BBVA Receives Green Light from UK Regulator to Take Indirect Control of a Banco Sabadell Subsidiary

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New advances have been made in the approvals for BBVA’s takeover bid (OPA) for Sabadell. The UK Prudential Regulation Authority (PRA) has given the green light for BBVA’s indirect acquisition of TSB Bank plc, Banco Sabadell’s UK banking subsidiary.

According to the bank, this authorization is one of the conditions tied to the purchase offer for Banco Sabadell’s shareholders and a necessary step to complete the deal, as TSB would become part of the BBVA Group.

BBVA submitted a purchase offer for Banco Sabadell shares to its shareholders on May 9th, and the process will begin once the necessary regulatory approvals are obtained. “Since then, BBVA has received approval for the operation from the competition authorities in several countries where Banco Sabadell operates (the United States, France, Portugal, and Morocco). The UK Prudential Regulation Authority, responsible for supervising around 1,500 entities, including banks and insurers, oversees TSB Bank, which is owned by Banco Sabadell,” BBVA explained.

Additionally, this authorization follows the Spanish regulator CNMV’s acceptance of the takeover bid for processing, “understanding that the prospectus and other documents submitted, following complementary documentation and modifications registered on 06/04/2024, comply with the provisions of the relevant article.” This does not mean the operation is final, but regulatory steps are being taken, as is customary in such cases. As Sabadell noted before the summer, the final decision will depend on the will of the shareholders.

Among the next steps before launching the purchase offer to Banco Sabadell’s shareholders is the approval of the offer by the European Central Bank (ECB) and the Spanish National Securities Market Commission (CNMV). Furthermore, the offer is conditioned on acceptance by the majority of Banco Sabadell’s share capital (a minimum of 50.01%) and approval by the Spanish competition authority (CNMC).

The Investment in Alternatives by AFOREs Is Growing in Amount, but the Percentage Remains Unchanged

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As the assets under management by AFOREs have increased, the resources allocated to alternative investments have also grown. However, the percentage these investments represent in the portfolio at market value remains low, not yet reaching double digits on average for all AFOREs, currently standing at just 7.8% of the $359 billion they manage (as of June 30). If commitments are considered, the percentage is higher, as only 58% of these commitments have been called.

To reach this 7.8%, in nearly six years, there has only been a 1.7% increase relative to assets under management (from 6.1% in 2018 to 7.8% in June 2024) when comparing in dollars. This equates to an average annual increase of 0.28% over six years. However, when looking at the growth in assets and alternative investments, the amounts are significant.

Over the past three years, the weighted percentage of AFOREs’ investment in alternatives has stabilized between 7.5% and 7.8%, with some individual cases sometimes approaching or exceeding 10%, while others are slightly above 4%.

Investments in alternatives rose from $10.3 billion at the end of 2018 to $27.8 billion by June 2024, representing a 2.7 times increase relative to the percentage growth during this period.

The assets under management by the 10 AFOREs ended June at $359 billion. The compound annual growth rate (CAGR) over five years (2018-2023) is 15.1% in dollars, while alternative investments had a five-year CAGR of 19.9%, a slightly higher percentage than the growth in assets under management.

Investments in private equity funds have been channeled both into Mexico (56% at market value as of June 2024) and internationally (44%). Regarding investments in Mexico, according to information published by Dario Celis (El Heraldo de México on July 31), the AFOREs invested $805 million in 12 combined cycle plants and a wind farm that the government purchased from the Spanish company Iberdrola. This investment is close to the average growth rate over the past six years (0.22% investment in Iberdrola vs. 0.28% average growth over six years), representing a significant amount invested in Mexico.

The market value of all alternative investments made in Mexico and internationally is $30.207 billion, according to public information from the 343 CKDs (133) and CERPIs (210) as of June 2024. Investments in Mexico made through CKDs represent 56%, while 44% is predominantly international since CERPIs invest at least 10% in Mexico.

The appetite for alternative investments by AFOREs is expected to increase as assets under management grow, and the percentage they represent is likely to approach the 9-10% range, which seems to be the level where AFOREs feel most comfortable.

Tikehau Capital Completes the Sale of Its Stake in Preligens to Safran

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Tikehau Capital has completed the sale of its stake in Preligens, a global artificial intelligence (AI) firm specializing in the aerospace and defense sector, to Safran for an enterprise value of €220 million. Following an exclusive negotiation process that began in June 2024, Tikehau Capital is divesting its stake in Preligens to Safran.

According to the asset manager, Preligens, founded in 2016 by two French engineers, offers field-tested AI analysis solutions for high-end imagery, full-motion video, and acoustic signals. “Tikehau Capital’s investment in November 2020 has been pivotal in accelerating Preligens’ growth, which has seen its revenues increase tenfold (from €3 million to nearly €30 million), expanded its operations in the U.S. and Asia, and now employs around 250 people, including 140 R&D engineers,” they noted.

This sale marks the first divestment of Brienne III, the Group’s first private equity fund dedicated to cybersecurity. According to the asset manager, this strategy has raised nearly €4001 million across its two funds and has now invested €150 million in 16 companies, including Trustpair, Chapsvision, and Egerie in France, and VMRay in Germany.

U.S. Equities don’t Have a Performance Problem, They Have an Expectation Problem

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The second-quarter earnings season in the U.S. is coming to an end. So far, results have surprised to the upside, with earnings per share (EPS) growth of 8% year-over-year, exceeding market estimates by 4%. A noteworthy aspect of this season is the broader participation in earnings growth, as the EPS of the S&P 500 has shown an increase even when excluding the large tech companies (Mag-7) for the first time in five quarters, notes Felipe de Solminihac, Investment Analyst at Fynsa.

In terms of sector performance, the highest earnings growth continues to be seen in technology-related sectors. In fact, the earnings growth of the Mag-7 has been 26% year-over-year.

Solminihac explains that despite the strong growth shown by the Mag-7 companies this quarter and exceeding market expectations by 6% (vs. +11% on average over the last four quarters), this has not been rewarded by investors, as the prices of all the stocks—except Meta—fell by an average of 8% in the three days following the earnings reports. In other words, when you have a sector with such high valuations in historical terms and so much implicit earnings growth, it is not enough to simply beat the current quarter’s estimates; it must exceed what had been surprising in previous quarters and also offer a strong forward-looking guidance.

For the Fynsa analyst, another risk factor is that the proportion of companies exceeding sales estimates has significantly decreased across the S&P 500. This factor could put pressure on margins in the second half of the year, as slower revenue growth combined with persistent costs could affect the future profitability of companies.

“With this background, and already thinking more about 2025, one might wonder if the market’s expected earnings growth of +15% might be a bit optimistic, especially in the context of a clearly slowing U.S. economy and valuations that are at the higher end of their historical range (Today, the market trades at 21.5 times forward P/E, representing a 23% premium compared to its historical average),” says Felipe de Solminihac.

For this reason, the bar by which corporate earnings in the U.S. should be measured is different from when the market was trading at lower valuations and prior to the AI boom.

Finally, the expert observes a crucial differentiation within the equity market: the S&P 500 equal weight trades at a 20% discount compared to its market cap-weighted version. This differentiation could present a better way to gain exposure to the U.S. market.

Funds Have Accumulated Over 32 Billion So Far This Year

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In August, investment funds continued to increase the volume of their assets, primarily due to net subscriptions. Assets under management now exceed €380.815 billion, according to preliminary data from Inverco, after recording an increase of €1.233 billion in the last month (a 0.3% growth compared to the end of July).

The growth in August is largely attributed to net subscriptions by investors (over €1.1 billion) and, to a lesser extent, to slightly positive returns (0.1%).

For the year as a whole, the accumulated growth in fund assets amounts to 9.4% (€32.716 billion), thanks to both market performance and cash inflows: from January to August, net subscriptions to funds totaled €16.471 billion.

During the month, fixed-income funds once again drew significant investor attention (€1.026 billion), particularly in the short-term segment. Year-to-date, this category has already surpassed €13.737 billion in inflows. Investor interest also focused on the money market category (€603 million in August and €9.082 billion accumulated for the year). Mixed fixed-income funds also saw inflows during the month (€205 million).

On the redemption side, global funds registered the highest net outflows, exceeding €430 million, followed by guaranteed funds (€132 million). Target return funds and mixed equity funds also experienced net redemptions of approximately €102 million and €55 million, respectively.

Returns Near 5% Over Eight Months

Although the return in August was only 0.13%, with slight gains across all categories and declines in international equity portfolios (-0.7%), year-to-date fund portfolios have appreciated by 4.7% due to market effects.

Among the winning segments are international equity (11.65%), index funds (15%), and domestic equity (10.56%). No fund category has experienced losses from January to August, according to Inverco data.

Industry Professionals Expect the SEC to Be More Flexible With Digital Assets

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SEC fines J.P. Morgan subsidiaries

Institutional investors and wealth managers expect more flexible regulation from the U.S. Securities and Exchange Commission (SEC) in the coming year regarding digital assets, along with greater clarity, according to a new global study conducted by Nickel Digital Asset Management (Nickel), a London-based, leading regulated and award-winning digital asset hedge fund manager in Europe, founded by former alumni of Bankers Trust, Goldman Sachs, and JPMorgan.

The study, conducted with organizations already investing in the sector, found that 68% expect greater flexibility from the SEC compared to 35% who anticipate stricter regulation. More than half (53%) expect increased clarity and guidance, while 44% believe the regulator will be more constructive, reflecting political changes.

Nickel’s research, which surveyed institutional investors and wealth managers in the U.S., U.K., Germany, Switzerland, Singapore, Brazil, and the United Arab Emirates, who collectively manage around $1.7 trillion in assets, found strong support for the SEC and recognition of its importance in the sector.

Around 90% believe the SEC has been an effective regulator of the digital assets sector, and 85% say it is currently very or somewhat favorable to the sector. Only 5% say it is either not constructive or aggressively restrictive. Approximately four out of five (80%) believe it has been clear in distinguishing between securities and non-securities in the digital assets space.

Nearly three out of four (73%) say the SEC’s recent clarifications on Security Token Offerings (STOs) have had the most significant impact on the sector, compared to 42% who highlight its guidelines for Initial Coin Offerings (ICOs).

Around four out of five (80%) agree that SEC regulatory clarity is important for the sector, and 83% say the SEC’s regulatory actions will have a very or somewhat positive impact on innovation in the digital assets space.

However, only 35% of respondents say SEC regulations have a significant impact on their investment decisions in the digital assets sector, while 55% say the regulations have a moderate impact, and 10% say they have a slight impact.

“Strict regulatory actions against FTX and Binance have contributed to increasing confidence in the digital assets sector. The survey reveals that institutional investors and wealth managers now expect more flexible regulation of the sector by the SEC after a period of intense scrutiny. It is reasonable to assume that a more accommodative regulatory environment will drive growth of the asset class in the U.S.,” comments Anatoly Crachilov, CEO and founding partner of Nickel Digital, in light of the survey results.

Muzinich & Co. Strengthens Its Presence in US Offshore With Jesús Belascoain in Miami

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Muzinich & Co. has strengthened its presence in the US Offshore Latin American market by relocating Jesús Belascoain Gómez to Miami.

“The offshore market is one of our key targets as we seek to expand our credit solutions through a wider range of distribution channels. Jesús’s relocation, to be closer to our clients in the region, demonstrates our commitment to this channel as we continue to develop and promote our ability to create solutions based on our clients’ risk/reward parameters,” said Rafael Ximénez de Embún, Country Manager for Iberia and LatAm at the firm.

Belascoain, who has 20 years of experience in financial services, joined Muzinich in 2015.

At Muzinich’s Madrid office, Belascoain was responsible for the business development of the company’s wholesale and institutional client base in Spain, Portugal, and Latin America.

“Muzinich is already recognized as a respected corporate credit manager in the region, with a diverse offering that covers the entire credit spectrum. In this new challenge, I am looking forward to continuing to work on established relationships and creating new ones that highlight the firm’s longevity, expertise, and range of credit products in both public and private markets,” commented the industry veteran who arrived in Miami.

According to BrokerCheck, Belascoain obtained his FINRA licenses in July of this year.

August Has Passed… and the Market Is Once Again Suffering From Excesses

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The correction in the S&P 500’s price at the beginning of August was resolved almost as quickly as it occurred, and the market is once again suffering from the same symptoms of overvaluation and technical and sentiment-driven excesses.

The market is nearing overbought territory again, and retail investor surveys are once more showing excessive confidence, as evidenced by investors’ reaction to Nvidia’s results on Wednesday, with a post-market drop that reached 7%.

The numbers highlighted the potential of the business: the company continues to exceed consensus expectations in sales, margins, and EPS quarter after quarter. Its outlook for medium-term demand maintained the optimism of previous quarters. “We expect to grow our data center business significantly next year. Blackwell is going to completely change the game for the industry,” said Jensen Huang, CEO of Nvidia. Additionally, concerns about delays in the launch of its new product, Blackwell, were alleviated. However, the strong performance and the CEO’s comments—unclear regarding the ROI impact of the massive GPU investments by companies like Microsoft, Google, Amazon, or Meta—did not fully satisfy investors’ optimism.

This is relevant because Nvidia is one of those rare cases where a single company, or sometimes a single industry, like technology in 1999, becomes so significant that it comes to dominate the macroeconomic landscape by embodying the essence of the generative AI theme. This is the underlying idea behind the stock market rally over the last two years, since the official launch of ChatGPT in November 2022.

The numbers don’t lie: this year, the GPU company contributed about 230 points to the S&P 500 before the earnings release, accounting for 27% of the total returns the U.S. index has generated so far this year.

Maintaining business momentum like the one Nvidia has shown over the past 12 months is not sustainable, and its growth is slowing both year-over-year and quarter-over-quarter—although, to be clear, sequential growth is expected to pick up again in the fourth quarter as Blackwell begins reaching end customers, while demand for Hopper remains strong.

At a macro level, a similar situation is unfolding, despite the desire to celebrate Jerome Powell’s comments at Jackson Hole a few weeks ago. Despite the strong U.S. GDP data for the second quarter and the July retail sales figures, there is evidence of weaker growth. Manufacturing activity has contracted again, and the U.S. consumer, the main driver of global expansion over the past two years, is now less dynamic.

Real disposable income is growing at only 0.9% year-over-year, and a number of multinationals tied to household spending disappointed during earnings season (e.g., McDonald’s, Ford, Alphabet, or LVMH). The excess savings accumulated during the pandemic have been spent, fiscal policy will be less generous—regardless of who ends up in the White House in 2025, and especially if it’s Donald Trump—and the labor market is showing signs of fatigue.

Cumulative unemployment claims suggest that companies are reluctant to hire, and while the most optimistic observers attribute the activation of the Sahm rule to the exceptional nature of Tropical Storm Beryl, which impacted the U.S. Gulf Coast in July, the rise in unemployment over the past 12 months is affecting not just Texas but 80% of the 51 states that make up the union.

While it is true that payroll growth continues to be positive—and is usually negative in the context of economic contractions—this fact confirms that immigration is likely the main cause of the rise in unemployment from a low of 3.4% to 4.3%. We find ourselves in the unusual situation of rising unemployment alongside a growing economy because the imbalance is coming from the supply side of workers.

Demand is moderating, as indicated by the JOLT (Job Openings and Labor Turnover Survey) data on voluntary quits and hires. Although the economy is still creating a reasonable number of jobs each month, and inflation-adjusted private sector wages are increasing by 2.5%, these figures do not pose an imminent threat to GDP. However, growth has peaked, is deflating, and raises doubts about the ability to meet the ambitious EPS growth projections that consensus is forecasting for 2025.

On the geopolitical front, the potential implications of Harris overtaking Trump in betting markets (according to PredictIt, but not Polymarket) and in polls do not appear to be adequately priced into stocks. Investors don’t like the economic platform of either candidate, but in Harris’s case, it is assumed that Republicans will control the House of Representatives or the Senate (if not both), which would prevent much of her fiscal agenda from coming to fruition. In Trump’s case, he would have near-unilateral authority on tariffs, creating risk regardless of what happens with Congress.

The CEO of Wealth Management at J.P. Morgan Will Join UBS as Head of US Wealth

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Michael Camacho, CEO of Wealth Management Solutions at J.P. Morgan, announced on Tuesday that he will be joining UBS as Head of Wealth for the U.S. market.

“After 33 incredible years at J.P. Morgan, I will be moving to UBS as Head of US Wealth. This decision was not made lightly, as my time at J.P. Morgan was filled with invaluable experiences, personal growth, and cherished relationships,” Camacho posted on LinkedIn.

As CEO of J.P. Morgan Wealth Management Solutions, Camacho is responsible for all wealth management products, services, and platforms, including investments, lending, and banking.

Before assuming his current role, he was Head of the Asset Management Investment Platform and developed its ETF and index businesses. Prior to joining Asset Management, he spent 25 years in the Investment Bank, holding several leadership positions, including Global Head of Commodities, Head of Structured Investments in the Americas, and Head of Exotic Rates Trading in dollars, according to his biography on the social network.

Additionally, he is a member of the Asset and Wealth Management and Global Private Bank Operating Committees and serves as the executive sponsor of the Hispanic Leadership Forum within Asset and Wealth Management.

He holds a degree in Computer Science from Columbia University and a master’s in Finance from New York University.

State Street Global Advisors Takes Stake in Australian Fintech Platform Raiz

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State Street Global Advisors announced a strategic investment in Raiz Invest Limited, an Australian fintech platform that helps customers grow their wealth by helping them to save and invest. The parties have entered into an equity investment agreement (the “Initial Share Purchase”) as part of a strategic relationship pursuant to which State Street Global Advisors will acquire approximately 5 percent of Raiz’s share capital through a placement.

In addition, the strategic relationship will see State Street Global Advisors’ trusted brand and deep knowledge of markets come together with Raiz’s mobile-first platform, which helps Australian retail investors with micro-investments primarily in ETFs and model portfolios. Leveraging State Street Global Advisors’ international library of resources, insights and trends, Raiz customers will have access to a broader array of financial literacy content and investment education tools.

“We are excited to expand our relationship with Raiz, a proven fintech leader in bringing important tools and educational resources to investors across the region. This strategic investment reinforces our strategy to join forces with wealth firms who share our commitment to help investors globally manage their investments and savings for retirement,” said Yie-Hsin Hung, President and CEO for State Street Global Advisors.

State Street Global Advisors’ SPDR® S&P/ASX 200 Fund (ASX: STW) is currently the largest single fund holding in the model investment portfolios provided by Raiz to its customers. The asset manager’s SPDR® MSCI Australia Select High Dividend Yield Fund (ASX: SYI) and SPDR® S&P® Global Dividend Fund (ASX: WDIV) are also available on Raiz, the firm information said.

State Street Global Advisors Head of Intermediary Asia Pacific, Meaghan Victor, said deepening the existing relationship with Raiz reinforces State Street Global Advisors’ commitment to the Australian market. “This investment is a natural extension of the successful relationship we have enjoyed with Raiz since launch in 2016. Both of us share a passion for making financial tools and solutions accessible to all investors, and through this strategic arrangement we will leverage our respective capabilities to help Australian investors plan and save for retirement.”

On the other hand, Raiz Managing Director and CEO, Brendan Malone, said the strategic relationship would see Raiz and State Street Global Advisors work more closely together to create innovative savings and investment insights and education for customers. “From learning about investments in ETFs through to more complex investment strategies such as superannuation retirement portfolios, we look forward to continuing our relationship with State Street Global Advisors on educational tools for all stages of a customer lifecycle.