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BTG Pactual Acquires Wealth Management Firm Greytown Advisors in Miami

BTG Pactual announced on Wednesday (25) the acquisition of Greytown Advisors, a Miami-based wealth management firm, as part of its global expansion strategy. While the transaction value was not disclosed, the acquisition has already received regulatory approval.

With $1 billion in assets under management, Greytown Advisors specializes in serving high-net-worth families, particularly in Latin America, a market where BTG had less penetration. The acquisition strengthens BTG’s operations in the region and complements its multi-family office segment. The cultural alignment between the firms played a significant role in the agreement, as Marcello Correa, president of Greytown, is Brazilian and has extensive experience in the financial market.

Following the acquisition, Correa will join BTG’s team as a partner.

Rogério Pessoa, partner and head of Wealth Management at BTG Pactual, highlighted that negotiations with Greytown lasted two years and hinted that this might be the first of several future acquisitions. “This transaction reinforces our presence in the United States and allows us to serve a demanding and global audience,” Pessoa said.

The acquisition of Greytown Advisors is part of BTG Pactual’s strategic moves to expand its international presence. In June of this year, the bank also announced the acquisition of M.Y. Safra Bank, a private bank based in New York, following the previous year’s purchase of FIS Privatbank in Luxembourg.

Currently, BTG Pactual operates in several countries, including Argentina, Chile, Colombia, Spain, Mexico, Portugal, the United Kingdom, and Luxembourg. With these acquisitions, the bank reinforces its global growth strategy, managing around $45 billion in assets under management in the multi-family office sector.

Overall, BTG Pactual recorded significant growth, reaching R$ 799 billion in assets under management as of June 2024, representing a 27% increase compared to the previous year.

The SEC Accuses Merrill Lynch and Harvest Volatility Management of Ignoring Client Instructions

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The SEC announced charges against Harvest Volatility Management and Merrill Lynch, Pierce, Fenner & Smith for exceeding the investment limits designated by clients over a two-year period starting in March 2016, resulting in clients paying higher fees, being exposed to greater market risk, and incurring investment losses.

As part of separate settlements, Harvest and Merrill have agreed to pay a combined total of $9.3 million in fines and restitution to resolve the SEC’s claims, according to the regulator’s statement.

According to the SEC’s orders, Harvest was the primary investment advisor and portfolio manager of the Collateral Yield Enhancement Strategy (CYES), which traded options on a volatility index with the goal of generating incremental returns.

The SEC determined that, starting in 2016, Harvest allowed dozens of accounts to exceed the exposure levels designated by investors when they subscribed to the CYES strategy, including many accounts that exceeded the limit by 50% or more, as detailed in the statement.

Merrill and Harvest earned higher management fees when investors’ exposure levels rose above the pre-established thresholds, thereby subjecting investors to increased financial risks.

The SEC’s order regarding Merrill concludes that Merrill introduced its clients to Harvest and received a portion of Harvest’s management and incentive fees, as well as trading commissions. It also found that Merrill was aware that CYES investors were exceeding the pre-established exposure levels but did not adequately inform the affected CYES investors, most of whom had advisory relationships with Merrill, the statement added.

The SEC also found that Harvest and Merrill “failed to adopt or implement policies and procedures reasonably designed to ensure that they communicated all material facts to their clients and alerted them to excessive exposure.”

“In this case, two investment advisors allegedly sold their clients a complex options trading strategy but failed to follow basic client instructions or apply and adhere to proper policies and procedures,” said Mark Cave, Associate Director of the SEC’s Enforcement Division.

The SEC’s orders conclude that Harvest and Merrill violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder.

Without admitting or denying the findings, Harvest and Merrill agreed to be censured, receive cease-and-desist orders, and pay penalties of $2 million and $1 million, respectively. Harvest will also pay $3.5 million in disgorgement and prejudgment interest, while Merrill will pay $2.8 million in disgorgement and prejudgment interest.

Alternative Funds Continue to Reign in Chile

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The latest report from the Chilean Association of Investment Fund Managers (ACAFI) reveals that public investment funds reached $37.483 billion at the close of the first half of this year. Of the assets managed by new funds, 86% corresponds to alternative assets.

Despite the industry’s dynamism, the first half of the year saw a 1.9% decline compared to June 2023, mainly due to the evolution of the exchange rate, which posted an annual increase of 18.6% during this period.

However, when analyzing the total figures in Chilean pesos, the industry’s assets grew by 16.3% year-on-year, reaching CLP 35.647 trillion in June.

Focusing on just the second quarter of this year, the ACAFI report reveals that 31 funds were created between April and June. As a result, a total of 50 new funds were launched during the first half, representing $410 million in new assets under management.

During this period, alternative assets continued their upward trend. Of the assets managed by new funds, 86% were in this category, with private debt vehicles dominating preferences.

According to Luis Alberto Letelier, president of ACAFI, another key aspect is that half of these 50 new funds invest directly in assets in Chile, primarily in projects that promote development, such as renewable energy plants, loans for entrepreneurs and startups, and initiatives to facilitate access to housing.

Regarding private debt funds, Letelier asserts that the observed increase “demonstrates that they are consolidating as a source of financing for various productive sectors in our country, contributing to Chile’s growth.”

BlackRock and Santander Expand Their Alliance for Private Asset Financing

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BlackRock and Santander have announced the signing of a memorandum of understanding under which funds and accounts managed by BlackRock will invest up to $1 billion per year in specific financing projects, energy financing, and infrastructure debt investment opportunities with Santander through structured transaction formats.

The agreement continues a previous one in which funds and accounts managed by BlackRock agreed to provide financing for a diversified $600 million infrastructure credit portfolio of Santander.

“We are thrilled to extend our long-standing relationship with Santander through this agreement, which will provide long-term, flexible capital on a recurring basis to support the growth of their project finance franchise. At the same time, this collaboration will provide greater access to attractive and differentiated investment opportunities for our clients now and in the long term,” said Gary Shedlin, Vice Chairman of BlackRock.

“This framework agreement with BlackRock will allow us to continue proactively rotating our assets, further strengthening our financial position, and enabling us to generate capital for additional profitable growth. We look forward to working with BlackRock through this expanded partnership,” said José García Cantera, CFO of Santander.

BlackRock’s private debt franchise, valued at $86 billion, offers differentiated, flexible, and scalable financing solutions to a wide network of financial institutions and global corporate relationships. The company has developed one of the leading infrastructure debt franchises in the market, sourcing, structuring, and managing client assets with revenue-generating potential.

The Percentage of Companies Reporting Their Carbon Emissions Remains Stagnant at 80%

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To mark New York Climate Week, the global technology platform Clarity AI has presented its new study, “Carbon Reporting Trends: Has Global Progress Stalled?” The report shows that greenhouse gas (GHG) emissions disclosure by companies has reached a point of stagnation: 80% of companies in the MSCI ACWI index report their Scope 1 and 2 emissions, but only 60% disclose at least part of their Scope 3 emissions. The study also highlights significant regional disparities and ongoing challenges in the quality of Scope 3 data.

“Despite advancements in emissions disclosure in recent years, our results show a concerning stagnation,” said Nico Fettes, Director of Climate Research at Clarity AI. “With increasing disclosure requirements for financial institutions regarding financed emissions, the demand for detailed and accurate corporate emissions data continues to grow. However, many companies still do not provide the comprehensive information necessary for effective climate risk analysis. This lack of transparency not only hampers informed decision-making by investors and stakeholders but also limits the public’s ability to understand and respond to climate risks, thereby affecting efforts towards a more sustainable future.”

Only 60% of Companies Report Scope 3 Emissions

While nearly 80% of companies in the MSCI ACWI index have disclosed their Scope 1 and 2 data, only 60% report any of their Scope 3 emissions, leaving a significant gap. This result reflects a slowdown in the growth of Scope 3 disclosure, particularly in emerging Asian markets, where only 41% of companies report these emissions, compared to nearly 90% in Europe and Japan.

Scope 3 Data Quality Improves by 130%, but Gaps Persist

Since 2019, the quality of Scope 3 emissions data has improved by more than 130%, according to Clarity AI’s internal reliability models. This improvement is largely due to more companies reporting both a greater number of categories and more relevant Scope 3 categories. However, the overall quality of these data still falls short of what should be considered sufficiently high-quality disclosure, highlighting the need for more robust reporting practices.

U.S. Companies Are Closing the Gap in Scope 1 and 2 Disclosure

Companies in Europe and Japan lead in Scope 3 emissions disclosure, with nearly 90% reporting this data. In contrast, emerging markets in Asia are falling behind, with only 41% of companies disclosing Scope 3 emissions. However, the growth rate of disclosure has stabilized across all regions.

In the United States, significant progress has been made. Since 2019, when the disclosure rate was much lower, U.S. companies have reached a 90% disclosure rate for Scope 1 and 2 emissions, almost matching their European and Japanese counterparts. Nevertheless, like the global trend, only 60% of U.S. companies report any of their Scope 3 emissions, underscoring the ongoing challenge of achieving comprehensive emissions disclosure, even in regions where Scope 1 and 2 reporting has improved significantly.

BBVA Forms an Alliance with KKR and Invests 200 Million Dollars in Its Global Climate Strategy

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BBVA and global investment firm KKR have formed a strategic alliance to support the decarbonization of the economy. As part of this partnership, BBVA will invest $200 million (€187 million) in KKR’s global climate strategy, which focuses on large-scale investments in solutions that drive the transition to a low-carbon economy.

Both companies made this announcement during Climate Week held in New York this week. The agreement aims to identify new investment opportunities related to climate infrastructure, particularly those supporting the energy transition and electrification. It will also leverage the complementary strengths of both companies, facilitate knowledge exchange, and advance shared goals to accelerate the energy transition.

“We believe that in the second half of this decade, we will see strong growth in new low-carbon infrastructure. The opportunity is immense, and BBVA aims to become a leader in advising and financing to support our clients in the U.S. and Europe in building this future infrastructure across key transition sectors—Energy, Construction, and Mobility, among others. This ambitious alliance with KKR will be a key component of our sustainability strategy. Both teams will work together to seize this growth opportunity for our businesses,” said Javier Rodríguez Soler, BBVA’s Global Head of Sustainability and CIB.

“To tackle the major decarbonization projects the world needs, it’s essential to have top global investors and financial institutions. Large asset managers and international banks are needed to finance this transition and accompany all sectors on their respective decarbonization paths in an orderly manner. With KKR’s proven expertise in this field, we will share knowledge and combine teams, capabilities, and efforts in this strategic alliance to multiply investment in infrastructure and climate projects,” added Rodríguez Soler.

Emmanuel Lagarrigue and Charlie Gailliot, co-heads of KKR’s Global Climate Strategy, added, “We are still in the early stages of what will be a multi-decade transition to net-zero emissions, representing one of the greatest investment opportunities of our time and requiring the full participation of the financial sector. We are thrilled to collaborate with BBVA, given their leadership in the renewable energy sector and their deep commitment to mitigating climate change impacts.”

BBVA aims to support and help its clients transition to a more sustainable world. To this end, sustainability is at the core of its business and is one of its six strategic priorities. The bank has identified decarbonization and ‘green’ technologies as two of its priority investment areas. To support this, it has created a global financing unit specialized in clean technology or ‘cleantech’ innovation. The team, based in New York, London, Madrid, and Houston, offers financing and advisory services.

BBVA is actively investing in some of the most cutting-edge and innovative climate action funds, with the goals of achieving financial returns, participating in disruptive projects, and gaining knowledge of these technologies to better advise companies affected by these innovations and in need of financing.

On September 12, BBVA announced the creation of a sustainability hub in Houston, aimed at leading the financing of the energy transition in the United States.

BBVA Opens a Securitization Hub in New York for Global Clients

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The BBVA Corporate & Investment Banking (BBVA CIB) unit in the United States has strengthened its range of services to offer global capabilities to corporate and institutional clients with the creation of a specialized group focused on securitization solutions and bridge financing. This initiative responds to the growing demand for structured financing from global corporations seeking to optimize their capital efficiently, according to the company statement accessed by Funds Society.

Securitization is a key product that U.S. firms use as part of their financing tools, and it also has a strong connection with institutional clients. Additionally, it provides corporations with essential tools to improve balance sheet efficiency, while institutional investors can diversify their portfolios with high-quality assets, BBVA added.

Richard Burke has joined BBVA Corporate & Investment Banking in the United States as Head of the Securitization Business and will lead this specialized team, which is being established with an initial structure in New York and Madrid, providing services to clients globally. Burke brings valuable experience in creating and managing complex solutions for institutional clients.

Previously, Burke was Co-Head of the Securitization Unit for the Americas at Mizuho CIB, where he led the origination, execution, and management of transactions in ABS products, securitization, and lease finance. He also headed the Asset-Backed Finance Origination Unit at HSBC Americas.

Initially, BBVA will begin this activity by offering portfolio financing lines to corporate clients, and over time, will also develop the capabilities for ABS structuring and placement. This type of operation is closely coordinated with key BBVA CIB units, such as Investment Banking & Finance, Global Transaction Banking, and Global Markets.

“Our clients demand this product because it is a key tool to finance their operations more efficiently. This new offering will not only strengthen our current relationships but will also position us as long-term strategic partners for our clients in the United States,” commented Regina Gil Hernández, Head of BBVA CIB in the United States, who added that there is also growing demand from Financial Sponsors for this type of operation, due to the high demand for Capex for data centers related to AI and renewable project financing.

With this new hub, BBVA reinforces its commitment to offering solutions to its global clients, adapting to a constantly evolving financial environment, as explained by Javier Rodríguez Soler, Global Head of Sustainability and CIB at BBVA.

BlackRock, Global Infrastructure Partners, Microsoft, and MGX Partner to Invest in Data Centers and Energy Infrastructure for AI Development

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Asociación de BlackRock, Microsoft y MGX

The development of the most powerful AI capabilities will require significant investment in infrastructure. To this end, BlackRock, Global Infrastructure Partners (GIP), Microsoft, and MGX have announced the creation of the Global AI Infrastructure Investment Partnership (GAIIP) to invest in new and expanded data centers to meet the growing demand for computing power, as well as in energy infrastructure to create new power sources for these facilities. These infrastructure investments will primarily take place in the United States, driving AI innovation and economic growth, with the remainder invested in U.S. partner countries.

This partnership will support an open architecture and a broad ecosystem, providing full, non-exclusive access for a diverse range of partners and companies. NVIDIA will back GAIIP, offering its expertise in AI data centers and AI factories to benefit the AI ecosystem. GAIIP will also actively engage with industry leaders to help improve AI supply chains and energy sourcing for the benefit of its clients and the industry. The partnership will initially aim to unlock $30 billion in private capital over time from investors, asset owners, and corporations, which will in turn mobilize up to $100 billion in total potential investment when debt financing is included.

The founding members of the partnership bring together leading global investors such as BlackRock, GIP, and MGX, an investor in artificial intelligence and advanced technology, with financing and expertise from Microsoft. GAIIP combines deep knowledge of infrastructure and technology to drive the efficient scalability of data centers, along with investment capabilities in energy, power, and decarbonization for AI-related enabling infrastructure.

Commenting on this initiative, Sheikh Tahnoon bin Zayed Al Nahyan, Chairman of MGX, emphasized the importance of AI for the future of economies: “Artificial intelligence is not just an industry of the future, it is the foundation of the future. Through this unique partnership, we will enable faster innovation, technological breakthroughs, and transformative productivity gains across the global economy. The investments we make today will ensure a more sustainable, prosperous, and equitable future for all of humanity.”

“Mobilizing private capital to build AI infrastructure, such as data centers and energy, will unlock a long-term investment opportunity worth trillions of dollars. Data centers are the foundation of the digital economy, and these investments will help drive economic growth, create jobs, and foster technological innovation in AI,” added Larry Fink, Chairman and CEO of BlackRock.

Meanwhile, Satya Nadella, Chairman and CEO of Microsoft, stated: “We are committed to ensuring that AI helps drive innovation and growth across all sectors of the economy. The Global AI Infrastructure Investment Partnership will help us fulfill this vision by bringing together financial and industrial leaders to build the infrastructure of the future and power it sustainably.”

“There is a clear need to mobilize significant amounts of private capital to fund essential infrastructure investments. One manifestation of this is the capital required to support the development of AI. We are highly confident that the combined capabilities of our partnership will help accelerate the pace of AI-related infrastructure investments,” added Bayo Ogunlesi, Chairman and CEO of Global Infrastructure Partners.

Finally, Jensen Huang, founder and CEO of NVIDIA, stated: “Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution. NVIDIA will use its expertise as a full computing platform to support GAIIP and its portfolio companies in the design and integration of AI factories to drive industry innovation.”

MGX was founded in Abu Dhabi earlier this year to invest in AI and advanced technologies with global partners to enable the technological fabric of the global economy, focusing on AI infrastructure, AI-enabled technology, and semiconductors. The announcement marks a major partnership within these segments, building on the emirate’s track record of investments in data centers, computing capacity, and enabling infrastructure.

Significant structural forces are creating opportunities for private capital to partner with corporations and governments to provide funding for critical infrastructure needs. BlackRock has an extensive network of corporate relationships as a long-term investor in both debt and equity, while GIP specializes in investing, owning, and operating some of the world’s largest and most complex infrastructure assets. These combined capabilities position BlackRock as a leading global investment platform to make these critical investments in data centers and related infrastructure, mobilizing private capital to support economic growth and job creation while generating long-term investment benefits for its clients.

The Growth of ETFs Is Being Driven by Strong Capital Inflows

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The growth of ETFs is being driven by strong capital inflows across all asset classes, while market performance continues to boost mutual fund assets, according to the Cerulli Edge-U.S. Monthly Product Trends report, which analyzes mutual fund and ETF trends through August 2024.

ETFs reached $9.7 trillion in assets, marking a year-over-year increase of 30%, with inflows of $78 billion in August, as advisors continued to turn to this structure for an expanding range of exposures.

The report, released on October 1 by Cerulli, also notes that institutional investors are reallocating their risk budgets toward private market investment strategies.

Additionally, by the end of August, mutual fund assets amounted to $20.3 trillion, with a month-over-month growth of 1.7%, despite outflows of $42.3 billion and $600 million, respectively, from active and passive mutual funds.

As institutions work to reallocate their risk budgets toward private market investments, their strategies around vehicle selection are crucial for ensuring adequate funding.

While lower-cost traditional market vehicles enable institutions to achieve this goal, the pursuit of customization can often counterbalance the search for lower-cost funds, blurring trade-offs between vehicles that would otherwise be clearer, the report concludes.

What Does the Fed Know That the Market Ignores?

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On Wednesday, September 18 for the first time since 2020, the U.S. Federal Reserve lowered its benchmark interest rate. This wasn’t a surprise. In fact, the Fed’s Chairman, Jerome Powell, had already hinted at this move during the central bankers’ meeting in Jackson Hole last August.

It wasn’t unexpected for the market either. The U.S. Treasury bond curve had already priced in the Fed’s monetary policy pivot. Even equity markets, reflected in recent index highs, anticipated the move.

So, if the direction of monetary policy wasn’t the surprise, what was? The magnitude.

Eight out of ten Wall Street analysts expected an interest rate cut of 25 basis points. In simple terms, the benchmark interest rate was forecasted to drop by 0.25% to a range of 5.25% to 5.00%. However, that didn’t happen. The cut was 50 basis points. And just as history shows that “the market always kills consensus,” this time it was Powell and his team who carried that burden.

When asked why the aggressive cut, Powell responded, “We are not willing to lag behind events.”

From the Fed’s macroeconomic consistency standpoint, the decision is justified by its projection of higher unemployment rates by year-end and lower expected inflation. The year-end unemployment forecast has increased from 4.2% to 4.4%, while the inflation measure, “PCE Inflation,” is now estimated at 2.6%, down from the previous 2.8%.

Up to this point, there doesn’t seem to be any reason for concern. However, the market doesn’t entirely agree, does it?

After the Fed’s decision, volatility took hold, and indices turned from green to red. It’s true that at this hour, stock futures are pointing to a strong recovery, but the market remains uneasy. Could it be that the Fed knows something the markets don’t at this stage?

Looking at economic indicators and metrics that forecast activity levels, there are no clear warnings beyond a slight marginal deterioration in the labor and manufacturing sectors. Again, nothing alarming.

Therefore, for those who love history and have interests at stake, events may not repeat exactly, though they tend to “rhyme.”

In my view, the Fed’s aggressive move (unexpected to me) is driven by two key factors:

1. The institution doesn’t want to “interfere” in the upcoming presidential election process with monetary policy adjustments, removing any potential noise between the economy and politics.
2. Jerome Powell and his team want to avoid allowing the market to dictate the pace of future adjustments amid the current volatility and extreme sentiment that prevails in today’s times.

If this is indeed the case, investors should focus on the forest, not the trees. The global macro perspective of the monetary policy pivot should, in the medium term, bring a favorable risk-return payoff for emerging market assets, longer-duration corporate debt, and tactical sector-specific equities, seeking value beyond the broader indices.

Time will reveal whether the Fed indeed knew something the investing world didn’t, or if, in this instance, history wasn’t a leading indicator for what lies ahead in the coming months.