Trump’s Tariffs Could End Up Being an Opportunity for the European ETF Industry

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The total unpredictability and the unprecedented policy shifts of the Trump administration, along with Europe’s seismic response to these, have led to a drastic reversal in investor sentiment and positioning in recent times. Experts at Xtrackers by DWS have identified several significant changes in performance and asset allocation, including that investors are moving away from U.S. equities and the Magnificent Seven toward regions previously “forgotten” and with low exposure such as, for example, Europe and China.

“There is a clear reversal in the European narrative following the elections in Germany and the change in the U.S. approach to the conflict between Russia and Ukraine. From our point of view, this makes the recent rally in Europe more than just a reversal effect. In times of high uncertainty, ETF flows seem to indicate that the market has finally heard the wake-up call for greater diversification beyond U.S. large caps,” they explain.

Chart: Relative performance versus the S&P 500 (last 12 months, total return in dollars)

U.S. equity ETFs are seeing a sharp drop in new inflows, as investors turn to European, global, and emerging market indices.

One of the main conclusions they draw is that the market inflection point could open opportunities to recalibrate portfolios, as these are experiencing a key reversal of the so-called “Trump Trade”, with a sharp drop in U.S. equities so far this year. In contrast, they point out that more attractive valuations of European equities, along with announcements of larger infrastructure and defense investments, have pushed markets upward in Europe. “This movement is supported by structural factors, such as the new uncertainties around AI and the capital expenditure (capex) investment story that comes with it, as well as the renewed fiscal momentum in Europe,” they clarify in their latest analysis.

At the same time, they believe that geopolitical tensions could make recalibrating risk exposure a priority: “For investors, this represents a window to reposition their portfolios, diversify beyond traditional winners and take advantage of evolving macroeconomic and thematic drivers. Several regions and sectors have been identified as structural laggards by investors (including Europe, China, and the world excluding the U.S.). With very low initial sentiment and a new geopolitical environment, these could become candidates for sustained recovery.”

The New Narrative: Europe’s “Whatever It Takes”

On one hand, the experts point out that a possible ceasefire between Russia and Ukraine is improving market sentiment, which contrasts with the urgency of EU members to substantially increase defense spending, with the goal of reducing their dependence on the U.S. “Germany has announced plans to make major investments in infrastructure and defense, financed through a relaxation of the debt brake and a special fund of 500 billion euros. This could increase indebtedness and the public debt ratio, but at the same time boost economic growth. Other EU countries are likely to follow this path,” they note as an example.

From the firm, they expect these measures to accelerate growth, especially starting next year. Xtrackers forecasts estimate that Germany will grow 0.4% in 2025 and 1.6% in 2026. For the Eurozone as a whole, they project growth of 1% in 2025 and 1.5% in 2026. Meanwhile, the ECB has further supported European markets with interest rate cuts, making equities more attractive compared to traditional savings products and, over time, easing the interest burden for companies.

Lastly, private consumption is beginning to recover thanks to a surprisingly strong labor market and declining inflation. Additionally, macroeconomic surprise indicators have turned positive for Europe. “We believe the euro could strengthen in the short and medium term. Moreover, European stocks, especially mid-caps, which have lagged in the recent rally, could benefit from the planned spending increase,” the analysts explained, adding that Europe’s macroeconomic momentum has become a tailwind for equities so far this year, while U.S. indicators have turned downward.

“Positive economic environment, positive risk appetite, positive structural factors (the historically forecasted higher EPS should drive superior profitability over the cycle, the adjusted valuation of Europe’s SME sector compared to large caps is below the historical average), greater domestic market exposure than large-cap companies,” conclude the experts at Xtrackers.

The U.S. ETF Industry Records Net Inflows of $298 Billion in Q1

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The ETF industry continued to deliver record-breaking numbers: in the United States, the sector received net inflows of $298 billion during the first quarter, according to ETFGI’s March 2025 report on the state of the ETF and ETP industry. The report highlights that this figure is the highest ever recorded, and that March marked the 35th consecutive month of net inflows. Will the spell be broken going forward?

“The S&P 500 Index fell 5.63% in March and we are down 4.27% YTD in 2025. Developed markets excluding the U.S. index dropped 0.36% in March and rose 5.70% in 2025. Denmark (-11.58%) and the United States (-6.34%) posted the largest declines among developed markets in March,” said Deborah Fuhr, managing partner, founder, and owner of ETFGI.

“The emerging markets index rose 0.65% in March and 0.91% over the course of 2025. The Czech Republic (+14.00%) and Greece (+13.13%) posted the highest gains among emerging markets in March,” she added.

As of the end of March, the ETF sector in the United States comprised 4,140 products, with assets totaling $10.40 trillion, from 384 providers listed across 3 exchanges.

In March alone, ETFs recorded net inflows of $96.24 billion. Equity ETFs registered net inflows of $41.56 billion, bringing total Q1 inflows to $108.53 billion—surpassing the $106.41 billion in net inflows during Q1 2024.

Fixed income ETFs brought in $11.43 billion in net inflows in March, raising total Q1 net inflows to $56.66 billion, well above the $31.68 billion recorded in the same quarter of 2024.

Commodity ETFs saw net inflows of $6.61 billion in March, pushing Q1 inflows to $11.74 billion, a turnaround from net outflows of $4.93 billion in Q1 2024. Meanwhile, active ETFs attracted $32.28 billion in net inflows during the month, with Q1 net inflows reaching $120.78 billion—nearly double the $63.23 billion seen in the same period of 2024.

The top 20 ETFs by new net assets collectively brought in $72.98 billion in March. The iShares Core S&P 500 ETF (IVV US) gathered $23.63 billion, the largest individual net inflow.

Finally, the top 10 ETPs by net assets collectively gathered $519.03 million in March. The MicroSectors FANG+ 3X Leveraged ETN (FNGB US) saw the largest individual net inflow, totaling $186.27 million.

During March, investors favored investments in equity ETFs/ETPs, the report states.

U.S.: SMA-to-ETF Conversions Are Growing

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conversiones SMA a ETF en EE.UU.
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The tax efficiency offered by ETFs has made them the preferred structure for advisors. Given the rising wealth of U.S. retail investors, advisors are expected to continue focusing more on tax-minimizing solutions, and the transfer of assets from separately managed accounts (SMA) to the ETF structure may be one of the components, according to the study The Cerulli Edge–The Americas Asset and Wealth Management Edition.

In 2017, 29% of practices focused on high-net-worth (HNW) clients—those serving households with $5 million or more in investable assets—offered guidance on tax planning. That proportion had increased to 45% in 2023.

In a 2024 Cerulli survey, HNW firm executives ranked tax minimization first, alongside wealth preservation, as the goals they perceived as most important for their clients: 73% rated them as very important.

Beyond tax efficiency, operational efficiency—including cost—is a critical component of SMA-to-ETF conversions. “The use of the ETF structure can enable more agile security purchases and avoids the need to distribute them across accounts, a challenge that grows along with the number of accounts, the complexity of the strategy, and the lowering of the minimums to access SMAs,” says Daniil Shapiro, director at the Boston-based international consultancy Cerulli.

“Even if these ETFs are intended solely for the firm’s clients, the ETF structure solves a major operational challenge. It has been suggested that ETFs can help an advisor generate hundreds of thousands in cost savings,” he adds.

The addressable market for SMAs and other advisor-managed securities to be converted into ETFs remains difficult to define at this early stage. The Cerulli study estimates that the total figure for the SMA sector stands at $2.7 trillion, of which more than half ($1.6 trillion) corresponds to wirehouses, and another $484 billion to the RIA channel.

However, according to the study, 45% of advisors report using separately managed accounts, compared to 90% who use the ETF structure.

The average SMA allocation for an advisor is 7.7%, although it declines rapidly for lower-market-base practices. Advisors with $500 million or more in practice assets report a considerable allocation of 12%, which they plan to increase to 15% by 2026.

“It is possible that, although initial discussions around conversion focus on the benefits for RIAs, there is a broader group in the wirehouse channel,” notes Shapiro.

Cerulli states that the main challenges for these conversions will be price and scale. With ETF launch costs and annual operating costs running into hundreds of thousands of dollars each, wealth management firms will need to contribute significant assets for each ETF conversion to make it attractive,” says the Cerulli director.

The consulting firm believes there is a significant opportunity for white-label providers and ETF issuers to offer support to RIAs and other clients in the wealth management segment interested in launching their own ETF product or converting.

Direct Indexing Strategies Have Surged in Recent Years, but They Are Still Not Popular Among Financial Advisors

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UMH adoption challenges
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The industry’s attention around direct indexing has surged over the past five years. However, adoption of these solutions among financial advisors has yet to match the perceived popularity across the wealth management landscape, according to the report The Cerulli Edge–U.S. Managed Accounts Edition.

According to the Boston-based global consultancy, overall demand for separately managed accounts (SMAs)—including direct indexing strategies—remains high throughout the wealth management sector.

At the end of 2024, direct indexing assets totaled $864.3 billion, compared to $9.4 trillion in indexed ETFs and $6.6 trillion in mutual funds. Adoption of direct indexing models remains low at $17.2 billion, but this has more than tripled since Q4 2021.

About half of distribution executives in 2024 cited model-based SMAs (53%) and manager-directed SMAs (44%) as the most in-demand products for wirehouses and broker/dealers.

While demand is not as strong among independent registered investment advisors (RIAs)—with 27% demand for model-based and 34% for manager-directed—there is still substantial interest in these strategies.

By the end of 2024, direct indexing strategies accounted for 37.6% of manager-traded assets declared by SMA asset managers, more than doubling since 2020.

Although the sector has seen strong growth in direct indexing, there is still a long way to go, as only a small segment of financial advisors has adopted the solution.

In 2024, 18% of advisors reported using direct indexing strategies, up from 16% in 2023. More than a quarter of advisors (26%) choose not to use it despite having access to the strategy, and 12% do not know what direct indexing is.

“Advisor education is crucial for adoption, as it’s unlikely that advisors will recommend direct indexing strategies to their clients if they don’t fully understand them,” explained Michael Manning, research analyst at Cerulli.

“Wealth and asset managers who want advisors to adopt these solutions must make a concerted effort to educate them on potential use cases, added benefits, and the tax optimization element,” he added.

Although both the buzz around direct indexing and the interest from industry firms are significant, it’s important to remember that the core goal of these strategies is to deliver better outcomes for clients to help them meet their objectives.

“As the industry evolves and product innovation moves rapidly, stakeholders must continue to monitor how their offerings fit into the changing ecosystem,” said Manning. “Both wealth and asset managers are working to add these capabilities to their platforms, so adoption is likely to be uneven, and firms that create the best advisory experiences will gain market share,” he concluded.

CAIA Brought the Miami Alternatives Sector Together Again at a Networking Event

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CAIA Miami networking alternativos
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The gathering took place at Hutong Miami. And the industry said “present!”

Karim Aryeh and Miguel Zablah, members of the CAIA Florida Board of Directors, organized the Spring 2025 networking event, which once again brought together around one hundred professionals from the alternative investment sector in the city of Miami.

Sponsored by CORPAG and with Funds Society as media partner, industry participants shared an afternoon at Hutong, the venue specialized in Northern Chinese cuisine, where they met and networked.

Karim Aryeh, executive of CAIA’s Florida chapter and director at Deutsche Bank, was in charge of welcoming the attendees. In a brief speech, he reminded everyone that the Chartered Alternative Investment Analyst Association has 13,000 members in various parts of the world, more than 400 of whom are based in the state of Florida.

Aryeh emphasized CAIA’s primary mission: to promote education and transparency within the sector, and to build a community of professionals in the alternative investment industry.

Then, Enrique Travieso, Managing Director at CORPAG, introduced the company and its financial and trust services. He also announced that the firm has appointed a new director in Mexico.

In that setting, surrounded by appetizers and great company, industry professionals made new connections within South Florida’s investment community.

CAIA Florida, founded in 2016, has the mission of growing, strengthening, and promoting education in alternative investments and fostering networking among local investment communities throughout the state.

SK Capital Partners Names John Novak Head of Business Development

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John Novak SK Capital Partners
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SK Capital Partners has appointed John Novak as Managing Director and Head of Business Development. In this role, Novak will lead efforts to identify and execute new investment opportunities, working closely with the firm’s teams to support ongoing growth. 

“I am excited to join SK Capital and look forward to working alongside the firm’s talented team to help drive continued growth and success,” said Novak. 

Bringing over 20 years of experience in private equity and investment banking, Novak has a strong background in strategic relationship-building and deal sourcing. 

Before joining SK Capital, Novak served as Managing Director at Paine Schwartz Partners, where he led business development and capital markets initiatives, overseeing a robust pipeline of new investments. His earlier experience includes roles at Swander Pace Capital and Banc of America Securities. 

“John has a proven track record of building strong relationships and identifying compelling opportunities that align closely with SK Capital’s investment strategy,” said Mario Toukan, Managing Director of SK Capital. 

Loomis Sayles Appoints Eric Williams as Portfolio Manager

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Eric Williams Loomis Sayles appointment
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Loomies, Sayles & Company has appointed Eric Williams as a portfolio manager on its Full Discretion Team, focusing on high yield and bank loan strategies. His appointment is effective May 12, 2025. 

Williams joins from Northwen Trust Asset Management, where he was head of capital structure and a senior portfolio manager on the global fixed income team. He led several leveraged credit strategies and oversaw the firm’s actively managed leveraged credit platforms. 

The Full Discretion Team manages $79 billion as of March 31, 2025, and takes a deep-value, equity-like approach to credit selection. In 2023, the team consolidated its high-yield and bank loans strategies in response to changes in market structure and asset class overlap. 

Williams holds a BA in economics from the University of Colorado and an MBA in finance and economics from the University of Chicago Booth School of Business. 

“Eric brings a specific, proven set of skills in high yield and bank loan portfolio construction and management that are highly applicable to the Full Discretion Team’s approach to those asset classes,” said Matt Eagan, head of the Loomis Sayles Full Discretion Team. 

As part of the team’s continued alignment, current high-yield portfolio managers Matt Eagen and Peter Sheehan will also take on portfolio management responsibilities for the team’s bank loan strategies, effective May 12. 

Allvue Systems Launches Nexius Platform

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Allvue Systems Nexius platform
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Allvue System has launched the Allvue Nexius Intelligent Data Platform, a new cloud-based platform designed to help private capital markets manage their data more effectively. Nexius is designed to break down data silos, automate processes and deliver real-time insights to help firms make faster and smarter decisions. 

According to Allvue’s 2025 GP Outlook report, 88% of firms consider data and reporting important, yet only 6% are “very satisfied” with their current data platforms. The report also found that 65% of fund managers struggle with consolidating data, and 53% of private capital firms say data management is one of their top tech challenges. 

With firms using 50% more data sources than they did five years ago, managing investment data has become increasingly difficult. 

The Nexius platform addresses these issues by centralizing investment, accounting, and operational data into one unified system. It automates processes like capital call booking, investor onboarding and deal pipeline management, providing firms with real-time analytics and reducing manual work. 

“Nexius ensures data accuracy, automates complex workflows and delivers the real-time insights firms need to scale and succeed,” said Ivan Latanision, Chief Product Officer at Allvue Systems.

One of the main problems firms face is fragmented data, which leads to errors and inefficiencies. Nexius solves this by acting as a “golden source of truth,” integrating data from various systems and automating processes like capital call booking, investor onboarding and deal pipeline management. 

“Nexius offers a centralized platform that delivers real-time insights. The platform has the potential to save firms hours of manual work and ensure data is accurate,” said Davit Harutyunyan, Head of Product, Data.

Since its launch, Nexius has already been adopted by seven fund administrators and 30 individual General Partners, representing a total of 250 GPs. The platform is built on Snowflake technology, ensuring high levels of data security, compliance and auditability. It is also AI-ready, enabling firms to prepare and manage their data for future machine learning advancements. 

Key features of Nexius include real-time portfolio analytics, self-service reporting and enterprise-grade security. The platform is built on Snowflake technology, ensuring data is secure and compliant. It’s also designed to be AI-ready, allowing firms to prepare their data for future advancements in machine learning. 

“Our trusted software solutions, coupled with deep portfolio and industry insights, empower private market participants with greater transparency, faster value realization and smart decision-making,” said Latanision. 

Argentina Embarks on a Clearer Path: Analysts Welcome the End of Currency Controls

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Argentina ends currency controls
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On Friday, April 11, the Argentine government announced the lifting of currency controls that had been in place for 14 years. On Monday, April 14, local markets reacted with a rise in the dollar, while in Wall Street, Argentine bonds and stocks surged. By Thursday the 17th, ahead of the Easter break, international firms had begun to weigh in on the new phase.

Fitch: A Clearer Path Toward Reserve Accumulation

Argentina’s currency reform and the new IMF program offer a clearer path to reserve accumulation and a potential recovery of market access, which could improve the country’s sovereign credit rating of “CCC”, according to Fitch Ratings. Greater currency flexibility should only temporarily delay Argentina’s economic recovery and disinflation, and the authorities are now better positioned to manage this transition than in the past.

President Javier Milei’s program was successful last year, with a primary fiscal surplus of 1.8% of GDP, which allowed the end of Central Bank (BCRA) monetary financing. However, its reliance on a slowly evolving fixed exchange rate, capital controls, and financial repression to curb inflation and monetary imbalances—though initially effective—resulted in an overvalued peso.

The modest increase in international reserves in 2024 gave way to losses in 2025, as carry trade operations unwound. By March 2025, reserves had dropped to $24 billion and net reserves to negative $7 billion (after accounting for the China swap, legal reserves, and repos), practically unchanged since December 2023 when Milei took office.

The new exchange rate regime carries certain risks, which likely explains the authorities’ cautious approach. According to Fitch, it involves an initial devaluation of the peso that will temporarily raise inflation, which had already climbed to 3.7% month-on-month in March.

Dollar bond payments (interest and principal) total $8.6 billion in 2025 (half paid in January and the rest due in July) and will exceed $11 billion in the coming years.

Fitch says an upgrade of Argentina’s credit rating will depend on confidence in the future accumulation of international reserves and the recovery of market access, both necessary to comfortably meet these debt payments.

JP Morgan Recommends Buying Peso Bonds Until the Elections

A report from U.S. bank JP Morgan advises clients to increase holdings in Argentine peso-denominated bonds following the lifting of the “cepo” (currency clamp).

According to the bank, the new currency regime, combined with the IMF loan, clarifies the outlook for local fixed-income investments.

However, JP Morgan also warns of risks tied to tariff wars and the Argentine elections in October. At the end of that month, legislative elections will take place, with partial renewals of the Chamber of Deputies and the Senate.

Bank of America Praises the “Boldness” of the New Plan
“We believe the plan has a high probability of success in reducing inflation and rebuilding foreign currency reserves,” says a Bank of America report signed by analysts Sebastián Rondeau and Lucas Martin.

For the investment bank, it is a financial package: more concentrated than expected and with greater-than-expected financial support to back the new exchange rate system and debt payments.

Multilateral organizations will provide $21 billion this year. The IMF is contributing $15 billion in 2025 (out of a four-year $20 billion program), $12 billion of which will be frontloaded in an unprecedented 60% initial disbursement. The BCRA renewed a $5 billion swap with China and is seeking a $2 billion repo with banks.

BofA analysts do not foresee a feared bank run on the horizon as the new currency band system begins, thanks to strong financial support, the second-quarter harvest season, long dollar positions, tight monetary and fiscal policy, and temporary tax cuts for exporters.

The bank also expects currency control removals to continue, as the BCRA could rebuild reserves and support Argentina’s eventual return to the MSCI Emerging Markets equity index.

A View from Chile: Ending the Currency Clamp as a Decisive Step
Fynsa’s Latin American fixed-income expert, Cristián Zañartu, believes Argentina is at a decisive moment: “The currency clamp, in its various forms, distorted relative prices, created persistent exchange rate gaps, and hurt both investment and foreign trade. Today, with President Javier Milei’s decision to liberalize the exchange market for individuals, the country marks a turning point in its economic policy.”

“Although the initial financial impact has been moderate, it’s important to note that asset managers in Argentina will not see an immediate effect on their dollar flows as happened under Mauricio Macri. In fact, some investors have shown renewed appetite for peso-denominated instruments amid greater currency stability. However, by mid- or late-year, a stronger flow toward international financial products is expected, which could boost local demand for foreign assets,” Zañartu notes.

For the fixed-income expert, Argentina still faces its most complex challenge: fully liberalizing currency market access for institutional players.

In a Volatile Environment, most Latin American Benchmarks Declined in 2024

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Latin American benchmark indices 2024 decline
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In a volatile environment, most Latin American benchmarks declined throughout last year, which led to significant variations in underperformance rates among active managers depending on the country and asset class.

S&P Dow Jones Indices published its year-end 2024 SPIVA Scorecard for Latin America. This report assesses the performance of actively managed funds domiciled in Brazil, Chile, and Mexico against their respective benchmarks across multiple time horizons.

Thus, equity fund managers in Mexico and fixed income fund managers in Brazil fared better than most, as fewer than half of the funds in these categories underperformed their benchmarks. In all other categories, the majority of active funds underperformed in 2024.

“Performance slowed across most Latin American equity markets in 2024. With the sole exception of Chile, all other major equity benchmarks analyzed in this report posted negative returns during the year,” explained Joe Nelesen, Head of Specialists of Index Investment Strategy at S&P DJI.

These were some of the key highlights from the 2024 SPIVA Scorecard for Latin America:

  • Fewer than one in five active equity fund managers in Mexico (18.6%) underperformed their benchmark over a one-year horizon. Over longer time periods, however, outperformance remained a challenge.

  • The year 2024 marked the eighth consecutive scorecard in which Mexican equity funds had the highest three- and five-year survival rates among Latin American fund categories.

  • In 2024, 58.0% of Brazilian mid-/small-cap active equity funds underperformed their benchmark, while a wider majority of active equity funds underperformed in other categories, with underperformance rates of 84.7% among Brazilian large-cap funds and 83.1% for Brazilian equity funds overall.

  • While Chile’s equity market was the only one analyzed that posted a positive benchmark return in 2024, the majority of Chilean active equity fund managers (65.1%) underperformed the S&P Chile BMI over a one-year horizon, and the underperformance rate increased over longer periods.

  • Fixed income funds performed relatively well in 2024, with one-year underperformance rates of 28.7% and 30.7% for Brazilian corporate and government bond funds, respectively. However, underperformance increased significantly over time.

The report’s authors pose the question: Can investment results be attributed to skill or luck?

The answer suggests that genuine skill is more likely to persist, whereas luck is random and fleeting. Thus, one way to measure skill is through the persistence of a fund’s performance relative to its peers.

The Persistence Scorecard measures this consistency and shows that, regardless of asset class or style, outperformance among active managers is generally short-lived, with few funds consistently outperforming their peers.