Moving upmarket requires wealth management firms to adopt a broader suite of services, yet the most critical capabilities—such as tax, trust, and estate planning—are also the most costly to scale and the most prone to being outsourced. According to the latest edition of The Cerulli Edge—U.S. Advisor Edition, the firm anticipates that practices capable of properly evaluating the trade-offs between building in-house, buying, or outsourcing will increasingly stand apart as margin pressure intensifies.
The rapid concentration of wealth in the United States over the past decade has heightened demand for more sophisticated wealth management and investment services. High-net-worth (HNW) households—those with more than 5,000,000 dollars in financial assets—are estimated to account for 57% of total U.S. household financial wealth by the end of 2025, up from 43% recorded in 2019.
To capture this expanding opportunity, firms seeking to outperform peers have pivoted their business models toward wealthier clients, a shift that requires overhauling their traditional service delivery frameworks.
“The services that make the biggest difference are also the most operationally burdensome to deliver and, consequently, the most expensive to bring to market,” noted Chayce Horton, associate director. “As a result, nearly all the critical services considered indispensable for moving upmarket are also the most likely to be outsourced by high-net-worth practices.”
On average, high-net-worth advisors report outsourcing between three and four services. Tax planning tops the ranking (55%), followed by trust services (40%), risk management and insurance (39%), and estate and legacy planning (37%).
Cerulli advises firms targeting the upper tier to avoid assuming that an expanded service catalog must be built and managed internally.
“Scale largely dictates where that line falls: large entities can support a deeper bench of internal resources, mid-sized firms tend to formalize integrations or acquire capabilities outright, and those below that tier are best served maintaining their core specialization and partnering or sourcing value from the market,” stated Horton. “As the wealth management industry continues its push upmarket and the ecosystem of independent specialists broadens, firms will need to rigorously assess which capabilities make sense to build internally, acquire, or contract through strategic partnerships,” he concluded.
Money once again carries a higher price, and fund managers are adjusting their bets. Following years in which expectations of monetary easing favored specific positions across fixed income and equities, the rise in sovereign bond yields is forcing a reassessment of the opportunity cost of holding equities, the merits of extending portfolio duration, and the appeal of holding cash.
The clearest signal is in the United States. As of October 26, the 10-year Treasury yield hovered around 4.99%, after touching 5.31% earlier in the month, according to market data published by MarketWatch. The Federal Reserve’s benchmark rate sat within a range of 3.75% to 4.00%, while investors awaited the monetary policy decision scheduled for October 28. Futures pointed to a high probability that the central bank would keep its rate unchanged, although the market continued to price in the possibility of another rate hike before year-end.
The significance of these movements extends well beyond expectations surrounding the Fed’s December announcement. When debt yields rise, investors gain a potentially higher-yielding alternative to risk assets, but they also face mark-to-market losses on bonds they already hold. Concurrently, higher rates increase the discount rate applied to future corporate earnings and can elevate corporate borrowing costs. Consequently, a rising-rate environment does not trigger a simple reallocation of capital from equities into bonds. It alters how managers calculate expected returns, weigh risks, and determine which assets merit a place in their portfolios.
Fixed income regains ground, but not all bonds equally
International flows provide initial evidence of this portfolio realignment. According to the Investment Company Institute (ICI), regulated open-end investment funds worldwide recorded net inflows of 550,000,000,000 dollars into fixed-income instruments during the second quarter of 2026, up from 380,000,000,000 in the first quarter. In contrast, equity funds attracted 139,000,000,000, down from 196,000,000,000 in the previous quarter. Money market funds absorbed another 208,000,000,000 dollars, compared to 193,000,000,000 in the first quarter.
The data demonstrate that fixed income and cash maintained a strong capacity to attract capital, though these flows cannot be attributed solely to rising interest rates. Growth expectations, geopolitical risks, liquidity requirements, and asset price fluctuations also drive allocation decisions.
Nor is the trend uniform across regions or asset classes. An analysis by State Street Investment Management published on October 23 found that, during the third quarter, manager allocations toward U.S. Treasuries with maturities of three to seven years reached the top quartile of their five-year historical range. Demand for longer maturities also exceeded its historical average for the first time since September 2024.
This dynamic suggests that some investors are beginning to view prevailing yields as attractive, even amid ongoing volatility and concerns regarding the U.S. fiscal trajectory. The opportunity to lock in elevated yields for multiple years can prove appealing to managers anticipating an eventual stabilization in yields or a moderation in inflation.
However, purchasing long-term bonds is not equivalent to taking on low risk under any circumstances. The longer an instrument’s duration, the more sensitive its price tends to be to interest rate movements. If yields continue to rise, capital losses can be substantial, even when the issuer possesses high credit quality.
Hence, discussions among fund managers extend beyond whether to expand fixed-income exposure. They must also decide where to position along the yield curve, how much duration risk to accept, and what term premium to demand for inflation and fiscal debt risks.
Selectivity is equally evident across different geographical markets. State Street reported that demand for European sovereign debt dropped from the 39th percentile of its five-year historical range at the end of June to the 2nd percentile by the end of September. In contrast, demand for European corporate bonds strengthened during the third quarter, surpassing the 70th percentile of its historical range from levels previously situated in the lowest decile.
This divergence matters: rising yields do not automatically benefit every issuer. Solvency perceptions, macroeconomic outlooks, debt supply, and fiscal conditions within each country can weigh just as heavily as headline interest rates.
The cost of capital tests equities once again
Equities face a different form of pressure. As bond yields climb, investors weigh corporate earnings potential against a fixed-income alternative that offers higher nominal returns. If equity prices do not adjust or earnings forecasts fail to improve, market valuations can lose their appeal. This effect is particularly pronounced among companies whose valuation hinges on cash flows projected far into the future. Growth companies, including several mega-cap technology firms tied to artificial intelligence, are typically more vulnerable to increases in discount rates because future cash flows account for a significant share of their net present value.
J.P. Morgan Asset Management noted in August that the 10-year Treasury yield had risen 53 basis points since the beginning of 2026, even as U.S. stock indices reached new highs during August. The firm emphasized that equity market reactions depend on the scale of the rate increase, the speed of the move, and the underlying catalysts driving it.
Yields rising because the economy is expanding and corporate earnings are strengthening is fundamentally different from yields rising due to an inflation spike, fiscal deterioration, or a higher term premium demanded to hold long-term debt. Under the first scenario, corporate earnings growth can cushion valuation compressions; under the second, elevated interest rates often coincide with rising input costs and dimmer profit outlooks.
Artificial intelligence introduces an additional dynamic. Building data centers, acquiring equipment, and expanding infrastructure require immense amounts of capital. This financing demand coincides with sovereign borrowing needs and heightened corporate debt issuance, intensifying competition for available capital.
Vanguard specifically identified persistent inflation, elevated energy prices, tighter central bank stances, and competition for capital as key forces lifting global yields in 2026. The asset manager cautioned that a 10-year Treasury yield sustained significantly above 5% would drive up the discount rate applied to future cash flows, putting downward pressure on equity valuations.
The challenge for managers is determining whether anticipated earnings growth justifies holding positions at rich valuations, or whether to rotate toward businesses generating immediate cash flow, maintaining strong balance sheets, and carrying less reliance on external financing.
Cash competes directly with risk assets
Money market funds are also integral to this reallocation. In an environment marked by elevated yields and volatility, these vehicles offer an effective tool to preserve dry powder while managers wait for more attractive entry points. U.S. data from ICI reveal a marked divergence between investor decisions in equity funds versus bond funds. Between January and August 2026, long-term mutual funds posted net outflows of 573,280,000,000 dollars. Within that group, equity funds shed 690,590,000,000, whereas bond funds gathered 174,376,000,000. Money market funds drew cumulative net inflows of 42,361,000,000 over the same period.
These figures reflect U.S. mutual funds and exclude ETFs from this statistical series; therefore, they do not encompass the entirety of assets under management nationwide. Nonetheless, they demonstrate how capital allocation can shift substantially across broad categories.
Cash carries an opportunity cost: if interest rates begin to decline, the yields provided by these instruments diminish, prompting investors to seek assets with higher upside potential. Yet preserving cash or short-term instruments also shields portfolios from immediate mark-to-market losses while maintaining liquidity to capitalize on sudden market dislocations.
Holding cash, in other words, is not necessarily an indicator of structural pessimism. It can serve as a tactical decision while assessing whether prevailing debt yields sufficiently compensate for risk, or whether valuations across other asset classes provide an adequate margin of safety.
Emerging markets face stiffer competition
Shifting conditions in the United States also carry repercussions for emerging markets. When Treasuries offer elevated yields, global investors typically demand wider risk premia to assume currency, political, and credit risks in other jurisdictions. This mechanism can exert downward pressure on emerging market currencies, increase external debt servicing costs, and erode the relative appeal of select local assets, though outcomes remain tethered to interest rate differentials, inflation trajectories, fiscal positions, and domestic fundamentals.
Market specialists pointed out in October that institutional demand for local-currency emerging market sovereign debt had returned to its historical median, but warned that the confluence of higher oil prices, a hawkish Federal Reserve, a resilient U.S. dollar, and higher Treasury yields continued to weigh on risk appetite for these instruments.
For global asset managers, the investment decision is not merely a matter of comparing nominal rates. A high yield can quickly unravel if currency depreciation erodes the spread or if sovereign risk perceptions deteriorate. Conversely, an economy characterized by anchored inflation, credible public finances, and a healthy rate buffer can sustain investor interest. In Mexico, this dynamic highlights the importance of tracking U.S. monetary policy, the behavior of the peso, and the policy decisions of Banco de México. Local bond yields must be assessed in tandem with foreign exchange risk and inflation expectations, rather than viewed in isolation.
A stricter selection process over mechanical rotation
Recent market dynamics also demonstrate that fund positioning can pivot swiftly alongside shifting interest rate expectations. According to LSEG Lipper data reported by Reuters, global equity funds attracted 28,160,000,000 dollars in the week ending October 21, while global bond funds absorbed 9,440,000,000. Both asset classes posted inflows for the fifth consecutive week, supported by an easing in Treasury yields and stronger-than-expected corporate earnings.
This development underscores that capital flows do not follow a purely mechanical playbook. Funds can expand exposure to equities and fixed income simultaneously when growth prospects improve, volatility subsides, or bond yields peak. They can likewise reduce risk across both asset classes if inflation, excessive leverage, or tightening financial conditions undermine the macroeconomic outlook.
The central task for managers is parsing what portion of expected return is generated by an asset’s income stream, what portion relies on capital appreciation, and how much incremental risk must be assumed to achieve it. In fixed income, this requires evaluating duration, creditworthiness, and term premia; in equities, assessing earnings resilience, cash flow generation, and interest rate sensitivity; and in cash, balancing current yield against the opportunity cost of waiting.
When capital becomes more expensive, funds do not necessarily abandon risk; they become far more discerning about the specific risks they choose to underwrite. Fixed income can regain attractiveness, cash can assume strategic utility, and equities can continue to advance if corporate profits substantiate their multiples. However, the leeway to overlook the cost of capital has narrowed substantially.
In such an environment, the edge lies not in forecasting the Federal Reserve’s next policy tweak, but in constructing portfolios resilient across divergent inflation, growth, and interest rate paths. When the price of money changes, the hurdle rates investors demand change with it, redefining where every asset stands in the competition for capital.
Apollo has announced that it will acquire a minority stake in Mubadala Capital and commit capital to its various investment strategies, working alongside Mubadala Capital as it continues to scale as a premier global alternative asset manager. According to Mubadala Capital, this transaction will support its next phase of growth. Founded in 2011, Mubadala Capital has grown rapidly into a next-generation alternative asset manager, with a core alternatives business managing more than 60,000,000,000 dollars across five investment strategies.
They explain that Apollo’s investment will help the firm expand its investor base, broaden its strategies, and pursue new opportunities globally. As part of this transaction, other strategic investors will also join as minority shareholders in Mubadala Capital and, together with Apollo, are expected to commit a total of 5,000,000,000 dollars to Mubadala Capital’s investment strategies at the initial close.
“Mubadala Capital was established to connect global capital with differentiated opportunities across private markets, and this partnership accelerates that ambition. Apollo is one of the most respected institutions in our industry, and its confidence in what we are building reflects the strength of the platform we have created and the trajectory we are on. Apollo has been a trusted partner to Mubadala and across Abu Dhabi for many years, and we look forward to working even more closely with them as shareholders,” stated Hani Barhoush, CEO of Mubadala Capital.
For his part, John Zito, Co-President of Apollo Asset Management, added: “Mubadala has been a trusted partner in building and scaling several of our strategies over the years. This investment in the differentiated asset management platform they have built at Mubadala Capital builds on our existing partnership and reflects our conviction in their business. With a talented team, a highly complementary global network, and real momentum across its investment strategies, Mubadala Capital is well positioned for its next phase of growth. This investment will deepen our alignment and strengthen our mutual commitment to each other’s success, while creating significant opportunities to reach a broader global investor base.”
Apollo joins the founders of Silver Rock Financial as a shareholder in Mubadala Capital. Mubadala Investment Company remains the majority shareholder, reflecting its long-term conviction in the platform it has backed since inception. Following the entry of the new shareholders, Mubadala Capital will continue to operate independently and maintain its own governance structure, with its current management team retaining full authority over investment decisions and operations. The transaction is expected to close in the fourth quarter of 2026, subject to legal and regulatory approvals.
Traditional private equity funds have a limited lifespan, typically around ten years, with potential extensions. During that time, the manager acquires companies, develops them, and sells them to return capital to investors. However, sometimes a company continues to grow strongly as the fund approaches its maturity. Selling it may mean giving up part of its upside potential; holding onto it requires finding an alternative formula.
A continuation fund is that formula. It is a new vehicle, sponsored by the same manager, to which one or more assets from the original fund are transferred in order to continue managing them for several more years. It belongs to the segment of manager-led secondary transactions, known as GP-led secondaries.
How the transaction works
The manager proposes the transaction and hires a financial advisor to run the process. Specialized investors, such as secondary funds, insurance companies, or pension funds, compete to provide the capital that will purchase the assets. An independent valuation, often accompanied by a fairness opinion, helps establish the price.
Investors in the original fund, known as limited partners or LPs, are then given a choice. They can sell their stake and receive cash at the agreed price, or roll over into the new vehicle on terms similar to the existing ones. For its part, the manager typically reinvests a portion of its own gains into the new fund, aligning interests.
By way of example, consider an investor with a stake in a private equity fund that is expiring soon. That fund owns a company which, according to the transaction’s independent valuation, is worth 1,000,000 dollars for this investor. The manager proposes transferring it to a continuation fund and provides two options: sell or roll over. In the first case, the investor collects 1,000,000 in cash and exits the investment. Immediate liquidity is obtained and the money can be allocated elsewhere, but if the company continues to grow, the investor does not participate in that upside. In the second case, the investor receives a stake equivalent to 1,000,000 in the new vehicle and remains exposed to the company for several more years. If the company appreciates, the investor benefits. However, if it fails to meet expectations, the investor bears that risk, and the capital remains tied up for an additional period.
Key differences from a traditional fund
The first is the starting point. In a traditional fund, the investor commits capital without knowing precisely which companies will be invested in, known as a blind pool. In a continuation fund, the assets already exist, have a track record, and are known to the manager.
The second is the time horizon. While a traditional fund operates for a decade, a continuation fund typically has a shorter term, focused on completing a value-creation plan already underway.
The third is the risk profile. Uncertainty regarding asset selection and capital deployment is reduced, and the J-curve—the initial period in which costs outweigh returns—is usually softened. In exchange, the entry price can be demanding, and returns depend on the asset continuing to create value.
The fourth is diversification. These vehicles are usually concentrated in one or a few assets, meaning performance depends on fewer companies than in a traditional fund.
The primary challenge: conflicts of interest
The structure introduces an evident tension: the manager sits on both sides of the table, selling from one fund and buying from another. For this reason, transparency is essential. Common safeguards include advisory committee approval, independent valuations, a competitive bidding process to determine price, and manager reinvestment.
What investors should assess
Anyone evaluating this type of transaction should consider the quality and potential of the asset, the reasonableness of the price, the value-creation roadmap, the management fees and carried interest (the share of a fund’s profits that the manager receives as compensation for performance, in addition to management fees) of the new vehicle, and the information available to decide between selling or rolling over.
In an environment where traditional exits, such as trade sales or initial public offerings, are not always straightforward, continuation funds have gained prominence as a liquidity and portfolio management tool. Understanding their mechanics is increasingly necessary to evaluate private equity in its full breadth.
The most recent projections point to a sharp expansion of the assets in the Mexican pension system. Beyond the differences among estimates, the challenge will not merely be accumulating these resources, but finding where to invest them efficiently.
The retirement savings system in Mexico is entering a new stage of growth. The gradual effects of the pension reform, the increase in mandatory contributions, wage growth, and investment returns could lift the assets managed by the AFOREs to levels that seemed difficult to reach just a few years ago.
As of June 2026, assets managed by the AFOREs amount to approximately 8.96 trillion pesos, equivalent to 513,000,000,000 dollars. The relevant question is what implications this growth will have for asset allocation and the Mexican financial market.
To gauge this phenomenon, we set out to analyze and compare different growth scenarios for assets managed by the AFOREs, contrasting them with estimates and benchmarks presented by BofA Global Research (2023), Santander (2023), BBVA (2023), J.P. Morgan Asset Management (2025), CONSAR (2026), and AMAFORE (2026).
Different methodologies, a common trend
Projections made in recent years show significant differences. Rather than a divergence between institutions, these differences largely reflect the time they were prepared, as well as distinct assumptions regarding contributions, wage growth, investment returns, inflation, account growth, withdrawals, and exchange rates.
This is particularly relevant in a period in which the system has undergone major structural changes and mandatory contributions continue to increase gradually.
Older estimates tended to be more conservative. BofA Global Research (2023) estimated approximately 9.9 trillion pesos for that same year.
Projections from BBVA (2023) and J.P. Morgan Asset Management (2025) are considerably higher, with estimates of approximately 15.1 and 15.45 trillion pesos, respectively, for 2030.
More recently, a presentation by CONSAR (2026) showed, as an approximation exercise under a conservative scenario, net SAR assets of around 14.1 trillion pesos in 2030, with a trajectory that would take them to 28.6 trillion in 2040 and 44.7 trillion in 2050. These figures should be interpreted as a benchmark to assess potential scenarios and not as an official CONSAR projection.
Despite starting from different methodologies and assumptions, the most recent benchmarks show convergence toward levels close to 15 trillion pesos by 2030.
This convergence is especially relevant because the various exercises are based on different assumptions and methodologies. Rather than seeking which of them will be exactly right, the set of estimates makes it possible to identify a structural trend: the Mexican retirement savings system could experience a significant change in scale over the coming years.
The exchange rate explains part of the differences
A fundamental aspect when comparing these projections is the currency in which they are presented.
A significant portion of the differences among forecasts, particularly when expressed in dollars, stems from the different assumptions used for the exchange rate. Over 10- or 15-year horizons, relatively small differences in the expected annual depreciation of the peso can produce major deviations in the final value of assets expressed in dollars.
J.P. Morgan provides a good example. Its 2030 estimate of 15.45 trillion pesos is practically identical to our base scenario. However, J.P. Morgan uses an exchange rate of 22.65 pesos per dollar for that year, while our scenario considers 19.51 pesos per dollar.
The result is illustrative. J.P. Morgan arrives at approximately 682,000,000,000 dollars for 2030. Applying our exchange rate assumption to essentially the same volume of assets in pesos yields 792,000,000,000.
That is, two models can reach practically the same system size in pesos and, at the same time, show a difference of 110,000,000,000 when expressed in dollars, mainly due to the exchange rate assumption.
The recent behavior of the peso helps illustrate this difficulty. Currently, the exchange rate remains around and even below 17 pesos per dollar, levels not observed since 2024. Part of this strength reflects recent international dollar weakness, in addition to factors specific to the Mexican economy. However, financial and monetary conditions can change significantly over long horizons, so extrapolating current exchange rate levels out to 2030 or 2040 would be imprudent.
For this reason, we believe that the comparison between the various projections must first be made in pesos. Conversion to dollars is very useful for sizing the system from the perspective of an international investor, but it must always be interpreted taking into account the exchange rate assumption used.
Our base scenario
Based on observed assets as of June 2026, we constructed two internal scenarios aimed at sizing the potential growth of the system. These are aggregate scenarios that apply nominal growth rates to assets under management and are not actuarial projections that individually model the various components of their evolution, such as contributions, wage growth, returns, inflation, contribution density, and withdrawals.
Our conservative scenario assumes annual nominal growth of 10.5% through 2030 and 8% thereafter. Under this assumption, assets would reach approximately 13.4 trillion pesos in 2030, 19.6 trillion in 2035, and 28.9 trillion in 2040.
Our base scenario considers 14% annual growth through 2030 and 10.25% thereafter. This would bring assets under management to approximately 15.1 trillion pesos in 2030, 24.7 trillion in 2035, and 40.2 trillion in 2040.
It is particularly relevant that our 2030 estimate is practically in line with BBVA’s (15.1 trillion), close to that of J.P. Morgan Asset Management (15.45 trillion), and slightly below the most recent estimate from AMAFORE (15.8 trillion).
Despite methodological differences, the proximity among several of these benchmarks suggests that the system could reach around 15 to 16 trillion pesos toward 2030, although the outcome will naturally depend on the evolution of contributions, financial markets, wages, and withdrawals over the coming years.
From 500,000,000,000 US dollars to more than 1.5 trillion US dollars
To size the magnitude of the change from an international perspective, we also converted our projections to dollars using a single exchange rate scenario.
We start from an estimated exchange rate of 18.38 pesos per dollar in 2027 and subsequently assume a gradual peso depreciation of 2% annually, resulting in approximate exchange rates of 19.51 in 2030, 21.54 in 2035, and 23.78 in 2040.
Under these assumptions, our base scenario would imply assets under management near 776,000,000,000 US dollars in 2030, 1.15 trillion US dollars in 2035, and 1.69 trillion US dollars in 2040.
Even under our conservative scenario, assets could exceed 1.2 trillion US dollars toward 2040. These figures are not intended to anticipate precisely what the exchange rate will be in fifteen years. Their purpose is to gauge the order of magnitude that the Mexican pension system could reach.
The real challenge will be investing the resources
Asset growth is only part of the story. As the size of the system increases, so does the challenge of finding sufficient investment opportunities capable of offering adequate diversification and returns.
An AFORE system that eventually manages between 1.2 and 1.7 trillion US dollars will have diversification needs that are very different from current ones.
This could have major consequences for the local debt and equity market, but also for demand in private equity, private credit, infrastructure, real estate, and other private market strategies, both in Mexico and abroad.
The evolution of the AFORE investment regime takes on special relevance in this context. As the volume of managed savings increases, even keeping the percentage allocated to a given asset class constant implies growing amounts of capital that must be invested.
To put this into perspective, each percentage point of allocation in a 40-trillion-peso system would represent around 400,000,000,000 pesos.
This illustrates how the growth of the system could transform not only the size of AFORE portfolios, but also the necessary depth of the markets and vehicles available to invest those resources.
The growth of the system can therefore become one of the main structural drivers of institutional asset demand over the coming years.
More than a projection, a change in scale
Naturally, estimates for 2040 must be interpreted as scenarios and not as precise forecasts. Small differences in returns, inflation, wage growth, contributions, withdrawals, and exchange rates can produce significantly different results when accumulated over extended periods. In particular, outflows from withdrawals could acquire growing importance as the system matures and the number of workers accessing a pension increases.
However, perhaps the most important message is not determining whether the AFOREs will manage exactly 40 or 48 trillion pesos in 2040.
What is relevant is the direction and magnitude of the change.
Mexico could be developing one of the most important pools of institutional capital in Latin America. If projections come close to reality, the challenge in the coming years will not only be increasing retirement savings, but creating conditions and expanding the universe of opportunities to efficiently invest an amount of resources substantially greater than today’s.
Sources consulted:
BofA Global Research — Pension Reform Can Provide Another Secular Tailwind to Mexican Equities, February 2023.
Santander — How Would Mexico’s Pension Reform Benefit Its Financial System?, February 2023.
BBVA — Mexico’s Pension Reform: A New Paradigm for the Financial System, March 2023.
J.P. Morgan Asset Management — Mexico Pension System Overhaul: Afores in the Spotlight, November 2025.
AMAFORE / Guillermo Zamarripa — presentation Jueves de Bolsa, Mexican Stock Exchange (BMV), July 30, 2026.
CONSAR — presentation at the VII BUAP Actuarial Congress (VII CAB), Puebla, August 18, 2026.
Photo courtesyLula and Geraldo Alckmin celebrate reelection in São Paulo, October 25, 2026. Ricardo Stuckert / Flickr Lula Oficial (CC BY-SA 4.0)
The reelection of Luiz Inácio Lula da Silva last Sunday (25) led international banks and asset managers to revise their outlook for Brazilian assets, following weeks of positioning favored toward a victory by Flávio Bolsonaro. In the analyses of these firms, the central concern is the government’s ability to present a sufficient fiscal adjustment to stabilize public debt. However, short-term caution coexists with assessments that the price correction may open opportunities in equities and fixed income.
Lula won Sunday’s (25) runoff with 51.79% of the valid votes, compared to 48.21% for Flávio Bolsonaro, according to the Superior Electoral Court. For the firms consulted, the outcome contradicted the scenario priced in after the first round. Investors’ focus now shifts to the composition of the economic team, the consistency of fiscal measures, and the ability to pass them through Congress.
Pressure on assets materialized concretely during Monday’s trading session. In a statement sent to the press, B3 confirmed the activation of the circuit breaker, with trading suspended for 30 minutes. The exchange reported a resumption via auction from 10:30 to 10:35. Brazilian financial markets reacted on Monday to the reelection of Luiz Inácio Lula da Silva as president of Brazil with a rise in yields on dollar-denominated sovereign bonds, a sharp depreciation of the real against the U.S. dollar, and a 17% plunge in the country’s stock exchange. Specifically, the yield on 10-year notes climbed to 6.478%, representing an increase of around 20 basis points from Friday’s close.
“From here on, the fundamental issue is not growth, but fiscal credibility,” states Jack Janasiewicz, portfolio manager at Natixis IM Solutions. His assessment is that new spending initiatives without a convincing debt plan could make sovereign financing more expensive and reduce room for interest rate cuts.
The Reversal of the Election Bet
Thomas Haugaard, portfolio manager on the hard-currency emerging market debt team at Janus Henderson, believes the surprise reveals an asymmetry in positioning. Even with polls indicating a tight race, the external debt market had largely priced in a Bolsonaro victory. “The election bet was already priced in, whereas the risk of a Lula victory was not,” he wrote.
In Haugaard’s assessment, the weakness of the real is an important transmission channel for the shock: depreciation can raise inflation expectations and local interest rates, increase government interest expenses, and worsen fiscal pressures. A lasting recovery in spreads would depend on recurring spending reforms and a credible debt trajectory.
This reading is shared by Thierry Larose, portfolio manager and analyst at Vontobel. In a commentary distributed before the market open, he projected sell-offs, higher interest rates, and a weakening real, with the potential reversal of post-first-round gains. “We believe the Lula government will also have no choice but to adopt fiscal consolidation measures,” he states. The doubt, he adds, is whether they will be sufficient to restore debt sustainability.
Larose sees, however, limits to a disorderly adjustment: the Central Bank in foreign exchange and the Ministry of Finance in public debt have, in his view, the capacity to contain chaotic movements. Kristin Ceva, emerging debt manager at Payden & Rygel, also associates the initial pressure with the unwinding of positions built in anticipation of a fiscal shift.
What Is Needed to Restore Confidence
UBS Global Wealth Management assesses that available information does not yet show a concrete adjustment sufficient to sustain the revaluation of Brazilian assets since the first round. In the report signed by Alejo Czerwonko, Luciano Telo, Solange Srour, Ronaldo Patah, and Debora Nogueira, the bank works with a return of equities, currencies, and interest rates to pre-first-round levels, allowing for temporary deterioration beyond that point.
The institution outlines three conditions to stabilize confidence: a package with quantified measures; alignment of the adjustment effort with campaign commitments estimated at 300 billion reais; and a viable pathway for congressional approval before year-end. The report points to public debt above 80% of GDP and a fiscal deficit near 10% of GDP as part of the initial hurdles for the new term. For currencies, UBS presents 5.40 BRL per dollar as an initial depreciation benchmark, without ruling out sharper initial moves. This is a bank scenario, not a closing price. The firm also considers that a delay in fiscal consolidation could slow the Selic rate-cutting cycle, especially if exchange rate pressures arise.
Mali Chivakul, emerging markets economist at J. Safra Sarasin Sustainable AM, expects Lula to seek to reassure investors with an appointment at the Finance Ministry that inspires confidence and with early announcements to stabilize debt. Even so, she foresees a period of weakness and volatility leading into the start of the presidential term. Performance in 2027 will depend, according to her analysis, on a fiscal correction perceived as lasting and credible.
At Fidelity International, Andressa Tezine, senior sovereign debt analyst, sees limited room for immediate fiscal progress and a risk of further rate hikes. Philip Fielding, emerging debt manager, points to cabinet appointments and fiscal plans for 2027 as decisive signals for assessing opportunities once prices stabilize.
Congress May Contain Spending and Complicate Reforms
The more conservative composition of the legislature appears as a counterweight across several analyses. Natixis, UBS, and J. Safra Sarasin consider that the need to negotiate with center and right-wing parties may limit spending expansion measures. Eirini Tsekeridou, fixed-income analyst at Julius Baer, highlights that legislative execution will depend on building coalitions in a fragmented and predominantly center-right Congress.
Viktor Szabó, investment director for emerging market debt at Aberdeen Investments, offers a less favorable interpretation of this counterweight. While an adversarial Congress can block more expensive pledges, it can also complicate revenue-raising measures and structural reforms, in addition to demanding costly concessions. “Paralysis is not consolidation,” he summarizes. For Szabó, the test goes beyond team names: investors need a framework capable of generating primary surpluses sufficient to stabilize debt, accompanied by measures on benefit indexation, mandatory spending, and tax expenditures. His analysis recognizes the strength of external accounts, natural resources, and the Brazilian institutional structure, but maintains that these attributes do not replace fiscal discipline.
Opportunities, with Conditions
Despite the cautious tone, market commentaries do not point to a generalized abandonment of Brazil. Larry Hatheway, global investment strategist at the Franklin Templeton Institute, considers that elevated interest rates, both nominal and real, must persist. “Despite short-term volatility, Brazil’s local-currency debt remains an attractive source of income and return,” he states. For Hatheway, the stock market can recover over the medium term if the government combines fiscal adjustment with liberalization measures that stimulate productivity and return on capital. Julius Baer also sees room for strong performance across bonds, the real, and domestic equities should there be a commitment to debt stabilization and the gradual consolidation of public accounts.
At Fidelity, Zoltan Palfi, Latin American equities manager, assesses that a sharp correction can create entry points for long-term investors. The firm considers Brazilian equities attractive compared to historical levels and other emerging peers, highlighting small and mid-cap companies focused on the domestic market. UBS’s analysis is more cautious regarding the starting point: prior to the result, it viewed the market trading near its 10-year historical average, at 9.6 times forward earnings. The assessments use different reference points, showing that there is no uniform view on asset discounts.
Lale Akoner, global market strategist at eToro, also distinguishes the correction of positions from a sudden deterioration in activity. “Part of the reaction reflects a rapid repositioning by investors rather than an abrupt deterioration of the Brazilian economy,” she states. She sees greater pressure on banks, retail, and companies reliant on the domestic consumer, while exporters with dollar revenues may benefit from a weaker real. Akoner recommends caution when seeking dip-buying opportunities. The key lies in separating structurally challenged companies from those sold off amid market nervousness, paying attention to balance sheet quality and potential signs of spending containment. Fidelity makes a similar caveat for fixed income: high interest rates do not guarantee a positive total return when bond losses and currency depreciation absorb incoming yield.
Payden & Rygel maintains a favorable view toward emerging debt as a strategic allocation, supported by positive real rates, foreign exchange reserves, and external fundamentals. The thesis covers emerging markets as a whole; it does not represent an exclusively Brazilian assessment nor does it eliminate local fiscal risks.
In commentary also received this Monday, William Castro Alves, chief strategist at Avenue, reinforces the importance of international diversification regardless of the election winner. The analysis complements the views of global firms by emphasizing the protection of dollar-linked liabilities and expenses.
For the coming months, the main difference across assessments lies in the degree of confidence that a fiscal correction will take place and the speed at which prices can offer compensation for the risks. The markers noted for this assessment are concrete: recurring spending measures, verifiable numbers, legislative support, and a debt trajectory capable of facilitating lower interest rates.
Revolut, the global fintech, has announced the incorporation of Revolut Ventures in collaboration with Carne Group, Europe’s largest third-party management company.As explained, Revolut Ventures will serve as a bridge between selected investors and high-growth, unlisted technology companies.
The company explains that these businesses are taking increasingly longer to go public, with the median time rising from 6.9 years in 2014 to 11 years in 2025. Consequently, a large portion of value creation now takes place prior to an IPO. In their view, these investment opportunities have traditionally been reserved for large institutions and high-net-worth individuals, leaving retail investors on the sidelines. In parallel, the firm maintains that public equity investment opportunities in the U.S. have been cut in half, dropping from 7,000 listed companies in 2000 to 3,900 in 2025. “More and more mature, cash-generating companies are becoming privately held or deciding never to go public, reducing opportunities for retail investors,” they point out.
As one of the world’s leading privately held tech companies, Revolut has deep, first-hand knowledge of the private markets ecosystem. The creation of Revolut Ventures represents a natural evolution following the launch of Private Markets in July 2026 across selected EEA markets.
Through partnerships with some of the world’s most prominent unlisted technology companies, the Revolut Ventures platform will be integrated into the Revolut app alongside existing investment options, which include U.S. and EEA stocks, ETFs, money market funds, bonds, and private market funds. While these alternatives offer growth potential, they are significantly less liquid than publicly traded equities and carry a substantial risk of capital loss.
Rolandas Juteika, Head of Wealth and Trading (EEA) at Revolut, stated that “with Revolut Ventures, our goal is to break down one of the final barriers in wealth management: the exclusion of retail investors from unlisted companies. Value creation occurs long before an IPO, and by operating our own platform, we are giving everyday investors the opportunity to access tomorrow’s market leaders directly from the Revolut app.”
Republicans are projected to lose control of the Senate in the U.S. midterm elections on November 3, 2026. This was anticipated by Ahmed Riesgo, Chief Investment Officer (CIO) of Insigneo, during the webinar “Brazil and the U.S.: Two Decisions, One Market,” organized by Grupo Cohen and moderated by its President and CEO, Anna Cohen. Riesgo attributed this scenario to Donald Trump’s unpopularity, the inflationary impact of tariffs, and public opposition to the war with Iran. For the executive, the surprise would not be an administration defeat, but rather Republicans managing to retain the upper house.
According to Riesgo, Republican states that seemed safe six months ago—Iowa and Texas, among others—are now open contests. Riesgo highlighted the case of Texas, where Democrat James Talarico could defeat Ken Paxton. “Texas voting Democratic blue has very few precedents in history,” Cohen noted. Riesgo clarified that the phenomenon does not reflect an ideological shift, but rather direct punishment of the president for rising prices. “You see it in the polls. They are going to crucify him over the war, and they are crucifying him,” he stated.
The Argentine analyst underscored the convergence of factors impacting the electorate: “You have a trifecta of negative impacts: the pump and consumption, the rate hike and borrowing costs, and the entire social issue, which in the United States continues along polarized trends.” Riesgo agreed: the political thermometer of the average American is the price of gasoline, and when it rises, the government pays the price at the ballot box.
The War with Iran
Riesgo highlighted the weak support for the intervention in Iran. A Pew Research Center survey conducted March 16–22, 2026, found that 59% of U.S. adults considered the initial decision to use military force a mistake, while 38% considered it correct. However, the executive cautioned that it would be premature to judge its long-term consequences. “There are signs that it could have positive long-term benefits, both for the United States and for the region, which are not visible today,” he added.
According to Riesgo, the combination of the military conflict and trade tariffs puts upward pressure on energy and input costs, and their eventual pass-through to consumers would deepen discontent among lower-income households. Cohen noted that higher-net-worth Americans are partially shielded: “Consumption has not fallen. Savings probably have; they are not over-leveraging, but there is some form of friction regarding inflation.”
The Insigneo CIO also commended the Trump administration’s push for artificial intelligence. In his estimate, the new technology lifts the economy’s potential growth from a baseline of 1.8% to nearly 3%. This is an estimate by the executive, not observed data or an official consensus. “It doesn’t sound like much, from two to three, but a shift in the trend level of growth for an economy the size of the United States is, as Trump says, ‘huge,'” he illustrated.
The strategist drew a parallel with Robert Solow’s 1987 paradox regarding the difficulty of seeing the impact of computers in productivity statistics. In Riesgo’s view, corporate margin expansion reflects AI benefits that those metrics do not yet capture. “Where did it come from? Did it come from Americans suddenly wanting to work harder? No, it’s the opposite. Every day Americans want to work less,” he quipped.
Cohen summarized the tension with a direct question: “What happens if there is a scare with upcoming earnings reports? Where does the S&P end up?” Riesgo replied that while some companies—particularly those exclusively exposed to frontier AI models—need extraordinary growth to justify their valuations, the vast majority of sectors are still pricing in very few benefits from the new technology.
Riesgo Projects the 10-Year Bond at 4.80% by Year-End 2026
Faced with a futures curve projecting policy rate increases in December 2026 and in March and September 2027, Riesgo deemed that monetary tightening excessive. The specialist stressed that the Federal Reserve is unlikely to follow that path and recommended positioning in duration: “One of the easiest trades to make money on in my career has been betting that the central bank is not going to do what it is telling you it will do,” he argued. Along those lines, he set his year-end target for the 10-year Treasury at 4.8%, 16 basis points below the 4.96% recorded by the benchmark note following trading on October 22.
During its quarterly client presentation in the final week of September, when the 10-year Treasury was yielding around 5.3%, Insigneo recommended adding duration to portfolios. Although Riesgo pointed out that bond yields are competitive against equities—standing around 5% in both cases, with lower volatility in government debt—he ruled out exiting equities: “You can’t be out,” Cohen agreed, given a cycle underpinned by corporate margin expansion.
Toward the end of the discussion, Riesgo suggested that the relationship between the United States and Latin America could gain strategic weight in the coming years. In his analysis, reduced Washington involvement in the Middle East would open room for greater focus on the hemisphere, citing signs such as U.S. investments in rare earths in Brazil and Treasury Department backing for Argentina. For the executive, this dynamic transcends the Donald Trump administration and reflects a broader shift in America’s international posture: “Absolute power has never been greater, but its relative weight has indeed declined,” he maintained.
Regarding relations with China, Riesgo compared the situation to a new Cold War characterized by cycles of détente and tension, but without a full rupture. “Both sides need each other far more than they realize. They want an economic divorce, but they have too many children and too much shared property together,” he illustrated.
No changes are expected in the U.S. Federal Reserve’s benchmark interest rate at next week’s meeting. The market takes it for granted that the U.S. monetary authority will choose to leave its monetary policy unchanged, holding rates within the 3.75%–4.00% target range set following last month’s hike. According to asset management experts, the rationale is twofold: the proximity of the midterm elections and the ongoing economic resilience displayed by the United States.
“The proximity of the midterm elections, along with the need to evaluate the impact that the previous rate hike has had on the market, are among the most significant arguments for postponing a decision to raise rates again in October. Consequently, even though the September U.S. inflation print came in worse than expected across both headline and core metrics, it still appears too early to confirm an upward trend. Investors believe Warsh will opt to delay any hike until December, when the market anticipates another increase in the policy rate that will lift the target range to 4.00%–4.25%,” explains Cristina Gavín Moreno, Head of Fixed Income at Ibercaja Gestión.
Between Statements and Data
Furthermore, as Kish Pathak, fixed-income research analyst at MFS IM, and Erik Weisman, chief economist and portfolio manager at MFS IM, recall, comments from Vice Chairs Williams and Jefferson revealed no intention to raise rates this month. Christopher Waller stated that hikes “do not necessarily have to happen at consecutive meetings,” and Bowman sees no urgency to act. Finally, Warsh’s remarks in Bangkok were notable for what went unsaid: he did not repeat the forceful anti-inflation message delivered at Jackson Hole.
“Data published since the last meeting supports the view that the labor market remains in good shape and that inflation is still too elevated for comfort. At the same time, Warsh has favored focusing on broader trends. A single additional month of data does little to determine whether the trend is shifting, which is why he has advocated for reducing the number of FOMC meetings. The nature of the risks confronting the economy also counsels patience. For instance, latent inflationary pressures will ease if some resolution to the war involving Iran is reached and energy prices retreat. The economy has proven resilient amid the oil crisis thanks to robust capital expenditure linked to artificial intelligence and the wealth effect generated by equities. If the recent volatility in AI-related stocks worsens, growth could lose momentum. By December, there will be more visibility on both fronts,” argue the MFS IM experts.
Bank of America (BofA) economists take a more critical view of the headline U.S. economic data, acknowledging that while there are “strong arguments for raising rates, there are substantial hurdles to executing it.” They maintain their forecast that the Fed will raise interest rates by 25 basis points, although they recognize it will be a difficult decision to implement given market developments over the past week. “September inflation, coming in well above expectations, bolsters the case for an October hike. The October decision will test Fed Chair Kevin Warsh’s resolve to introduce a radical shift in the institution’s forward guidance. If the Fed raises rates, fears of excessive monetary tightening could emerge; if it holds rates unchanged, markets might question its credibility,” they state.
A New Way of Communicating
Thus, according to market experts, the primary focus of next week’s meeting lies in the Fed Chair’s assessment of the condition of the U.S. economy. “Even if he does not deliver formal forward guidance, he can certainly offer clues about what to expect—not so much for the remainder of this year, where the market already prices in a December hike, but looking ahead to 2027. If consumer strength persists and inflationary pressures become entrenched, that could lead to two additional hikes next year,” Gavín notes.
According to Christian Scherrmann, Chief U.S. Economist at DWS, in one of his rare public appearances outside the post-FOMC press conference, the Fed Chair refrained from commenting on the monetary policy outlook. “This was widely interpreted as a signal that the Fed will maintain the status quo, likely referencing his Jackson Hole remarks prior to the last rate increase. However, other Fed officials continue to send mixed signals. For example, Governor Christopher Waller still entertains the possibility of further hikes, even as higher Treasury yields tighten financial conditions. Vice Chair Philip Jefferson advocates for patience, while Governor Michelle Bowman sees little urgency to act. Others, such as Austan Goolsbee, Beth Hammack, John Williams, and Susan Collins, worry that inflation could prove stickier than expected. This divergence of views suggests the committee itself is divided over whether policy is already restrictive enough. In any case, central bankers have become more active in recent months rather than less, contrary to what Chair Warsh suggested. We interpret this as a sign of an engaged FOMC, which in our view reinforces the institution’s independence,” Scherrmann emphasizes.
For François Rimeu, Senior Strategist at Crédit Mutuel AM, although he agrees with fellow analysts that forward guidance has fallen out of favor, close attention must be paid to Warsh’s remarks during the ensuing press conference. “The official statement is likely to remain largely unchanged from September: solid growth, a stable labor market without wage pressures, elevated inflation, and a reaffirmed commitment to price stability. In the press conference, Chair Warsh is expected to maintain his stance of avoiding guidance on the future path of interest rates,” he adds.
Funds Society is returning to Chile to convene the local asset and wealth management industries to share conversations and insights, this time in a new format: the Funds Society Leaders Summit, organized in partnership with CFA Society Chile. This gathering is tailored for leaders in asset and wealth management, created by the industry and for the industry.
The event is scheduled for November 17 of this year, starting at 8:00 AM, at The Ritz-Carlton Santiago hotel, located in the Las Condes district. Those who wish to participate must register, as spaces are limited.
With this summit—an event created by the industry, for the industry—the Leaders Summit aims to bring together leaders from asset and wealth management for a day centered on the topics that matter most to and most concern sector professionals.
The agenda, designed in collaboration with CFA Society Chile, will feature top-tier speakers and experts from key areas such as asset management, private banking, family offices, pension funds, and insurance firms, who will discuss the major challenges and trends of the moment.
The program combines dynamic panels with networking sessions, concluding with a cocktail reception to exchange views and continue connecting.
This initiative is made possible thanks to our partner, CFA Society Chile, and our sponsors: Ninety One, Lumyna, VanEck, HSBC Asset Management, Insigneo, and State Street Investment Management.
Funds Society Leaders Summit Chile brings to South America the event format previously held in Madrid and Miami.
