely to be limited,” they qualify.

The U.S. is not the only country taking action. Hong Kong has launched new regulations to attract innovation in stablecoins, and Europe is exploring the digital euro, although its use would be limited to avoid impacting the banking system. “If other countries allow interest-paying stablecoins, or promote central bank digital currencies (CBDCs), this could weaken the dollar’s role in international trade. Nevertheless, the U.S. could respond by also allowing interest on stablecoins,” the report states.

According to experts, this wave of digital asset adoption by governments — through regulatory frameworks and support from the U.S. administration — foretells greater future adoption, which strengthens the investment thesis on Bitcoin as a differentiated driver of risk and returns in portfolios. “Despite this, stablecoins still represent a relatively small part of the crypto universe, and as this ecosystem evolves, it remains unclear how they will compete against other digital assets,” concludes BlackRock.

Inflation and Negotiations: Two Key Focus Areas to Monitor in the Tariff Game

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International Asset Managers’ Experts Believe That Trade Uncertainty May Be Easing as the United States Reaches Agreements With Its Main Partners; However, They Caution That It Remains to Be Seen What Impact All These Tariffs Will Have on Inflation and, Above All, on the U.S. and Global Economy. While We Wait to See This Impact Materialize, All Attention Is Focused on Negotiations and Agreements.

In the opinion of Chris Iggo, Chief Investment Officer (CIO) at AXA IM, U.S. trade agreements are “a naive idea.” According to his argument, these will not force a redirection of U.S. spending from foreign goods to domestically produced goods. “If successful, the U.S. trade deficit should decrease, and there would be inflows into the capital account of the balance of payments in the form of direct and portfolio investments. In such a scenario, a strong dollar would be expected, not only due to a lower trade deficit and higher investment flows but also from a sentiment perspective: America is winning and is exceptional,” he states.

Monitoring Inflation


The Chief Investment Officer at AXA IM warns that “instead, import prices will rise, and that will mean lower profit margins for companies that import intermediate or final goods to distribute in the U.S. market. And it will probably mean higher prices for U.S. consumers and, therefore, more inflation.”

In this context, Iggo indicates that “foreign suppliers could see some decline in demand and might reduce their selling prices, taking a hit to their profits.” From his perspective, for European markets, the outlook is less clear: “There will be an impact from U.S. tariffs on European profitability. That’s a headwind for growth and may have contributed to the Eurozone’s quarterly GDP growth rate falling to 0.11% in the second quarter, from 0.57% in the fourth quarter. However, lower interest rates in Europe and potential fiscal stimulus from Germany should allow for a slight improvement in the coming quarters.”

According to Patrick Artus, Senior Economic Advisor at Ossiam (an affiliate of Natixis IM), some U.S. economists and investors believe that exporters to the United States will resort to their profit margins, and as a result, there will be no inflationary effect in the U.S. from the higher tariffs. However, Artus warns that it is “impossible for exporters to the United States to offset higher tariffs through their profit margins,” explaining that “it is impossible for exporters to reduce their prices by 15% to 30% to fully compensate for the tariff increase.”

Given this scenario, the Ossiam expert warns that “we can expect a significant increase in U.S. inflation. This will be transitory inflation, not permanent […] Thus, the most likely scenario is that U.S. core inflation will be around 3.4% by year-end.”

The Case of Switzerland


As investment firms point out, while monitoring potential inflation dynamics, the other focus is on negotiations and agreements between countries and the U.S. A notable case is Switzerland. According to the Trump Administration’s argument, it is worth noting that in 2024, the U.S. goods deficit with Switzerland reached approximately $38.5 billion, representing an increase of 56.9% compared to 2023. In fact, U.S. exports to Switzerland totaled $25 billion, while imports from Switzerland amounted to $63.4 billion during that year. These figures, within Trump’s rhetoric, would justify a 39% tariff.

In the opinion of Christian Gattiker, Head of Research at Julius Baer, this level of taxation is “dramatic” and “unexpected.” However, he acknowledges that there is ample room to reach an agreement. “Both parties remain in contact, and it is still possible to reach a negotiated solution similar to the framework between the U.S. and the EU. For investors in Swiss assets, this is a time to stay calm, not to act. The market impact will likely be initial and concentrated, with a spike in volatility as implications are digested. It is advisable to avoid deploying liquidity prematurely: wait for clear signs of extreme dislocation or capitulation on one hand, or immediate resolution on the other, before repositioning,” Gattiker highlights.

For Nannette Hechler-Fayd’herbe, Head of Investment Strategy, Sustainability and Research and EMEA CIO at Lombard Odier, Filippo Palloti, Economist, and Serge Rotzer, Equity Analyst at Lombard Odier, the forecast is similar: “We expect negotiations will bring the 39% tariff for Switzerland closer to the 15% agreed with the EU and Japan, albeit with potentially complex concessions and a possible increase in U.S. investments.”

In this regard, they acknowledge that although the pharmaceutical sector is excluded and high value-added products such as watches, precision machinery, and medical devices could pass on part of the cost, if the 39% is confirmed, margins could be affected or there could even be a sharp drop in sales to the U.S. “In the unlikely event that this trade dispute is not resolved, we will revise our Swiss real GDP forecast for 2025, as well as our expectation that interest rates will not fall below 0%,” they comment.

Regarding the implications for investors, Lombard Odier experts point out that while Swiss equities are likely to suffer during this period of uncertainty, Swiss corporate bonds and the real estate sector may continue to offer attractive sources of income. “Our 12-month forecast for the USD/CHF exchange rate is 0.79,” they conclude.

The Democratization of Alternative Investments as a Tool to Build a New World

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The Democratization of Alternative Investments Has Become a Key Factor in Restructuring the Portfolios of Individual Asset Owners. In just under twenty years, alternative investment assets under management have quintupled, driven mainly by institutional allocations.

In this analysis, Sandy Kaul – Senior Vice President, Head of Industry Advisory Services at Franklin Templeton – writes in CAIA’s study “Crossing the Threshold – Mapping a Journey Towards Alternative Investments in Wealth Management” about the current state of the industry and its possible future.

Understanding the democratization of alternative investments is not just about analyzing figures; it is also about “understanding how this transformative trend alters capital raising norms, changes corporate DNA, and fundamentally redefines who can participate in the broad range of investment opportunities,” the expert argues.

The importance – she continues – lies not only in the figures but also in the empowerment of investors, the evolution of market dynamics, and the new frontiers of financial accessibility that drive innovation and change.

The growth of alternative investments has been one of the defining trends of recent years: between 2005 and 2023, alternative investment assets under management increased from $4 trillion to $22 trillion, representing 15% of global assets under management during that period.

One impact of the record growth in alternative investments, particularly private equity, has been a shift in capital raising patterns, according to Kaul. “Historically, most companies needed to access public markets to obtain the capital necessary to maintain their growth trajectory. With the abundant availability of venture capital and private equity funds, that pattern has changed,” she states.

Between 2000 and the end of 2020, the number of publicly listed companies decreased by 38%, from 7,810 to 4,8145. Meanwhile, the number of unicorns – private companies valued at over $1 billion – has increased: the first unicorn appeared in 2005 (Alibaba); twenty years later, there are more than 900.

The expert argues that the impact of this trend is that, proportionally, fewer small- or mid-cap companies are available in the public markets. “Whereas previously all investors could access these growth opportunities through the public markets, now only those investors who meet the requirements to invest in private funds have the opportunity to access them,” she states.

New Ways to Facilitate Access for Retail Investors


Now, finding ways to access a more democratized group of investors has become a new goal for alternative asset managers. Key firms have launched private wealth divisions and have added staff dedicated to working with advisor networks and creating new products that offer innovative structures with lower minimums, no deductions, simplified tax reporting, and regular liquidity windows.

However, the expert specifies that only a limited number of alternative firms have the resources or willingness to directly address the wealth management channel. To address this, many have opted to affiliate with broader asset management platforms and allow organizations that are already well established in the wealth channel to handle the logistics, regulatory compliance, and product creation necessary to reach these investors.

For their part – Kaul continues – many of the largest asset management platforms are open to these arrangements, as they see opportunities to better serve their clients and add new products that can help mitigate margin compression.

There have also been acquisitions among the main fund providers. For example, BlackRock announced in June 2023 the acquisition of European private debt firm Kreos, and in early 2024, Global Infrastructure Partners. Franklin Resources announced multiple acquisitions in the alternatives sector, including European private credit firm Alcentra (2022), secondary markets firm Lexington Partners (2021), private real estate manager Clarion Partners, and alternative credit manager Benefit Street Partners (2019). T. Rowe Price announced plans to acquire Oak Hill Advisors in 2021, and in that same year, Vanguard announced a strategic alliance with HarbourVest.

New Types of Alternative Products


In this context, the expert notes that various product structures are being explored to drive greater sales of alternative exposures to the wealth management channel. These include:

  1. Feeder Funds. The most common approach in recent years has been to work with a technology intermediary to help create feeder funds capable of pooling an advisor’s clients to reach the minimum investment threshold required to subscribe to a private fund.

  2. Interval Funds. Closed-end, illiquid alternative funds offered directly to investors and not publicly traded. Their price is calculated daily based on net asset value (NAV). Investors have the periodic opportunity to resell shares directly to the fund at NAV at specific intervals (e.g., monthly or quarterly).

  3. Business Development Companies (BDCs). These closed-end capital structures are vehicles used to raise capital that will be allocated to lending to U.S. companies, public or private, with a market value below $250 million. These are generally small, emerging, or distressed companies overcoming financial obstacles. BDCs must distribute 90% of their income to shareholders to avoid corporate income tax. There are both listed and non-listed versions of BDCs.

  4. European Long-Term Investment Funds (ELTIFs). Specifically designed to allow anyone to invest in unlisted European companies and long-term assets such as infrastructure. The original regulation came into effect in 2015 but was considered too restrictive, a situation that the ELTIF 2.0 regulation, activated in January 2024, could address.

  5. Tokenized LP Shares. Tokenization is a new approach being used to explore the possibility of making alternative exposures more accessible to investors.

New Classes of Individually Focused Alternative Assets Are Also Emerging


In addition to the democratization of traditional alternatives, a new set of digital alternatives has also emerged, which “includes peer-to-peer lending platforms, equity, debt, real estate crowdfunding, fractional investments in collectibles, and cultural assets such as wine, art, and cryptocurrencies.”

What unites these offerings, according to the expert, is their go-to-market approach. “Instead of relying on a broker or wealth advisor, individuals can access the information they need to make their own investment decisions and execute them at will,” she explains, adding that while the types of products are very diverse, the platforms that enable access to all of them have several features in common:

  1. Accessibility and Ease of Use. Individual investors can directly access each offering in this category via the internet or their mobile phones. Registration and account activation are done online and are usually completed within minutes.

  2. Reduced Minimum Investment. Investment minimums are low so that individuals can participate.

  3. Multiple Liquidity Options. Both liquid and illiquid assets are offered, from cryptocurrencies accessible 24/7, 365 days a year, to platforms like Moonfare, with $2.2 billion in assets under management, allowing individuals and their advisors to invest in selected private equity funds.

“In a sense, these new types of digital frontier offerings are becoming alternative markets. While retail versions of more traditional alternatives may be preferred by higher-net-worth individuals in advised portfolios, digital frontier assets offer almost all retail investors a way to diversify their portfolios,” Kaul states.

The expert concludes that managing these trends becomes “fundamental for investors,” as the rapid growth of alternative investments evolves and is reshaped by changes in global capital markets.

Furthermore, as changes in capital formation and value creation continue to test the significant relationship between public and private markets, “it is likely that the asset management industry will continue creating innovative ways to expand access for retail investors.”

Are We in the Early Stages of a Major Stock Market Rotation?

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Stock market rotation early stages
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The S&P 500, the most representative index of the U.S. economy, has accumulated a return of around 7.5% so far this year (data as of July 23, 2025). In the same period, the MSCI Emerging Markets has gained nearly 18%, the EuroStoxx 55 has advanced 8.5%, and the Topix has added more than 6%. This is a somewhat novel situation after the strong dominance of the U.S. stock market in recent years. These returns are accompanied by positive flows, particularly towards Europe, raising the question: Are we at the beginning of a major rotation?

Small Changes, Big Changes


“It is too early to talk about a major rotation, but smaller ones should occur,” says Benjamin Melman, Chief Investment Officer at Edmond de Rothschild AM. The expert cites several reasons that are holding back this major rotation, starting with the fact that “international diversification from the U.S. investor’s perspective has not been rewarded, as foreign assets have shown lower Sharpe ratios from a historical standpoint.” Melman also points out that “there is no recession in sight in the U.S.” and that the monetization of AI is not yet a market topic, “so U.S. investors are not in a hurry to invest abroad.”

That said, the expert does believe that U.S. investors “could slightly reduce their underexposure to some international assets” towards markets like Japan, Europe, or emerging markets. “Likewise, international investors overweighted in U.S. assets could also reduce their exposure to the U.S., as the American giant’s supremacy that prevailed at the beginning of the year has lost significant momentum,” he concludes.

The Moment for European Equities


Other experts consulted for this report are more categorical. For example, Sabrina Denis, Senior Portfolio Strategist at Janus Henderson, highlights that one of the “most notable surprises” of 2025 has been the strong rebound of non-U.S. stocks, evidenced by the 16% rise of the MSCI All Country World Index (ACWI) ex-USA (as of June 2025), compared to just over a 2% increase of the S&P 500 in that time, which for the expert “clearly indicates that a significant rotation towards developed markets outside the U.S. is already underway.” “This performance is not just a short-term anomaly but is supported by deeper structural changes and attractive valuations in non-U.S. markets,” she adds.

Víctor de la Morena, Chief Investment Officer at Amundi Iberia, summarizes the sentiment of many investors these days: “There is no doubt that the American economy remains the most important in the world; however, the European economy has gained relevance or ‘momentum’ recently thanks to economic recovery and European stimulus plans that are being increased and will serve as a major catalyst for the coming years, especially in infrastructure and defense.”

From Jupiter AM, European equity managers Niall Gallagher, Chris Legg, and Chris Sellers state that they see the possibility of “a shift in the economic order that could benefit European equities.” Specifically, the trio of experts believes that “structural changes in trade, capital allocation, and government policies are contributing to a long-awaited shift towards Europe.”

In particular, the managers point to the attractiveness of Southern European countries, a region they consider “is approaching the end of nearly two decades of deleveraging.” This implies that “consumer debt is low, the banking sector is healthy and capable of supporting expansion, and even immigration patterns are positive.” Additionally, as they indicate: “These countries have abundant and cheap energy, such as Spain, which has significant solar and onshore wind resources.”

This positive outlook on European equities is also shared by Andrew Heiskell, Equity Strategist at Wellington Management, and Nicolas Wylenzek, Macroeconomic Strategist at the firm: “European equities have entered a regime change that has recently accelerated, which could lead to the largest rotation since the global financial crisis.”

While the strategists warn that “this transition is not without challenges,” they also highlight Value segment stocks as the main beneficiaries, such as banks, telecoms, defense companies, or European small caps. They also believe that companies key to the energy transition with high entry barriers, such as network operators, as well as companies they refer to as “quality stable compounders”—that is, “resilient companies with consistent growth and strong balance sheets, whether Growth or Value style”—will benefit.

Conversely, they state that “the main losers could be those that benefited from globalization and a low-interest-rate environment.”

New Arguments


Mario González, Head of Capital Group’s business in Spain, Portugal, and US Offshore, points out that since “Liberation Day” on April 2, U.S. equities have shown a strong correlation with non-U.S. equities—something expected in a period of high volatility—but adds that “once things settle, the situation for non-U.S. stocks looks favorable.”

The expert indicates that the starting valuations of non-U.S. markets remain “much lower than in the United States.” He provides some data: on one hand, the MSCI ACWI ex-USA trades at 13 times forward 12-month earnings, while the MSCI EAFE (international developed) trades at 14 times, both near their 10-year averages and at a significant discount compared to the S&P 500, which trades at 20 times earnings.

Non-U.S. stocks are trading near their lowest level in 20 years relative to U.S. stocks.

That said, the expert from Capital Group recalls that the argument of low valuations has been brought up in recent years without any impact on the market, as those valuations have often been justified by the anemic earnings growth compared to the U.S. For González, what is different this time is the presence of new catalysts that “are changing the narrative for the first time in years”: fiscal stimuli in Germany, corporate reforms in Japan and South Korea, weakness of the U.S. dollar, signs of stabilization in China, and an improved political environment in Europe. “Additionally, in an environment of increased infrastructure spending, non-U.S. markets display greater diversity and have a higher weighting in heavy industry, energy, materials, and chemicals compared to the S&P 500,” he concludes.

Semiannual Balance and Forecast Review: Focus on Active ETFs, Crypto ETFs, and ETFs With Private Assets as Underlying

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Exchange-traded funds (ETFs) are not slowing down. Zachary Evens, manager research analyst at Morningstar, is clear about this. And for good reason, as firms are launching new ETFs every day; investment flows continue to pour into these vehicles, and both investors and providers “are beginning to venture into previously unexplored territories.”

ETFs attracted $540 billion in new investment during the first six months of 2025, surpassing the total subscriptions of the first half of 2024, as the expert recalls.

Regarding products, by June of this year, 464 new ETFs had already been launched, quickly approaching the annual record of 726 launches. Among the most notable are the first public-private credit ETF, countless new buffer ETFs, covered call and active options ETFs, cryptocurrency ETFs, and even money market ETFs.

Faced with this dizzying array of figures in the industry, Evens takes stock: reviewing some of these developments and revisiting his predictions about ETFs made earlier this year. “So far, so good, but there’s surely much more to come in what has already been a hectic 2025 for ETFs,” he asserts.

Prediction 1: Active ETFs Outnumber Passive ETFs


This was inevitable. And it didn’t take long to happen. By the end of June, there were 2,226 active ETFs and 2,157 passive ETFs available to U.S. investors. Asset managers have fully embraced this tax-efficient instrument, meeting the demand of investors who continue to pour money into this sector.

However, there are nuances in the active ETF story: some of the most popular active ETFs are not so popular, Evens points out. Most of those that have taken off so far follow a quantitative or rules-based strategy. They are labeled “active” because they do not track an index. Examples include options-based strategies, such as defined outcome or covered call ETFs, or diversified quantitative strategies.

“Active ETFs are booming, but for now, most of the growth and interest have been centered on these types of strategies. It is likely that rules-based ETFs will continue to lead the charge in active ETFs,” the expert states.

Story 1: Private Assets ETFs


A significant trend in ETFs, according to the expert, is investment in private markets. Apollo has partnered with State Street to bring private credit to the retail market, and Vanguard is working with Wellington and Blackstone on the same—though Vanguard currently lacks a widely available public-private offering.

State Street‘s ETF, SPDR SSGA IG Public & Private Credit ETF (PRIV), was the first to hit the market in February this year. The launch was not entirely smooth, and doubts remain about the viability of illiquid assets in a liquid wrapper. But according to industry opinions, “more public-private products are clearly on the horizon.”

Investment inflows into the SPDR SSGA IG Public & Private Credit ETF have been moderate so far, but picked up in early July, “so it will be interesting to see how quickly competitors enter the market and how investors respond to this nascent segment.”

Prediction 2: Vanguard’s VOO Surpasses State Street’s SPY as the World’s Largest ETF


In 2025, the Vanguard S&P 500 (VOO) took only seven weeks to surpass SPDR S&P 500 Trust (SPY) as the world’s largest ETF. Vanguard’s fund started the year $40 billion behind SPDR’s, but now holds a $46 billion lead.

The expert believes the next question is whether the iShares Core S&P 500 (IVV) will surpass the SPDR S&P 500 Trust by the end of the year: it’s a very low-cost fund that isn’t structured as a trust. “After starting 2025 with a $38 billion gap compared to SPDR S&P 500 ETF Trust, the iShares Core S&P 500 ETF narrowed the gap to $14 billion by mid-year. This could be the tight race to watch,” he argues.

Story 2: Cryptocurrency ETFs


The fastest-growing ETF in history is the iShares Bitcoin Trust ETF (IBIT). Its assets have grown to over $75 billion after just a year and a half on the market. Its strong performance, crypto-friendly regulation, and adoption in model portfolios have helped this ETF reach its current level, the expert explains. But other cryptocurrency ETFs are also making headlines.

The Morningstar digital assets category has grown from $28 billion and 43 ETFs just two years ago to over $150 billion in 106 ETFs by the end of June 2025. However, this rapid growth “comes with froth,” and recent cryptocurrency ETF filings are drawing attention. Among the applications are several memecoin ETFs, including one that tracks the price of Pudgy Penguin NFTs.

“Bitcoin ETFs are here to stay, but time will test the resilience of the newcomers to the digital assets category,” concludes Evens.

Prediction 3: ETF Share Classes Become Reality


ETF share classes are on the verge of becoming a reality. They haven’t been approved yet, but Evens predicts this situation should change in the second half of this year. At the time of writing, 70 firms have applied for a Vanguard-style hybrid share class.

Firms are eager to offer this share class. However, Lan Anh Tran, manager research analyst at Morningstar, noted in her prediction that “once approved, they might not be the lifeline many expected” and that the share class “could create more problems than it solves.” Tran cites capacity constraints, SEC best interest regulation concerns, and capital gains complexities as reasons.

Nonetheless, ETF share classes could be a positive development for investors under the right circumstances. And until they are approved and launched, we won’t know their impact on each fund.

Story 3: Outcome ETFs Gain Ground


Following several proprietary launches in this area, BlackRock predicted in March that assets in outcome ETFs would grow to $650 billion by 2030. Outcome ETFs, as defined by BlackRock, include covered call ETFs, buffer ETFs, and some others. All of them use options to deliver a specific outcome.

Covered call ETFs fall under the derivative income category. These vehicles typically sell call options against a long position in an underlying asset, such as the S&P 500 index, to generate income. The largest ETF in the category—and currently the largest active ETF—is the JPMorgan Equity Premium Income ETF (JEPI), which contributed to the category’s boom and demonstrates that the prudent use of options can be an effective way to restructure risk and generate income, as Evens points out. By the end of June, there were 155 ETFs with $130 billion in the derivative income category.

Regarding covered call ETFs on individual stocks, Evens explains that their sky-high yields attracted billions in inflows, “but funds like these often end up on our list of ‘worst new ETFs of the year’ for sacrificing total returns in favor of income while increasing risk and costs.”

Buffer ETFs are the most explicit outcome-based strategy, offering investors a defined range of both losses and gains. Several firms even offer ETFs with 100% downside protection: they should not lose money before fees, but only gain up to a maximum cap, usually between 8% and 10% annually.

The defined outcome category, which houses buffer ETFs, has evolved from a simple buffering strategy to much more complex products in just a few years. This new category now holds nearly $70 billion in assets spread across 408 ETFs, “the largest of all categories.”

Defined outcome and derivative income are among the fastest-growing categories, thanks to ETFs. “It is clear there is investor interest, and issuers have been more than willing to offer new products. However, ETFs in these fastest-growing categories remain quite expensive compared to traditional index funds and even many actively managed ETFs. There is room for costs to come down as the sector matures,” Evens asserts.

The New World Order of International Trade Shaped by Trump Arrives

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Trump dismisses Fed Governor Lisa Cook
Photo courtesy

The President of the United States has made a final plot twist in his tariff game. Trump has signed the executive order that reconfigures international trade through the imposition of new tariffs, which will take effect on August 7, six days later than expected. In general terms, the new minimum rate for nations with which the United States maintains a negative trade balance has been set at 15%, according to the White House.

In this regard, about 40 countries are subject to the 15% rate, including Costa Rica, Ecuador, Venezuela, and Bolivia. Meanwhile, in the case of those with which the United States maintains a positive balance, the tariff will be 10%. However, there are also levies above 30% for some countries that have not reached trade agreements with the U.S., including Canada (35%), Switzerland (39%), Algeria, Bosnia, Syria, South Africa, Serbia, Myanmar, Libya, Laos, and Iraq. In the case of Brazil, Trump confirmed a 50% tariff, accompanied by sanctions against the Brazilian Supreme Federal Court, in retaliation for the trial against former president Jair Bolsonaro. As for Mexico, he has granted another 90-day extension to prolong their negotiations.

According to Yves Bonzon, CIO of Julius Baer, Donald Trump is determined to increase public revenues through higher tariffs, and this is a critical aspect of his economic agenda to achieve a rebalancing of the U.S. economy and move away from chronic deficits. “Part of the U.S. master plan to rebalance global trade has China as an implicit target. Beijing has made it very clear that any sovereign state is free to conclude a bilateral trade agreement with Washington, but it cannot do so at the expense of China‘s interests. If other states end up exempting U.S. imports from tariffs, it will be hard for the U.S. administration to argue that it does not benefit from a most-favored-nation clause,” Bonzon notes.

From the perspective of Mark Dowding, BlueBay CIO of RBC BlueBay Asset Management, Trump has obtained virtually all the concessions he expected in the trade negotiations held so far. “Our analysis leads us to conclude that the U.S. has increased its average global tariff rate to approximately 18%. Based on this premise, we project annual tariff revenues of around $450 billion, compared to $77 billion in 2024; an increase equivalent to 1.25% of GDP. This revenue volume should help slightly reduce the U.S. fiscal deficit, bringing it below 7% of GDP next year,” Dowding explains.

Asia and Europe: Market Openings


Following the official announcement, Trump celebrated his new trade policy on the social network Truth with a clear message: “A year ago, the U.S. was a dead country, now it is the most attractive in the world.” For their part, both Asian and European markets opened slightly lower, showing that uncertainty remains entrenched in the investor community. In Asia, the MSC Asia-Pacific fell 0.4%, the Kospi 1.6%, and the Nikkei 225 0.6%. According to experts, these declines reflect the announcement of new tariffs ranging from 10% to 41% on imports from India, Taiwan, Korea, and other countries.

In Europe, the main indices also reacted with “moderate negativity”: the DAX and CAC fell 1.6%, and the FTSE 100 dropped 0.7%. It is worth recalling that the trade agreement between the U.S. and the European Union had boosted the STOXX 600 by 0.7% on July 28, but the August 1 decision reversed that slight optimism.

“Although the agreement between the U.S. and the EU avoided a harmful trade war, its real effects remain to be seen. While progress was made in strategic sectors and energy cooperation was strengthened, the pact leaves several structural issues unresolved. Still, in a world marked by geopolitical fragmentation and economic risks, this understanding represents a diplomatic reprieve. It will be crucial for both parties to continue working on a joint agenda that prioritizes stability, fair trade, and shared innovation,” says Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS.

In Bonzon’s view, the markets have been pricing in the trade war for some time. “Collective wisdom is probably right in asserting that the trade war will not occur. Nevertheless, the rest of the world has an opportunity here to move forward and continue fostering a friendly trade framework,” he comments.

Investors Prepare


The new direction of U.S. trade policy is a clear example of how the world is transforming at an unprecedented speed. “While the global economy moves toward decarbonization to achieve the goal of net-zero emissions, trade wars are slowing globalization, demographic change is causing a shrinking labor force, and digitalization is advancing at a dizzying pace. We are now living in the era of geoeconomics. Although the idea of using economic tools for political purposes is not new, it is hard to find another moment in history when foreign policy, security, and the economy have been so intertwined and acting simultaneously with such intensity. And, logically, this has a direct impact on both economies and markets,” argues Hans-Jörg Naumer, Global Head of Capital Markets & Thematic Research at Allianz Global Investors.

According to the asset manager, for investors, this means ensuring that their investments are well diversified in this constantly changing “multiverse” of opportunities and being prepared to adjust their portfolios. “The challenge is not only to rebalance a portfolio to reflect these changes but also not to lose sight of diversification. In fact, a well-known saying, deeply rooted in portfolio theory, makes perfect sense here: don’t put all your eggs in one basket,” says Allianz GI.

In their view, multi-asset solutions could play a determining role here. “The logic is simple: why not design a portfolio tailored to the investor’s individual risk appetite that combines different asset classes? And it doesn’t have to be limited to just stocks and bonds,” they argue.

Why Customization is Becoming a Must-Have in Wealth Advisory

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Photo courtesyPablo Méndez, Chief Investment Strategist at LarrainVial

FlexFunds and Funds Society, through their Key Trends Watch initiative, share the perspective of Pablo Méndez, Chief Investment Strategist at LarrainVial, one of the leading financial advisory firms in Latin America. With a 90-year track record, the firm operates in Chile, Colombia, Peru, Panama, Mexico, Bolivia, and the United States, and holds key partnerships with investment managers in Europe.

Pablo Méndez has been part of this financial institution for over a decade. Today, he leads the Investment Strategy team and stands as a key figure in the evolution of high-level wealth advisory. A business engineer from Universidad Diego Portales with a master’s degree in Global Finance from NYU, Méndez represents a new generation of leaders in wealth management: one that combines strong academic background, strategic vision, and a deep commitment to personalized service.

Designing strategic solutions

The LarrainVial Strategy team develops both liquid and alternative investment solutions for high-net-worth clients. “Our model is similar to the Portfolio Solutions model in the U.S.: the banker manages the client relationship, but we design and coordinate the investment strategy,” he explains. In a context where financial margins are tightening and services are becoming more standardized, Méndez highlights that “the real differentiator remains the service.” Despite technological advances, he insists that “people are looking for a face, a relationship, and professional support. Technology doesn’t replace that.”

Fixed income and alternatives: Current portfolio pillars

Asked about current portfolio composition, Méndez identifies two key pillars: “In the liquid space, fixed income has regained prominence, with higher rates offering an attractive risk-return profile. In alternatives, we’ve developed programs aimed at generating decorrelation (hedge funds), stable cash flow (credit alternatives), and capital appreciation (private equity).”

Today, 28% of LarrainVial’s wealth management assets are allocated to alternative investments. Still, Méndez acknowledges an excessive concentration in local private debt and real estate, and sees expanding exposure to global and diversified assets as a major challenge.

When asked about the biggest obstacle to capital raising or client acquisition, he notes the industry is reaching maturity: “There’s no longer a large mass of underserved clients—what’s left are specific segments that are more sophisticated and demanding. Also, services tend to become standardized, which makes it even harder to stand out.”

Another relevant challenge is scaling the service without losing personalization: “It’s almost a paradox because scaling usually implies some standardization, and that can go against the individualized experience clients value. Striking that balance is a top priority.”

What do clients prioritize when investing today?

Institutional reputation and experience come first. Then, depending on their profile, clients value either technical expertise or the ability to translate that knowledge into an accessible language. In both cases, service quality is key.

For Méndez, personalization is more important than the product itself: “Closeness, real understanding of the client, and delivering tailor-made solutions are the elements that create a sustainable competitive advantage.”

The advisor as strategist: Skills that will make the difference

In his view, the financial advisor of the future won’t just be a technical analyst, but a strategic interpreter able to turn data into decisions aligned with the client’s real goals.

“The industry is moving toward a new talent configuration. On one hand, we need profiles with technical mastery—data science, automation, software management—especially in operational areas. But what will make the difference is the ability to abstract,” he says. “The key is to be able to step out of the party and look at it from above: see the big picture, understand the environment, and make informed decisions.”

This approach translates into deeply personalized wealth advice: “Before discussing markets or products, we need to understand what that person or institution wants to achieve. From that objective, we build a portfolio that aligns with their actual needs and constraints,” Méndez explains.

Although there are standardized solutions by profile—whether including alternatives or not, in local currency or dollars, conservative or aggressive—the real value lies in adaptation: “Advising a foundation with high real estate exposure in Latin America is not the same as working with a globally focused family office. Our job is to design strategies that consider that starting point and evolve over time.”

Technology: Embracing efficiency without losing human focus

On the impact of technology in the industry, Méndez is clear: “Artificial intelligence plays a fundamental role in processes and back office, but its usefulness in investment decision-making is limited by the efficiency of financial markets.”

He also points out a transformation in team structures: “The pyramid is being inverted. We used to have many data processing profiles; now we need more people who can think abstractly and make strategic decisions.”

According to Méndez, one of the clearest trends set to transform portfolio management in the next 5 to 10 years is the growing importance of alternative investments. These assets will continue to grow, as long as they remain well-aligned with clients’ goals. There is increasing demand for solutions that offer real diversification, decorrelation, and long-term investment horizons.

“On the other hand, we’ll see a significant evolution in how financial institutions integrate technology. Automation and artificial intelligence are freeing up resources previously tied to operational tasks, allowing that human capital to be redirected toward higher value-added areas like client service and strategic decision-making.”

In asset management, this doesn’t mean replacing the advisor—it means redefining teams. The human role remains central, especially in wealth advisory, but the required profiles are changing: more analytical capacity, strategic thinking, and tech-savvy professionals. It’s a reconfiguration process that is already underway.

What sets LarrainVial apart from its competitors?

“Being a non-bank firm gives us the freedom to innovate,” Méndez notes. “We can pursue internal ventures, create independent solutions, and report directly to senior management. Our only mandate is to generate returns and value for the client.”

This approach has already earned recognition. In December 2024, The Banker and PWM awarded LarrainVial as Best Private Bank in Chile, and its Strategy team as Best Chief Investment Office in Latin America.

Interview conducted by Emilio Veiga Gil, Executive Vice President of FlexFunds, in the context of the Key Trends Watch by FlexFunds and Funds Society.