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Jupiter Asset Management and the “Golden Era” for Active Management

Photo courtesyMatthew Beesley, CEO of Jupiter Asset Management

In troubled waters, fishermen profit. Financial markets are currently experiencing volatile times and, as a result, the power of active management is becoming increasingly relevant. That is the current environment, according to Matthew Beesley, CEO of Jupiter Asset Management, the England-based firm known for its focus on active management and high-conviction strategies. “I think we are in a period that may, in retrospect, be seen as a golden era for active management,” the executive said in an interview with Funds Society.

What has changed? After the advent of quantitative easing, there was a rather “indiscriminate” inflation in asset prices. That context, notes Beesley, made it harder to outperform the broader market. “It was simply about beta trade,” he comments.

After a decade of expansionary monetary policy, that has normalized considerably, the professional explains, with inflation becoming a persistent concern and the rise of geopolitical uncertainty. “Even without wars and challenges, we are also in this period of deglobalization,” he notes, with countries and blocs trying to assert themselves more strongly on the unstable global stage and a “very unpredictable U.S. president.”

The golden era

This is the context in which active management truly shines, according to Jupiter’s CEO. “That creates a very volatile environment, but that is where active managers can really add value,” he says, something that has delivered strong results for the European firm.

Lower correlation between assets, increased dispersion in investment strategy returns, and higher volatility create fertile ground for the sector.

“Market dislocation creates opportunities for agile managers. You don’t have that benefit as a passive investor. That’s why active management can add a lot of value in these times, because you have the ability to take advantage of these short-term opportunities,” in Beesley’s words.

While passive management still has a role to play in portfolio construction, he adds, active investment selection contributes significant value.

Additionally, the main driver of passive management has also leveled out: cost. The price of active management has decreased over the years, he explains, narrowing the cost gap with passive strategies.

Diversification beyond the U.S.

Among different investment strategies, a notable ongoing trend that catches Jupiter’s CEO’s attention is investors’ view on the U.S., a market to which global capital is generally overexposed.

“There are some themes that are consistent across all markets. One is that U.S. equities have become quite expensive, and many people are already well positioned in U.S. equities,” the executive explains. Along these lines, a prevailing trend is to “look at everything that isn’t” that asset class.

This does not mean that investors are withdrawing money from the U.S. stock market, he clarifies. While there was some outflow from the asset class at the beginning of the year, it reversed in March. And it is difficult for the world’s largest economy to lose its privileged place in global portfolios.

However, there has been a reconsideration of portfolio weights: “Many people are overweight U.S. and are questioning whether that is the right decision,” the professional explains.

As a result, more international capital is looking toward Europe and Asia, seeking investments that provide income, both in equities and fixed income.

They have also seen widespread interest in liquid alternatives, driven by the challenges of these two categories. “People want daily liquidity, but they want things that are not correlated with equity or fixed income markets,” he notes.

Jupiter’s formula

In this context, the British asset manager is exploring its future options. While they completely rule out entering passive management—considering that their brand “is built on active management,” Beesley emphasizes—they are interested in the possibility of expanding into new asset classes.

“Everything we do is in liquid public markets,” he comments, but “there may be opportunities in somewhat less liquid public markets.” In that sense, one possibility would be to expand along the risk-liquidity spectrum in fixed income, where instruments such as credit restructuring, defaults, ABS (asset-backed securities), and CDOs, among others, are found.

“There are no plans at the moment,” the firm’s CEO emphasizes, but it is a possibility on their radar. “There are some less liquid fixed income asset classes that could fit quite well within Jupiter,” he adds, pointing to the “gray area” between truly private and truly public markets. “There may be opportunities for us to move there over time,” he says.

Additionally, there is the technology component, which they have been leveraging as a tool for operational efficiency. In this regard, Beesley notes that artificial intelligence will “definitely” help the sector add value for investors.

“We incorporate AI into everything we do, in our teams and investment processes,” including supporting systematic strategies, he says. And while technology is not yet driving revenue growth, it is helping them become more efficient. “We have a statistic that the average Jupiter employee has saved around 42 minutes a day on tasks now handled by AI. It doesn’t sound like much, but it is quite significant,” he explains.

M&A on the horizon?

Jupiter Asset Management has played a fairly active role in the industry’s mergers and acquisitions activity. In recent years, they have acquired two firms: CCLA Investment Management Limited, the asset manager associated with charities and the largest church in the UK, and Origin Asset Management, which manages global funds.

Looking ahead, they remain open to potential acquisition opportunities. “We have excess capital, so we have resources to invest,” Beesley emphasizes, adding that they are “still looking at opportunities to grow our business through M&A.”

While there are no concrete plans on the horizon, Jupiter’s CEO says they are looking at firms “where we can find differentiated investment capabilities or access to markets where we are not yet present,” with niche strategies.

On the other hand, they rule out being sold and becoming part of a larger firm. Many investment companies currently merging, he notes, are seeking to consolidate a scalable operating model to improve their cost base. That is not the case for Jupiter, he adds, so they have no need to be acquired by another asset manager.

Shanti Das-Wermes (MFS IM): “Since 2020, the Change in the Cost of Capital Has Been Underestimated”

| By Marta Rodriguez | 0 Comentarios

Throughout the day, Shanti Das-Wermes, Portfolio Manager at MFS Investment Management and lead manager of the Prudent Capital Fund, faces numerous reports, headlines, and analyses. As she acknowledges, her trick to isolate herself from the noise is to focus on the numbers, work hard, be willing to learn and change her mind, and to surround herself with people who have strong expertise.

This is her work mantra for managing the Prudent Capital Fund, a multi-asset vehicle with a portfolio concentrated in a variety of fixed income instruments and bonds, and which can invest in cash and derivatives to manage market exposure and downside risk. The strategy invests with a long-term approach, emphasizing absolute value rather than relative value. To discuss how to approach a multi-asset portfolio, the role these types of portfolios play today, and why they have fallen out of favor, we spoke with Das-Wermes in this interview.

What lessons from your professional career do you consider helpful in your role as a fund manager?

I have had several experiences throughout my career. I started in strategy consulting, then worked in private equity, and finally in public markets, from which I have learned to feel comfortable with the idea that you can be wrong. The current context requires us to think in terms of probability and to remain open to changing our minds. Additionally, for me, something consistent and universal has been the value of hard work and continuous learning instilled by my family. Thinking this way and having these values, I believe, is very helpful.

Of course, to this we must add relying on numbers and data to manage any fund. Many times, the market tells us one narrative, but the numbers show us a different one. A clear example of this is artificial intelligence (AI), where the numbers of many companies tell a somewhat different story from what the stock price or the rhetoric or the messages on social media might suggest.

In the current context, we talk about noise, geopolitical risks, stagflation, and even a possible energy or inflation shock. Do you think there is something the market is underestimating?

The structural change that I believe has been underestimated since the end of 2020 is the cost of capital. After all the monetary and fiscal stimulus, I consider this something the global market has underestimated. And this, obviously, led to serious repercussions in asset performance in 2022, when interest rates rose.

Another aspect that I believe is underestimated is the impact of structural changes on valuations. We are in a historical moment where decades seem to pass in just a few years, where all megatrends are moving very fast—technology, demographics, energy, artificial intelligence, wars—yet in some ways the market shows us that valuations imply a high degree of certainty about what may happen. I believe there is a great deal of uncertainty about how these structural changes will impact the economic, political, and market order.

How has the market environment and the way of building portfolios changed with the new interest rate environment and its outlook?

For our multi-asset portfolios, which are capital preservation funds, this has led us to focus on shorter durations in fixed income and to remain focused on companies without leverage and with pricing power in equities. For us, our philosophy of creating value in real terms remains very important, which, put simply, means generating a real return above the inflation rate in order to increase our clients’ purchasing power. To achieve this, we see it as necessary to be dynamic within the portfolio, both when selling assets and when adding new positions.

In the past 12 months, we have seen many launches of fixed income and equity strategies, but not multi-asset products. What can be said in defense of this type of vehicle in the current market context?

I believe the flexibility it offers to move between different asset classes is very relevant, and I say this from experience, not theory. With a multi-asset strategy, we can be much more dynamic and diversified. For example, in our fund, which has no constraints, we can move across markets, countries, or sectors where we see opportunities. Our job is simply to find those opportunities and take them wherever they are. And we do so in a concentrated way, which is very different from a typical multi-asset fund that may hold 300 or 350 stocks. We aim to hold around 20 to 40 positions.

When an investor includes a multi-asset fund in their portfolio, what role are they seeking for that fund within their overall investments?

It depends greatly on the client. Many of our distribution channels, of course, involve intermediaries, and the fund may serve the function of constituting the entire portfolio or, in other cases, be considered a somewhat more conservative position compared, for example, to equity funds that provide much higher beta; sometimes it may even be used to offset a more contrarian position. Without a doubt, this depends heavily on the client profile and the intermediary profile. For our mandate—and I do not think this is necessarily the same for all multi-asset funds—the strategy serves the function of capital preservation across different stages of the cycle.

Among all the assets in your portfolio, where do you currently see the best opportunities?

It is worth noting that the fund is positioned relatively conservatively, as we believe that current valuations imply low or possibly negative future returns. That said, one of our largest positions is in U.S. Treasury bonds, on the short end of the curve, since the base currency is the dollar, but also in mortgage-backed securities and corporate credit. In equities, we are finding opportunities in subsectors related to AI, within this context of winners and losers that has been shaping the sector. We also see other sectors that, cyclically, are in a position favored by AI, where it is interesting to take long-term positions, as well as some cyclical sectors such as chemicals or construction. In defense, we have also maintained our exposure, which began after COVID, particularly on the European side.

María Hebditch (Insigneo): “Solid Careers in This Industry Are Built with Time, Discipline, and a Genuine Focus on Providing Value”

| By Marta Rodriguez | 0 Comentarios

María Hebditch, Managing Director at Insigneo and winner of the Lifetime Achievement of the Year category at the Gen-Wealth Awards by Funds Society in collaboration with CFA Society Miami, is proof that “solid careers in this industry are built over time, with discipline and a genuine focus on providing value,” as she herself acknowledges.

With more than 30 years of experience in the industry, Hebditch continues to emphasize the importance of ongoing education and learning not only from changes in global markets, but also from how client needs evolve. Her vision of this profession, which has passed the most significant market “tests” of recent decades, has led her to set a single goal: “After having built long-term relationships, I would like to continue seeing those families grow and evolve, accompanying new generations in making increasingly complex financial decisions.”

Within the framework of the Gen-Wealth Awards ceremony during the Funds Society Leaders Summit in Miami, we spoke with her to learn her reflections on her career, the industry, and her contribution to the sector.

What have been the most relevant milestones that have shaped your trajectory as a financial advisor?

I would highlight the successful management of portfolios during different economic cycles and financial crises such as the one in 2008. I would also highlight the evolution toward comprehensive advisory, incorporating tax and estate planning. Beyond financial results, one of the most significant achievements has been the trust built over time, reflected in multigenerational relationships: today I have the privilege of advising not only my original clients, but also their children and, in some cases, even their grandchildren.

How has your value proposition for clients evolved over the years, especially in an increasingly sophisticated and global environment?

My value proposition has evolved from a more investment management-focused approach toward comprehensive advisory. Today, clients not only seek returns, but a global view of their wealth. This involves integrating tax planning, estate planning, international structuring, and risk management. Additionally, in a more sophisticated environment, I have incorporated greater diversification, including global and alternative assets.

In your experience, what structural changes have defined the evolution of wealth management in the U.S. and in Miami in particular?

In the U.S., I would highlight three major structural changes: first, increased regulation and transparency; second, the globalization of investments, which has significantly expanded the universe of opportunities; and third, the growing sophistication of clients, who now demand more comprehensive and personalized solutions. In Miami, these changes have been amplified by its positioning as a gateway for international capital. The city has evolved into a key financial center for Latin America, with a growing concentration of clients requiring cross-border advisory, efficient structures, and a global perspective. This has raised the level of demand and professionalization in the industry.

Miami has consolidated itself as a key hub for international investors. How has this dynamic influenced your client base and your advisory approach?

In my particular case, I have focused on Mexican clients who previously had stronger ties to markets such as Houston or San Diego, and who now see Miami as a key hub. This has raised the level of sophistication and driven a much more global and structured advisory approach.

What motivated you to join Insigneo Advisory Services, and what does this firm contribute to your advisory model?

My decision to join Insigneo was heavily influenced by the fact that my two children were already part of the firm and were very satisfied with its culture and platform. Beyond that, Insigneo offers a solid platform, with multi-custody and open architecture, as well as an increasingly relevant focus on Latin America. Additionally, it provides strong support in market analysis and resources across different advisory areas, which allows me to complement and strengthen my day-to-day work as an advisor. All of this, together with the possibility of ensuring continuity for my business, were the main reasons.

Throughout your career, what do you believe is the key to managing different market cycles? What key lessons would you pass on to current investors?

The key has been maintaining a long-term perspective and discipline in decision-making. Market cycles are inevitable, but what matters is avoiding emotional decisions in moments of volatility and maintaining proper diversification. One of the main lessons is that capital preservation is just as important as growth. And that planning, beyond the short term, is what truly allows one to navigate different market environments successfully. To today’s investors, I would say to remain consistent in their strategy and rely on professional advice to avoid reacting impulsively.

Looking ahead, how do you think the role of the financial advisor will evolve in the coming years?

I believe the advisor’s role will evolve toward an even more strategic and comprehensive figure. Investment management will remain important, but the real value will lie in the ability to integrate different aspects of wealth: tax planning, estate planning, and coordination with other specialists. Additionally, technology will play an increasingly relevant role. However, the human component—trust, judgment, and closeness—will remain irreplaceable.

If we now focus on younger colleagues in the industry, what three values do you admire in them?

First, their ability to adapt to technology and new tools, which allows them to be highly efficient. Second, their global mindset, with a more open view toward different opportunities and markets. And third, their interest in innovation and in questioning traditional models, which is key to the industry’s evolution.

If you had to give advice to a young financial advisor starting their professional career now, what would you say?

I would tell them to prioritize building long-term trust-based relationships over short-term results. This is a profession based on credibility and consistency. Also, to invest in continuous education, not only in financial topics, but in understanding the client as a whole: their goals, their family context. And finally, to be patient. Solid careers in this industry are built over time, with discipline and a genuine focus on providing value.

The Dollar Moves from the ‘Petrodollar’ Thesis to a Bullish Outlook

| By Marta Rodriguez | 0 Comentarios

During the first quarter of the year, the dollar showed a sideways/downward trend with volatility, especially in March. According to experts, we are witnessing a transition from a strong dollar—as seen between 2022 and 2024—toward a more neutral, and even weak, environment. In this regard, the first three months have resulted in a slight depreciation of the dollar and an open debate about its role as a global benchmark and its fundamentals.

“The obituary of the U.S. dollar has been written many times, with increasing frequency over the past year, but most of the catastrophic analyses of the currency focus on only one side of the equation and overlook the full picture,” laments Sonal Desai, CIO of Fixed Income at Franklin Templeton.

The Failed ‘Petrodollar’ Thesis

As a result of this connection, the “petrodollar” thesis has gained traction, arguing that the dollar’s dominance is sustained by oil trade being denominated in U.S. dollars, and that the shift of crude exports from the Middle East to Asia, along with the localization of Gulf defense spending, signals the beginning of the end of dollar hegemony. In Desai’s view, this perspective is notably simplistic: “It partially reverses the causal relationship. Oil-exporting countries have a strong self-interest in receiving payments in dollars because of what dollars represent: access to the deepest and most liquid capital markets in the world, supported by an institutional and legal framework that protects property rights and enforces contracts, and backed by a strong, dynamic, and innovative economy.”

According to the Franklin Templeton expert’s analysis, three pillars sustain this system: the scale and dynamism of the U.S. economy, institutional credibility, and unmatched market depth. “There is also no credible alternative; the euro lacks a unified large-scale safe asset; the renminbi operates under capital controls; and digital currencies may settle transactions but do not provide the store-of-value function required of a reserve currency,” Desai adds.

An Open Debate

She also argues that the data supports this view in areas such as reserves, payments, foreign exchange trading volumes, and the depth of the Treasury market—metrics not typical of a currency in decline. “Dollar weakness is cyclical, not structural, although its true vulnerability lies in U.S. fiscal policy. For investors, I maintain a constructive view on the dollar’s status as a reserve currency in the foreseeable future and would recommend staying agile at the margins and focusing on fundamentals. I believe investors should look at bilateral exchange rate movements rather than betting on the end of the dollar dominance regime,” she concludes.

However, Thomas Hempell, Head of Macro & Market Research at Generali AM (part of Generali Investments), is more critical and emphasizes that, in the short term, the evolution of the U.S. dollar remains closely tied to how the conflict in the Middle East unfolds. “It is not so much that the dollar has regained its role as a safe haven, but rather the effect of oil prices: when oil rises, the dollar now tends to benefit, as the United States has become a net energy exporter. By contrast, the euro and the yen are affected, as Europe and Japan import much of their energy, so rising oil prices worsen their trade balances and growth outlook,” he argues.

Outlook for the Dollar

Looking ahead, Hempell expects the dollar to weaken again if the war subsides soon and oil prices decline. He argues that global investors are likely to continue diversifying their portfolios away from the dollar, and that a conflict with Iran could even erode the system’s reliance on the petrodollar. “This maintains the medium-term upward trend of the euro/dollar pair, although to a lesser extent than we would have expected before the war, as energy prices are likely to remain structurally higher and the eurozone recovery will now be more moderate,” he explains.

Economists at BofA are also bearish on euro/dollar in the short term: “Our forecast for the end of the second quarter is 1.14, with downside risks.” Their thesis is that persistently high energy prices generate stagflationary pressures globally and a slower convergence of growth between the U.S. and the eurozone. In addition, the divergence between the Fed and the ECB that BofA economists expect later this year creates an interesting backdrop: on one hand, an ECB focused on preserving its inflation credibility versus a Fed prioritizing the labor market could support euro/dollar; on the other hand, they acknowledge that the outlook becomes more complex when analyzing forecasts in real terms.

“Beyond short-term factors, the dollar still faces potential downside risks from the U.S. labor market, private credit, and rising fiscal risks. In the longer term, the implications of the shifting geopolitical environment will continue to raise questions about optimal exposure to the dollar. We forecast euro/dollar at 1.20 by year-end, contingent on the Fed not raising rates, energy normalization, and gradual growth convergence between the U.S. and the eurozone,” they conclude.

Productpalooza: The Bets That Flourish Amid Volatility

| By Marta Rodriguez | 0 Comentarios

Photo courtesyFrom left to right: Alejandro Guardiola, from Insigneo; Alberto Arrambide, from Sabadell; Denise Desaulniers, from Banco BCI; and Cristina Vergara, from BTG Pactual (Source: @mybest.photo)

Global markets are experiencing unusual times, with a landscape of uncertainty and volatility that would have seemed unthinkable a decade ago. In a minefield of inflation expectations, geopolitical conflicts, and rapid technological transformation, investors and asset managers have been adapting to choppy waters, relying on a variety of strategies. This is the context in which the Productpalooza 2026 panel took place, within the framework of the Funds Society Leaders Summit.

The event, organized jointly by Funds Society and CFA Society in Miami, featured a range of perspectives from leading international investment firms, and the focus on investment products was no exception. Moderated by Alejandro Guardiola, Investment Solutions Product Manager at Insigneo, it brought together the views of Sabadell, Banco BCI, and BTG Pactual on the different assets and vehicles that have flourished in the current environment.

Technology Reigns on All Fronts

The sector that has driven Wall Street’s rise for years was the first topic discussed. “Technology is where everything is happening right now,” in the words of Alberto Arrambide, SVP Portfolio Manager & Head of Discretionary Investments Unit at Sabadell.

First with the emergence of the internet, the software boom, and the widespread adoption of social media, and now with artificial intelligence (AI), technology companies are “what has been shaping the world since we started our careers,” the professional noted, evolving over the years and shaping the broader business environment.

And this goes beyond the names in portfolios, affecting the investment management business itself. “Technology is one of the major themes, not only as an investment, but also at the level of solutions for clients,” explains Cristina Vergara, Executive Director of Offshore Funds at BTG Pactual, with digital platforms facilitating and improving service across different client segments.

The Moment for Structured Notes

With U.S. President Donald Trump and the dynamics of AI-related stocks, Banco BCI sees investors increasingly interested in structured notes. “They have wonderful features for clients to invest in shorter-term products,” with characteristics such as guaranteed coupons and discounted put strikes on major technology stocks, explains Denise Desaulniers, SVP and Head of Investment Solutions at the firm.

“It’s not a new theme, but one that is becoming more popular,” she says, adding that “clients are enjoying selling calls and puts.” Moreover, there is now the option to invest in various ETFs with options-selling strategies within indices, further expanding the investable universe.

Considering how much equities have already grown in the recent past, this type of strategy appears particularly relevant, in her view. “It’s a great investment right now. I don’t see the market achieving another 20%+ increase this year, so you definitely want to be selling both sides of the market,” she comments.

The Appeal of Specialized ETFs

Speaking of index funds, another area identified as a useful tool in these times is specialized ETFs.

While in fixed income Vergara emphasizes that “active management has been able to generate returns above the benchmark, creating significant value,” exchange-traded funds also help refine portfolio construction.

“Specialized ETFs, in both fixed income and equities, play a major role in achieving the exposure you want in a portfolio,” says the BTG Pactual executive. With these instruments, she adds, more specific objectives can be met within the portfolio, while also enabling active management of those components.
In this regard, she highlights a preference for flexible fixed income funds.

Emerging Markets and Their Opportunities

In equities, the panel’s investment professionals emphasized the opportunities that have opened up in emerging markets.
Latin America, in particular, is seen as fertile ground in the current landscape. At Banco BCI, there is a growing inclination toward these markets within the emerging universe, due to the “short-term commodities boom.” “They are benefiting from higher oil prices, and metal prices have performed well in recent years,” notes Desaulniers, which favors the region.
She adds that they also like Asia, although rising oil prices are less favorable there. China remains the world’s second-largest economy, she emphasizes, and they also see opportunities in Taiwan, South Korea, and India.

That said, it is important to note that the emerging world has changed from the days when the entire category moved in sync with globalization trends of the past. “Emerging markets have become much more complex than before,” says Arrambide of Sabadell, with greater granularity and a wider diversity of dynamics, sectors, and companies.

The Demand for Personalization

Beyond the assets that make up portfolios, the industry is also witnessing an evolution in investment management formats. It is no longer enough to offer access to specific vehicles or assets; clients are seeking a “more holistic service,” highlighting the need for adaptability, according to Vergara.
This has translated into a shift in product offerings. “The entire industry has been moving more toward client solutions,” she explains, with an emphasis on portfolio construction and client education so they understand their investments.

In this vein, her firm has observed a shift among investors toward managed accounts, an area that has generated significant interest, as it provides “more personalized services and better advice.”

However, while personalization is important, it also presents challenges. In the case of discretionary mandates, there is the difficulty of managing customized portfolios while making decisions across a large number of accounts.

At Sabadell, they manage around 1,200 discretionary mandate accounts, so “you achieve a certain level of personalization, but you need strong control to manage those customizations,” reports Arrambide. “When we make decisions for a portfolio, we practically make them for most of them,” he adds, noting that they are working on “other tools to achieve greater granularity in personalization.”

This is possible, he explains, because there is now access to instruments such as structured products, which provide exposure to private markets, as well as tools like active ETFs and separately managed accounts (SMAs).

Fixed Income, AI, Real Assets, and Longevity, the Essential Themes in a Changing World

| By Marta Rodriguez | 0 Comentarios

Photo courtesyFrom left to right: Alicia Jiménez, CEO of Funds Society; Nicholas Chbane, CIMA, Director RIA South at VanEck; Fernando de Frutos, CIO at Mora Capital Group; Karlan Patel, Vice President ETF Investment Strategies at State Street Investment Management; and Ahmed Riesgo, Chief Investment Officer of Insigneo.

The recently held Funds Society Leaders Summit in Miami featured a panel in which chief investment officers and representatives from various ETF-specialized firms analyzed the state of the markets in general and the technological revolution in particular. The panel, “Alpha, Beta, and the AI Revolution: A Dialogue with Miami CIOs on Risks and Opportunities,” moderated by Alicia Jiménez, CEO of Funds Society, began with the perspective of Fernando De Frutos, CIO at Mora Capital Group, who noted that it is not usually a “good idea to base investment portfolios on geopolitics,” although he admitted that this time “it might be different.”

Here, the Mora Capital expert explains that market volatility “is very low, at the same time that extreme risks are increasing. And that is quite unusual.” Therefore, although “there are very good reasons to be optimistic about equities, we are getting used to sharp corrections and very rapid V-shaped recoveries,” and he insists that he does not believe “we should prepare for the worst-case scenario, but markets have probably become too complacent in considering extreme risks, such as the possible permanent destruction of infrastructure.”

Also regarding the influence of geopolitics on investment strategies, Ahmed Riesgo, Chief Investment Officer of Insigneo, emphasized that “geopolitical risk and conflict will be a constant in the system over the next 10 or 15 years.” For now, he sees the need to hedge positions in oil within portfolios, where “there is a kind of permanent geopolitical risk premium.” Even so, he expects crude oil could stabilize around $80. He also observes factors “behind the scenes of the market that overshadow any type of geopolitical conflict, and it revolves around AI.” The impact of artificial intelligence, according to Riesgo, “is a trend that is driving productivity worldwide” and, although it is somewhat more advanced in the United States, “over time, it will outweigh any impact that a particular crisis might have.”

Karlan Patel, Vice President ETF Investment Strategies at State Street Investment Management, drew on the firm’s index measuring investor risk and sentiment—both retail and institutional—to conclude that the average institution holds around 20% of its portfolio in cash, a percentage that “has remained stagnant over the past five years.” However, that position drops to 5% or 6% in the retail segment. “I would say the average institutional investor now maintains a neutral stance, which gives us some sense that markets have reasons to rise.” But as a counterpoint, Patel does not observe that “a lot of money” is being invested.

For his part, Nicholas Chbane, CIMA, Director RIA South at VanEck, offered his perspective on how to generate returns safely. To begin with, he defined the firm as an expert in “macroeconomic themes,” so its efforts are focused on long-term trends. He starts from the premise that the trend of devaluation will persist due to “continuous money printing, digitization, AI, and improvements in productivity and efficiency.” In this way, he acknowledges that he sees opportunities in AI and related industries, while perceiving risks in traditional fixed income.

Ultimately, for Chbane, real assets “are the area to be in” to hedge that devaluation risk, but also to “take advantage of the opportunity in the development of AI infrastructure, because they include many of these underlying components, whether gold, nuclear energy, natural resources, traditional energy, infrastructure; they have generated annual returns above 20% over the past five years.” Within fixed income, Chbane believes that “creativity is key.” Here, he acknowledges that they have been successful “capturing assets and CLOs over the past two years” and sees appeal in emerging market debt, which combines protection against deflation with higher real yields.

Interest Rates and Fixed Income

Fernando De Frutos, regarding central banks’ monetary policy and its impact on investment decisions, notes that the 60/40 portfolio “is not dead,” as interest rates are much closer to inflation. “We have comfortable returns of 4%–5% with investment grade,” he states, and observes that “carry will continue to help,” so from a portfolio management standpoint, “it is a good asset to be in.”

For his part, Riesgo believes the environment is positive for both fixed income and equities but adds that it will depend on the region. He recommends buying equities from Western countries and fixed income from Eastern economies. “I like the Chinese technology sector, but I prefer U.S.-listed companies,” he notes. Regarding fixed income, the opposite applies: “I prefer Chinese sovereign bonds to U.S. Treasuries,” which does not mean they do not hold U.S. fixed income in their portfolios.

Even so, he believes it makes sense to diversify into markets such as Australia, Canada, and New Zealand, since “their fiscal position is much better.” The reason for his preference for Western equities lies in the fact that innovation is based in the United States. “U.S. companies are better at generating profits than those anywhere else in the world. That’s why U.S. equity markets perform better. And I don’t see that changing. In fact, I almost foresee this trend accelerating over the next two years,” he states.

Regarding interest rates, Riesgo believes that “many people spend a lot of time and attention on this issue, as well as media coverage,” and considers that whether the Federal Reserve cuts rates once or twice, or does not cut them this year, “really won’t make a big difference. For a holder of 10- or 30-year bonds, there could be a minimal difference, but it won’t actually change anything.” He does not expect the monetary authority to enter a cycle of sharp cuts or pronounced hikes over the next six months to a year. Therefore, he sees value in buying Treasuries “if things get really bad” in Iran, but the scenario will not be unfavorable even if his base case unfolds.

From a practical standpoint, Patel believes that in the high-yield segment “it is essential to adopt active management.” For the core portion of fixed income portfolios, bank loans stand out to him, which “are very particular, but require an expert in that area to navigate properly.” As for equities, “it is entirely possible to express tactical strategies” with passive instruments. At this point, he explains that in a 60/40 portfolio, 6% can be allocated to three main sectors with a 2% weighting each. With this decision, “the portfolio’s standard deviation does not change, but now significant exposure to factors in the direction of those sectors is assumed,” including technology and utilities. In general, according to Patel, passive instruments provide all the options needed to express both alpha and beta.

Artificial Intelligence, Longevity, and China

Technology was one of the central themes of the panel. Chbane notes that the economy is moving into the adoption phase of artificial intelligence, which “raises concerns about how certain industries will be affected and who the winners and losers will be.” He acknowledges that “it is very difficult to predict who the winners will be,” making technological diversification and analysis of implementation challenges essential.

In this regard, Chbane identifies two bottlenecks: computing—related, for example, to semiconductors—and electricity. “We manage a semiconductor ETF that is already approaching $50 billion and continues to attract investments because there is a strong need for chips,” he notes. Regarding natural resources, they also represent an opportunity “because the new digital world cannot be built without real-world assets,” such as land, buildings under construction, electricity supply, materials for chips, servers, and data centers. Even “nuclear energy as a diversification factor to meet future energy needs.”

Riesgo pointed out that the market is currently focusing only on a couple of layers related to AI. He mentions longevity as a side effect of this technological advancement. “We are about to witness a boom in longevity, and AI is driving and will continue to drive returns in that area,” he states, citing recent advances in curing pancreatic cancer. “It has not yet been reflected in stock prices, in the healthcare sector, or in investor outlook,” he notes, suggesting that the opportunity and growth potential in longevity are significant.

For the expert, this means that future 60/40 portfolios will have a greater equity component, potentially reaching 65% or even 70%, since “people will live longer and the real risk is running out of money.” Riesgo admitted he fears missing the bullish inflection point, as the power of compounding would be reduced. “What longevity means for us is a higher proportion in equities and real assets than in fixed income.”

To capitalize on technology opportunities in the near term, De Frutos agrees with the other panelists that “AI is the most transformative development we have probably experienced in our lifetime” and that it is necessary to analyze all areas where AI will have an impact, “including a possible blind spot, such as China.” Here, De Frutos notes that China does not resemble the United States in terms of investor protection, but also believes that “we could be in for a surprise.”

Five Reasons Explaining Why the Dollar Is Losing Ground Against Emerging Markets

| By Marta Rodriguez | 0 Comentarios

Carlos Carranza, Senior Fund Manager at M&G Investments for local markets and Latin American sovereign debt, warned that the dollar is facing a process of structural diversification that could mark the end of 15 years of US exceptionalism. He also noted that flows into emerging market debt remained positive even during the onset of the war between Russia and Ukraine, contrary to all historical patterns.

“Since the war began, we have had net inflows into emerging market fixed income debt. That, to me, is quite surprising because historically, five, ten, or fifteen years ago, if you had a spike in volatility like the one we are experiencing now, you would normally see outflows from that asset class,” Carranza said during a presentation at the Leaders Summit, a professional event in Miami organized by Funds Society.

The manager—who has more than 21 years of experience in the industry and a track record at JP Morgan, Allianz Global Investors, and currently at M&G since October 2025—structured his analysis around two pillars: the factors weakening the dollar and the strengths of emerging markets themselves.

The dollar under pressure: five reasons

The first factor Carranza identified is the change in leadership at the US Federal Reserve (Fed). Jerome Powell, who led the institution for eight years through crises, high inflation, and periods of stability, will step down on May 15, handing over to Kevin Warsh. “We are moving from someone we know, who has led the Fed for eight years through multiple crises, to someone new as chairman. That simply adds more uncertainty,” he noted.

The second factor is the US midterm elections. Carranza presented a slide with data from the past 20 years showing that the party in power lost the midterms in every case, regardless of political affiliation. Since World War II, that pattern has repeated 90% of the time. For international investors, he noted, this may translate into greater institutional uncertainty and less coordination between the Executive and Congress.

The third reason is fiscal dynamics. US public debt as a share of GDP has risen from approximately 70% two decades ago to 122% כיום, with a deficit running at 6% of GDP. For this year, estimates point to net issuance of $2 trillion in Treasury bonds. Faced with that supply, Carranza outlined the logic of some investors: “Why not buy emerging market bonds instead of Treasuries? Why not buy Chile, a solid investment-grade credit yielding 200 basis points more and not issuing debt this year?”

The fourth factor is the geopolitical environment. Carranza listed a series of ongoing tensions: the debate over the Panama Canal, the conflict in Ukraine, negotiations over the USMCA—whose review will begin in the coming weeks—the conflict with Iran, and tariff volatility. On February 20, the US Supreme Court ruled that President Donald Trump cannot impose tariffs unilaterally. “There is a lot of research showing that perhaps new marginal savings in Europe are no longer being allocated 100% to US equities, as used to be the case,” he said.

The fifth element is the trend reversal in emerging market currencies. According to the index presented by Carranza, emerging market currencies appreciated against the dollar in 2024 for the first time after fifteen consecutive years of weakening, a period that began around 2010. “It could be the beginning of a reversal of fifteen years of US exceptionalism. Or not. But it could be,” he said.

Emerging markets with stronger fundamentals

In the second pillar of his analysis, Carranza contrasted the fiscal position of emerging markets with that of developed economies. While US debt-to-GDP has nearly doubled over two decades, the average across about 20 large emerging countries has increased by only 18 percentage points over the same period.

Another argument in favor of emerging markets is the discipline of their central banks. Brazil raised interest rates by 1,000 basis points before the Fed made its first 25-basis-point hike in the post-COVID cycle. Colombia surprised with a 100-basis-point increase just a few weeks ago. Chile adopted a restrictive stance following recent global events, and countries in Central and Eastern Europe are already anticipating hikes due to concerns about inflationary pressures. “The repricing and the speed at which emerging market central banks have reacted have been enormous and very fast,” Carranza said.

As a result of that discipline, average real rates in emerging markets stand at around 2.5%, providing room to maneuver in the face of a potential new round of inflationary risks stemming from oil prices.

Underpositioning and flow potential

Carranza also challenged the perception that investors are already overloaded with emerging market assets following last year’s strong performance. International holdings of local sovereign debt in emerging markets stand at around 16%, below the 23% level seen before the COVID-19 pandemic, according to central bank data.

The M&G manager concluded with a figure illustrating flow potential: the US pension fund industry manages around $6 trillion and allocates only 5% to non-US assets. An increase of just one percentage point would amount to $60 billion in inflows into emerging markets. “A fund in Minnesota, if it shifts 1%, implies hundreds of millions of dollars for a very under-owned asset,” he illustrated.

Rick Rieder (BlackRock): “We Are in an Environment of Earning the Coupon, Capturing Carry, and Sleeping Soundly”

| By Marta Rodriguez | 0 Comentarios

Rick Rieder, Global CIO of Fixed Income at BlackRock, is one of the most respected and influential voices in the global asset management industry. Known for being a “data maniac,” as he himself admits, he oversees approximately $2.4 trillion (trillions in Anglo-Saxon nomenclature) for the firm, in addition to serving on Alphabet’s advisory board and UBS’s investment committee. His name was even mentioned as a possible candidate to head the Fed—at least, it was an option that appealed to the markets.

During his participation in BlackRock’s annual event for Latin American and US offshore investors in Miami, Rieder speaks with us. The room is spacious, a pleasant spring warmth filters through the windows, and his deep voice fills the space with comfort. The way he gestures with his hands reveals that Rieder is a methodical man; for that reason, we begin our interview by asking him about his working method.

How do you manage to isolate yourself from noise to do your work?

From my perspective, I am absolutely obsessed with data. I study it very intensely. I think there is too much focus on anecdotal information that is not very relevant, and it often creates inertia of biased information. I read a huge number of corporate earnings reports, which tell me what companies are doing with their inventories, why they are hiring staff, or what they are doing with capex. For me, that is the best source of information. I learn a great deal. In fact, I experience it like a game, like a treasure hunt: you read a report and look for clues. I also have monthly calls with clients, which I’ve been doing for 30 years, and I have my own process that involves reviewing about 1,000 charts and tables. Literally, I lock myself away to analyze them two days a month. All of that helps me piece together the puzzle, and I cannot do it without studying the data. Even though I have a great team that helps, I need to process it myself. Then I integrate all that information and build a view that is not always correct, but I need to go through that process.

As a result of that analysis, what differences have you identified between narratives and information?

We are seeing something we have never seen in this generation: an economy that works very well, but only with two engines. On the one hand, there is massive investment in technology, AI, and data centers, which is sustaining the economy and tech equity markets. On the other hand, there is a high-income cohort that is doing very well, even benefiting from high rates because they are net savers. The top 10% accounts for 23% of consumption, while the bottom 40% accounts for 22%. That is a huge distortion. Therefore, when you look at the economy as a whole, it appears strong—you can have nominal GDP growth of 5.5% or even 6%—but it is only functioning well on two fronts. The majority of the population is struggling, and that is why I have been quite clear regarding interest rates: they mainly affect those in a worse situation.

From all the information on corporate earnings, what relevant conclusions have you reached?

From bank earnings, I would highlight that M&A activity is real. It is clearly visible in the results: companies are becoming more strategic, making acquisitions to reduce costs and grow. Trading activity, especially in equities, has been very high, which makes sense in a volatile environment. Another point that I think has been greatly exaggerated is concern about private credit. During this earnings season, there was talk of stress, but I think it is often overstated by anecdotal stories. When you look at the results of major banks, the “mark-to-market” stress appears less severe than some interpretations suggest. As for technology, I am impressed by the figures. The market is pricing in explosive growth in the short term, but with caution in the medium term, because there could be technological changes that reduce demand. Personally, I think the market is being too conservative: demand has more runway than is being priced in.

Returning to your reflection on the distortion in economic growth, do you think there is an employment problem?

There is no job growth. In fact, excluding healthcare, we have lost 378,000 jobs over the past 10 months, which is surprising given an economy growing at that pace. We have an employment problem. From the outside, it seems the Fed does not need to do anything, but the reality is that the economy is not working well for most people. And we still have to see the real impact of artificial intelligence (AI), which has not yet arrived. It remains to be seen how all that technological efficiency will translate in companies that are already more efficient even before AI has its full impact. We have not yet seen that impact, and we already have no job growth. Some say it is not concerning because labor supply is lower due to immigration, but it is still a problem: there are not enough job openings.

We have read your analysis on the “weakness of the labor market” for young people. Is it a trend? Is it related to AI?

I think it is a disaster. The unemployment rate among college graduates is the highest in a generation, and youth unemployment (ages 16–24) is increasing. There are several factors: on the one hand, people over 55 are staying in the labor market longer, reducing vacancies, and on the other, we have the impact of technology and AI. I think it is a serious problem for young people and low-income groups. And it is ironic: older people, with higher incomes, benefit from high rates because they are savers, while young people are the ones with debt.

Let’s move to economic policy. What should we expect from the Fed? And regarding the deficit and interest rates?

I mean, first of all, the United States has too much debt, and almost all of it is in the short end of the yield curve. We rely on Treasury bills, and I think no company would manage its business like that. We need to reduce debt; otherwise, the dollar will remain under pressure. There are only two ways to do that: cut spending—which will not happen soon—or grow faster than the debt. This leads me to believe that the reason the Fed will cut interest rates is that a large portion of the country’s financing is short-term. They will have to wait a bit because of the impact of oil, but even so, I think they can make two cuts this year. If it were up to me, I would cut rates right now, regardless of oil or the potential impact on food. The longer we keep rates high, the more we worsen the debt problem.

As for the neutral rate that the market currently estimates, I do not think it is correct. I believe it is considerably lower than what is assumed, for two reasons: first, productivity is helping to reduce inflation, and second, the interest rate tool no longer regulates investment (capex) as it once did. Therefore, interest rates no longer significantly influence business investment, which is a huge difference compared to the past. In reality, rates mainly affect the housing market, low-income groups, and small businesses, which are the ones suffering the most. How could that not indicate that current rates are too restrictive? Moreover, they are not significantly reducing inflation. Therefore, I think they are restrictive precisely in the areas where it matters most.

That said, I have learned in my career that you must invest not based on what I would do, but on what they are going to do. It took me 20 years to understand that. I always thought: “this is a good idea, they will do it.” But the only thing that matters is what they will actually do. And I do not think they will cut rates now. I think they will wait one more meeting, analyze the data, unemployment will rise a bit, and then they will cut rates.

In this context of monetary policy, how do you interpret inflation?

There is a big difference between demand-driven inflation and supply-driven inflation. I think it is unfair to say we have an oil shock. I think we are facing a supply shock, and that shock, by itself, will already slow the economy. We do not need higher rates to curb it, as that will reduce consumption, especially among lower-income households. Today we are at core inflation close to 3%, and we believe it will fall to 2.5% by the end of the year. The Fed’s target is 2%, but that does not mean we need to get there next month. As long as it stays around 3% due to the oil shock, it will already have its effect.

Are you still very convinced about the rise of the fixed income cycle? Are we already there or has something changed?

We are in a golden age of fixed income. In five years, we will look back and say: my goodness, we could build portfolios with very attractive returns. Real rates are spectacular. You can build a portfolio with a yield of 6% or 6.25%. If inflation is at 3%, that is a very attractive real return. If you look at the 20 years prior to COVID, we had negative rates in Europe and Japan, and close to zero in the US. Now you can get 6% or more, and not with low-quality assets: you can use agency mortgages, AAA CLOs, AAA assets. When I say it is a golden age of fixed income, it is not because I think we will make a lot of money from rate cuts; it is more an environment of earning the coupon, capturing carry, and sleeping soundly. I think the Fed will act cautiously and that long-term rates will not fall too much.

Do you see value in the widening of corporate credit spreads?

I think public credit markets are simply fine; they are not exceptional. Securitized markets and emerging markets are more attractive in relative terms. I like places like Mexico and parts of Brazil, especially if you are willing to take currency risk—and I think you can, because I do not expect significant dollar appreciation. That is why emerging markets are more attractive than credit today. Securitized assets as well, since you can structure them yourself with better collateral. Securitization markets are in very good shape: commercial real estate, residential, asset-backed securities.

You mentioned emerging debt. In this case, the issue is the dollar, but do you like the Mexican peso?

I like the yield that Mexico offers. I do not have a strong view on the peso, but I do think the dollar will not appreciate much; it could even depreciate slightly. If we talk about the country’s debt, I think the administration is receptive to a weaker currency. So, in Mexico’s case, I think the peso against the dollar should remain stable and might even appreciate somewhat. But the important thing is that the yield is very attractive, as long as you are willing to take that risk. I use strategies in volatility markets, such as selling options on my positions, which allows me to generate even more return. Given that volatility in emerging markets, especially in currencies, is high, very attractive returns can be generated in places like Mexico.

For about three years now, BlackRock has made a significant innovative bet with the launch of iBonds. To some extent, you have been the “brain” behind these vehicles. Are you thinking about something equally revolutionary for the future in the fixed income world?

I think the big change in fixed income is that, for 30 or 40 years, fixed income was that 40 added to the equity portfolio in the classic 60/40. But in recent years it has been shown that it no longer works that way. From 2023 until now, every time the equity market has suffered, traditional fixed income indices have also fallen, because inflation affects both bonds and equities in the same way. The big evolution is that now people think about what to do with that 40 and whether they can build a source of income from it and manage it without taking excessive risks, in such a way that they can combine that income with equities and also with private assets.

What is needed is for fixed income to be stable. Traditionally, people thought they knew how interest rates would behave, but now it is different, and I think it will remain so in the coming years. Interest rates are still a useful tool, when they fall, equities rise and bonds also perform well, but that is not a good hedge nor does it create balance. It simply amplifies both positive and negative returns. The idea of managing a balanced and resilient portfolio has changed, and more and more tools and products are pointing in the same direction: helping investors generate income, which I will combine with equities, private equity, or other assets.

The Fed Heads Into Its Meeting With a Message of Continuity and Powell’s Farewell

| By Marta Rodriguez | 0 Comentarios

The Fed is expected to keep its benchmark interest rate unchanged at its meeting, despite pressure from the energy sector. According to experts, the information currently available to voting members of the FOMC does not allow for identifying any possible transmission effect of rising energy prices to core prices. So, what can we expect from this meeting?

According to Erik Weisman, chief economist, and Kish Pathak, fixed income analyst at MFS Investment Management, the overall message will be that monetary policy is in a good position to “wait and see” how growth and inflation prospects evolve. “As early as March 18, Chairman Powell downplayed economic projections, given the uncertainty related to the conflict. He is likely to reiterate that the outlook depends on the conflict. Although the uncertainty associated with the war in Iran has decreased since then, it remains very high. Nevertheless, the market will be very attentive to any change in tone regarding growth and inflation prospects,” they acknowledge.

What we do know for certain, as shown by the minutes of the March meeting, is that a minority view is emerging according to which rate hikes may be necessary to protect the inflation aspect of the mandate. “Chairman Powell may have to answer questions seeking to clarify what developments could tilt the FOMC in that direction. He will likely state that it is too early to make that judgment and that monetary policy is in a good position to balance risks on both sides of the mandate. This would be in line with most of the Fed’s communications since the March meeting,” say the experts at MFS IM.

Issues on the Table

For his part, Mabrouk Chetouane, Chief Markets Strategist at Natixis IM Solutions, believes that what is at stake in this meeting is twofold. “First, to anchor investor expectations regarding interest rates and inflation in order to avoid any undesired tightening of financial conditions; and second, to maintain a range of options available to address any type of scenario,” Chetouane notes.

In his view, this energy crisis could lead to a significant decline in aggregate demand. “We believe cyclical risks could materialize and that the Fed’s reaction function continues to place greater importance on economic activity and, consequently, the labor market. We maintain that the Fed could cut its benchmark interest rate by between 25 and 50 basis points between now and 2026, not to satisfy the wishes of the White House, but due to the need to support demand,” he adds.

Given this strong confidence that Powell’s Fed will opt for continuity, Marco Giordano, Investment Director at Wellington Management, recalls that central bank decisions will be determining factors for the global cycle in the coming quarters, as policymakers absorb this latest exogenous shock and act accordingly. “Throughout the month of March, central banks around the world chose to keep interest rates unchanged, citing rising geopolitical risks and uncertainty surrounding inflation prospects driven by energy prices,” he comments.

The Handover Arrives

Another of the most important aspects of the April meeting is that it will be Chairman Powell’s last press conference, if Kevin Warsh is confirmed soon. “He will likely be asked again about his decision to remain a Board member after the end of his term as chairman and how that decision could change if the Department of Justice investigation is closed. Most likely, he will repeat that he has not yet made a decision on the matter,” acknowledges Weisman.

What might a Warsh Fed look like? For Eiko Sievert, Head of Public and Sovereign Sector Ratings at Scope Ratings, if Kevin Warsh is confirmed as the next Chairman of the Federal Reserve, he is likely to advocate for interest rate cuts based on his view that AI-driven growth will not generate inflation.

“His appointment would point to a significant reduction in the intensity of supervision and a shift toward deregulation, as well as a more limited focus on the Fed’s dual mandate of ensuring stable prices and maximum employment. As a result, issues such as climate risk and social equity are likely to receive significantly less attention. Reducing the Fed’s balance sheet will be a priority, although implementation is likely to remain gradual to avoid undue market volatility,” Sievert emphasizes.

Finally, the expert sees it as likely that there will be changes in how the Fed communicates publicly, with less forward guidance on FOMC members’ expectations regarding future interest rates.

“With this background scenario, the June FOMC meeting will be subject to close scrutiny. Rate cuts carried out without data backing a decline in inflationary pressures would signal a weakening of the Fed’s independence,” he concludes.

The Fed Enters a “New Regime,” but What About Its Independence?

| By Marta Rodriguez | 0 Comentarios

After hearing Kevin Warsh before the Senate, during his confirmation hearing to chair the U.S. Federal Reserve (Fed), experts believe that not all the cards have been put on the table. In his speech, Warsh proposed a “regime change” at the institution, suggesting more than four FOMC meetings, collaborating with the Treasury to reduce the balance sheet, and using AI tools to review inflation models he considers imperfect.

Without a doubt, markets expected Kevin Warsh’s confirmation hearing to offer clues about the Fed’s next steps and, to some extent, it did. His key message was to assure that he would not be a “puppet” of President Trump and that the monetary institution must act without political pressure. He even denied having agreed on interest rate cuts with Trump, arguing that monetary policy decisions must be based on the economy and not politics.

“Let me be clear: the Federal Reserve must make independent decisions. I will not accept instructions from any elected official. My duty, if confirmed, will be to Congress and to the American people. I am also aware of concerns about potential conflicts of interest. I commit to fully complying with all ethical requirements and to divesting from the necessary assets to ensure the integrity of the office,” he assured.

In addition, he was critical of the institution: “In recent years, the Fed has faced extraordinary challenges. However, we must also recognize that there have been errors — in the assessment of inflation, in the communication of monetary policy, and in the management of its balance sheet — that must be addressed frankly.”

Regarding his plans, Warsh explained that his goal will be to restore clarity, discipline, and credibility in monetary policy. “This implies a firm commitment to price stability, a review of the Fed’s strategic framework, and a prudent and predictable reduction of the balance sheet.” And he concluded: “This is an important moment for U.S. economic policy. With the right approach, we can achieve a more stable, more dynamic, and more prosperous economy.”

Independence and balance sheet

For experts at Banca March, however, Kevin Warsh’s appearance unfolded as expected. “Democrats focused their interventions on questioning the candidate’s independence — highlighting the moment when Elizabeth Warren called him a ‘sock puppet’ — while the Republican bloc largely offered its support. Even Republican Thom Tillis expressed his backing, although conditional on the closure of investigations into the current Federal Reserve governor,” they note as the most striking aspect of his appearance.

That said, the main debate for experts is whether this “new phase” will be synonymous with independence. In the view of Laura Torres, chief investment officer at IMB Capital Quant, the market is now operating in a back-and-forth of statements that leaves little definition, high volatility, and uncertainty. “The diplomatic stalemate and the belligerent stance of the Trump administration have created a scenario where complacency is no longer an option. The Fed’s narrative also enters a phase of high volatility with the possible appointment of Warsh, who seems willing to break with the institution’s traditional independence to align it with the fiscal and tariff objectives of President Trump,” Torres criticizes.

From UBS Global Wealth Management, they believe that the Fed remains on track to further reduce interest rates, as cooling inflation and moderating growth should allow the U.S. central bank to act toward the end of this year.

“We maintain the view that the Fed should cut rates by another 50 basis points toward the end of this year. Greater easing should support equities and high-quality bonds in the medium term,” says Mark Haefele, chief investment officer (CIO) at UBS Global Wealth Management.

Regarding the balance sheet situation, Tiffany Wilding warns of the moral hazard arising from the progressive increase in the Fed’s balance sheet as a result of regulatory liquidity requirements in the U.S. financial system: “The growing holdings of Treasury bonds by the Fed needed to satisfy that demand may distort price formation in the market — including Treasury repo funding markets — and reduce liquidity in the public debt market,” Wilding explains.

The other key points

From Oxford Economics, they consider that Warsh will be a more dovish voice within the Federal Open Market Committee, will advocate for an aggressive reduction in the size of the Fed’s balance sheet, and will seek to introduce significant changes in the institution’s communication strategy. However, they recall that the Fed chair cannot make these changes unilaterally, so they expect that Warsh’s need to build consensus will limit the scope of changes in policy or in how the Fed communicates.

“Warsh stated on several occasions that a ‘regime change’ is needed at the Fed. He favors modifying the institution’s current communication strategy and opposes the use of forward guidance as a policy tool, as well as the publication of economic forecasts, which he considers an obstacle to flexibility because members of the Federal Open Market Committee ‘cling to those forecasts longer than they should.’ He also suggested that he might favor reducing the number of FOMC meetings to fewer than eight per year, which is the current schedule; the law requires the committee to meet four times per year. He also did not commit, if confirmed, to holding press conferences after every FOMC meeting, which has been the norm since 2019,” they explain.

Finally, the firm notes that Warsh’s selection “remains in limbo.” According to their forecast, it is expected that the Senate, controlled by the Republican Party, will confirm Warsh if his nomination is approved by the Senate Banking Committee. “However, we expect his candidacy to remain stalled in committee for some time. Senator Thom Tillis of North Carolina made it clear at Tuesday’s hearing that he will not support Warsh’s nomination until the Trump administration’s case against Powell is withdrawn. However, in an interview prior to the hearing, President Trump gave no indication that he would pressure the Department of Justice to drop the case. Given the narrow margin in the committee, the nomination cannot advance without Tillis’s support. This increases the likelihood that Powell will continue as chair beyond May 15, when his term officially ends,” they add.

From J. Safra Sarasin Sustainable AM, they acknowledge that, paradoxically, a delay in his confirmation could work in Warsh’s favor. “With inflation moving in the wrong direction, it is unlikely that the FOMC will cut rates in the short term. A prolonged process would leave Powell bearing the cost of inaction, thus preventing Warsh from having to confront Donald Trump prematurely at the start of his term as chair,” they conclude.