Olivier Cassin

bfinance, the award-winning investment consultant, has published new analysis revealing that investment management costs appear to be entering a new downward phase. A near two-decade decline in public market fees is spreading out to private markets in the ‘turbulent twenties’, according to the latest instalment of the consultancy’s Fee and Cost Insight series.

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The report gives an insight into how sophisticated institutional and wealth investors are interpreting ongoing geopolitical, economic, and market uncertainty.

bfinance, the award-winning specialist investment consultancy, has published its Q1 2026 Manager Intelligence and Market Trends Report, providing comprehensive insights into investor activity across all major asset classes during the first quarter of 2026.

The report gives an insight into how sophisticated institutional and wealth investors are interpreting ongoing geopolitical, economic, and market uncertainty. Private markets were in focus amid a broad slowdown in fundraising, led by private credit and real estate. The market slowdown did not, however, translate into a broad slowdown in bfinance private markets activity.

Private markets: infrastructure activity bucks industry slowdown

Infrastructure accounted for more than a quarter (27%) of bfinance private markets activity for the trailing 12-month period to end March 2026, extending a consistent uptrend over the past year. Real estate activity held up, maintaining a near-quarter share (24%) of mandates, in contrast to a tough industry backdrop. Fundraising in the real estate sector effectively stalled in Europe and only a handful of US focused funds closed above the $1 billion mark amid heightened geopolitical uncertainty.

Real asset activity (real estate, infrastructure and natural capital) proved resilient, accounting for more than half of all bfinance private markets activity. For more on the infrastructure trends see: Global Infrastructure Survey – Three Takeaways as Broad Enthusiasm Gives Way to Selectivity and Precision^[1].

Our private debt activity proved less resilient to the headwinds, weighed down by negative news around a so-called “SaaS apocalypse” and widely reported redemptions from semi-liquid funds.

Search activity trended lower to just over a quarter (27%) of private markets mandates from 35% in 2025. For disciplined managers, periods like this can support better pricing and, often, stronger lender protections and tighter documentation.

Investment strategy: Rethinking currency and portfolio construction

There are many evolving strategic questions facing institutional allocators. The Iran conflict accelerated a reassessment of US dollar exposure as a new ‘multi-polar’ world order emerges. Greater fragmentation, with multiple currencies sharing influence over time, reinforces the case for currency overlays, as reflected in ongoing bfinance search activity for such strategies in our liquid alternatives business (see below).

Liquid alternatives: Continued strong interest, particularly in wealth segment

There was continuing client interest in currency overlay strategies, consistent with the idea that asset allocators may need to rethink currency risk, and gradual portfolio diversification away from dollar assets. Our diversifying strategies business (public market, or ‘liquid’ alternatives) also saw continuing momentum across multiple hedge fund investment styles and custom multi-asset strategies. For more on the renewed interest in liquid alternatives see: Hedge Funds: Are Push and Pull Dynamics Coming into Rare Alignment?^[2]

Equities: Emerging markets and demand for differentiated returns

Emerging markets strategies dominated equity activity, accounting for approximately 38% of mandates, versus 24% the prior year. Global equity remained the largest single category at 54%, though down from 60% the prior year. The majority of global equity mandates were core, benchmarkrelative searches, though a handful incorporated style-specific angles – including AI equity, value, and impact strategies – pointing to selective demand for differentiated return sources.

Fixed income: Search for diversification and strong interest in high yield

Despite tight credit spreads there was a significant increase in high yield and loan-related searches, which accounted for 38% of fixed income search activity. Investors have been willing to reassess their manager line-ups, while also allocating new capital to the asset class to capture the higher yield on offer. Multisector and non-traditional fixed income strategies featured prominently in search activity as investors sought diversification.

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Notes:
[1] Global Infrastructure Survey – Three Takeaways as Broad Enthusiasm Gives Way to Selectivity and Precision
[2] Hedge Funds: Are Push and Pull Dynamics Coming into Rare Alignment?

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Anish Butani

Institutional investor conviction in infrastructure remains exceptionally strong – but the way capital is being deployed is changing materially, according to a major new global survey from bfinance, the independent investment consultancy that advises more than 620 institutional investors across 47 countries.

The bfinance Global Infrastructure Survey 2026, based on one-to-one interviews with more than 40 senior institutional investors – including CIOs and Heads of Infrastructure – managing over US$4 trillion across 13 countries, found that more than 90% of respondents view infrastructure positively, 50% plan to increase their allocation, and 97% expect to commit capital in 2026.

Yet the survey also reveals that infrastructure is no longer treated as an automatic or undifferentiated allocation. Investors are becoming sharply more selective: pulling back from greenfield development and expressing growing caution around mega-fund fees and AI-driven digital infrastructure valuations. Meanwhile, there is increasing focus on operational brownfield assets, mid-cap strategies, European markets and shorter-duration fund structures.

Geopolitics and AI bubble fears top the agenda

Geopolitics emerged as the single biggest macro concern, cited by 25% of respondents, followed by regulatory and policy risk at 22%. Investors described geopolitics as an umbrella risk, cascading into inflation, supply chains and policy direction in ways that are difficult to anticipate.

Fears of an AI-related overbuild in digital infrastructure – flagged by 18% of respondents – have also risen sharply up the agenda. Investors cited concentration risk, valuation stretch and the potential for oversupply as key concerns, even as digital infrastructure remains a core sector preference overall.

The greenfield gap

One of the survey’s most striking findings is the disconnect between stated flexibility and actual portfolio construction. While 68% of investors report no formal cap on greenfield exposure, 74% describe their portfolios as predominantly brownfield (existing, operational assets) in practice – a gap driven by experience with rising construction costs, supply chain disruption and the difficulties of justifying j-curve profiles internally.

Investors said they increasingly favour operational assets with contracted cash flows and predictable downside protection. Energy transition remains the most preferred sector at 38%, followed by digital infrastructure at 24%, power and electrification at 18% and transport at 10%.

Geographic preferences shift toward Europe

Geographic allocation is also changing. Europe is the most preferred region for incremental capital, cited by 42% of investors, valued for its regulatory visibility, energy security priorities and perceived political stability. North America, at 27%, remains a core allocation but faces harder scrutiny over political and policy uncertainty. APAC and emerging markets remain selective, niche exposures for most, typically accessed via developed market or specialist managers.

Mid-cap strategies gain ground as fee pressure intensifies

Fee structures are under significant pressure. Twenty-two per cent of investors named lower fees as the single improvement most likely to unlock additional capital, with performance fees a particular area of concern over alignment.

This dynamic is driving a clear preference for mid-cap strategies over large-cap mega-funds, with 53% of respondents favouring mid-cap opportunities. Investors cited less competition, greater operational influence and broader exit optionality as key advantages. bfinance’s own performance analysis supports this, with small-cap funds showing stronger DPI outcomes across vintages, while large-cap funds have performed in line with or below broader asset class metrics.

Duration preferences and fund structure

Investors are also shortening their duration expectations. Sixty-one per cent prefer capital to be returned within a 15-year window, with governance and alignment concerns cited as key factors limiting appetite for longer-dated structures. Closed-ended funds remain the dominant deployment vehicle, though open-ended structures play a specific role in portfolio construction, pacing and liquidity management for some investors.

Return targets have shifted upward by approximately 100–200 basis points across strategies compared to predecessor vintages, reflecting a higher cost of capital and a broader repricing of risk. Most investors now target nominal returns of 8–10%, with income accounting for around half of total returns.

Anish Butani, Managing Director and Head of Infrastructure at bfinance, said: “This survey captures a market entering a more mature phase. The broad enthusiasm of the last decade is being replaced by far greater precision around risk, manager selection and portfolio construction. This is a refinement of capital allocation, not a retreat – and investors who approach it with rigour stand to benefit from a rich opportunity set in the years ahead.”

Frithjof van Zyp, Senior Director, Australia at bfinance, said: “What this survey tells us is that Australian investors are maturing in how they approach infrastructure. The days of broad, undifferentiated exposure are over. We’re seeing a much sharper focus on operational assets, on fee efficiency, and on making sure the risk in a portfolio is the risk investors actually want to be taking.”

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Yohei Omichi

bfinance, the independent global investment consultancy, has opened a new office in Tokyo. Yohei Omichi has been appointed Senior Director to lead the firm’s Japan presence, strengthening support for Japanese asset owners and global institutions at a key turning point for the country’s economy and capital markets.

The opening reflects growing two-way demand. On the one hand, global institutional investors are increasing their focus on Japan opportunities. On the other, Japanese asset owners, energised by the new dynamism of the domestic economy, are looking outwards with renewed optimism, seeking investment insight to create global portfolios across both public and private markets.

With extensive experience working with public/private pension funds and distributors, Omichi is well placed to capitalise on opportunities as Japan’s economy and capital markets look set to enjoy a sustained recovery. More broadly, with the addition of Tokyo, bfinance significantly strengthens its existing Asia Pacific (APAC) presence in Hong Kong and Australia.

The new office adds to a global footprint now spanning 12 locations, also including London, Paris, Munich, Amsterdam, Rome, Chicago, Toronto, Montréal and Dubai, the company’s hub for the Middle East and Africa.

Japan’s renewed economic dynamism and a vibrant outlook for APAC

Japan’s pension and insurance companies represent one of the world’s largest pools of institutional capital, while the country’s savings and investment landscape is at a key turning point following a series of co-ordinated reforms.

A sustained focus on corporate value creation, capital efficiency, continued momentum in shareholder engagement and corporate action is reigniting interest in Japanese capital markets. Inflation is now close to the Bank of Japan’s 2% target and there are high hopes the new government will successfully execute a further shift towards growth-orientated policies.

The reforms to date have helped restore a long-absent economic dynamism, seemingly drawing a line under a punishing period of deflationary economics. This is not only stimulating external interest in Japan but also prompting Japanese-based asset owners to broaden their investment horizons and begin looking outwards again.

bfinance has certainly seen strong demand in Japan for the full range of private markets, and particularly for income-generating asset classes such as infrastructure equity and debt. Diversifying liquid strategies have been another ongoing source of strong demand as Japanese investors seek to optimise long-term returns and manage risks in a low-yield environment, as Japanese interest rates slowly normalise in response to the return of moderate rates of inflation.

The company has long observed a good appetite for low‑volatility, market‑independent hedge fund strategies in Japan. While these strategies are currently enjoying strong performance tailwinds, bfinance’s independent analysis has consistently identified those with a track record for alpha generation across different market cycles.

More broadly, over the past five years, bfinance has helped a wide variety of investors across APAC, in Australia, China, Hong Kong, Japan, Malaysia, Singapore, South Korea and Thailand.

It has partnered with these clients on the full range of private markets assets, including all the real asset classes of infrastructure, real estate and natural capital (timber and agriculture), as well as the entire range of liquid markets (including diversified strategies, fixed income and listed equities).

This has included working with an array of APAC wealth clients, as the region is set to become the predominant source of wealth creation. Financial wealth is projected to grow at about 9% annually in APAC through 2029, compared to 4% in North America and 5% in Western Europe*.

What the Tokyo office means for international and Japan-based clients

The Tokyo office brings bfinance closer to clients and market participants in Japan, combining local presence with the firm’s global research and implementation platform.

• For Japan-based asset owners: closer day-to-day support, faster execution, deeper local market insight, and direct connectivity to bfinance’s global manager research specialists.
• For global institutions: stronger on-the-ground due diligence, improved access to Japan-based managers and opportunities, and tighter coordination across cross-border research.

David Vafai, CEO at bfinance, says: “The opening of a Tokyo office strengthens our ability to support clients at a time when Japan is increasingly central to institutional portfolios – both for global investors re-engaging with the market and for Japanese asset owners building more international, multi-asset portfolios.

“Our focus is on delivering independent manager research, rigorous due diligence and practical implementation support, with the responsiveness and local presence that sophisticated investors expect.

“Yohei brings deep institutional experience and a strong understanding of the needs of Japan-based asset owners. His appointment is an important step as we deepen our commitment to clients in Japan and across the region.”

Yohei Omichi, Senior Director, says: “I’m delighted to lead bfinance’s Tokyo office at a time when institutional investors – in Japan and globally – are reassessing portfolio construction and implementation. Japanese asset owners are increasingly seeking global reach, transparency and disciplined execution, while global institutions are looking for stronger access to Japan opportunities and local market insight.

“bfinance is well positioned to support both needs by combining independent global research with practical implementation expertise. I look forward to partnering with clients as they navigate more complex portfolios and a rapidly evolving investment environment.”

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Ravi Rastogi

bfinance, the independent investment consultancy, has announced the appointment of Ravi Rastogi in a newly created senior leadership role: Managing Director and Global Head of Insurance. He will be based in the firm’s London office. The shift underscores the increasing strategic importance of the insurance practice globally, which has represented a key growth driver for the firm in recent years.

An industry veteran, Rastogi brings more than thirty years of experience in financial services, with almost twenty years in the specialist insurance investment field. His previous insurance investment leadership positions include regional roles at Mercer (2015-18) and (Willis) Towers Watson (2010-2015) and EY (2021-2024). In 2018 he founded Ark Advisors, an insurance-investment focused specialist consultancy. Prior to his appointment as Global Head of Insurance at bfinance, he had been working closely with the firm for several months in an advisory capacity.

In this new role, Rastogi will work closely with the senior team and client consultants across all international offices. The appointment will strengthen bfinance’s ability to support insurers in navigating increasingly complex investment, regulatory and sustainability challenges, refining the firm’s strategic offerings in this space and enhancing capabilities.

The appointment reflects the growing importance of the insurance sector to the consultancy: bfinance has over 100 insurer advisory relationships, with almost 90% of these engaging in the last 5 years. As such, the insurance practice represents one of the fastest-growing parts of the business. This shift reflects wider trends such as insurer portfolio diversification, evolving regulatory frameworks and the improving accessibility of certain alternative asset classes.

Client diversification across segment and geographical lines has been a key tenet of bfinance’s long-term strategy as it seeks to maintain resilience and sustainable growth through a period of transformative change in the global institutional investment landscape. The firm’s Wealth Management practice also represents a key strategic growth priority, providing added service capability for the broader integrated insurance and asset management groups.

Ravi Rastogi, Managing Director, Global Head of Insurance at bfinance, said: “bfinance has a long-standing reputation for independent, rigorous advice and for acting as a true extension of its clients’ internal teams. The research pedigree and unique client-centric business model resonate deeply with insurers’ own commitment to delivering investment outcomes for their end clients. Having worked closely with the firm as an advisor, I am delighted to be taking on this role full time. I look forward to working with colleagues and clients globally to help insurers address evolving investment priorities, governance demands, and sustainability objectives.”

Frithjof van Zyp, Senior Director, Australia at bfinance, said: “Ravi’s appointment further reinforces bfinance’s global strategic focus on the insurance sector. This comes at a time when Australian insurers are seeking more specialised investment support. It is a sector we have been active in since 2016, and we continue to see accelerating demand locally. Ravi’s deep sector expertise will enhance our ability to support Australian insurers across complex areas such as multi‑asset portfolio design, alternative asset class implementation, and the integration of sustainability and regulatory considerations.”

David Vafai, Chief Executive Officer at bfinance, said: “Ravi’s appointment reflects both the depth of his expertise and the growing importance of insurance clients within our global business. He brings a rare combination of strategic insight, operational experience, and deep sector knowledge. His leadership will be instrumental as we continue to expand and strengthen our insurance offering worldwide.”

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Donn Cox

bfinance, the independent investment consultancy, today announces the appointment of Donn Cox as its first Head of North America.  Cox—an industry veteran best known for founding LP Capital Advisors and his subsequent leadership positions within Pavilion Alternatives Group and Mercer—will head up a growing team of consultants in the U.S. and Canada across offices in Chicago, Toronto and Montreal.

Cox’s appointment in this newly created role expands the firm’s senior leadership team and strengthens its growing footprint across North America. His arrival closely follows another senior appointment in the region, with Tomas Bylaitis joining the U.S. team in August 2025 as Senior Director Client Consulting. Les Marton (Managing Director, Canada) and David Ness (Senior Director, U.S.) will report directly into the new position.

Strategic expansion across geographies, channels

Established in 1999, bfinance has served institutional investors in 47 countries representing over USD 8 trillion in assets including pension funds, insurers, endowments, foundations, family offices, and wealth managers. The firm has been active in Canada since 2006, with a long-standing client base of more than fifty institutions in the country and opened its first U.S. office in 2017.

Over the past two years, the firm has seen particularly strong growth in the US RIA and Wealth Management channels. Independent wealth platforms, multi-family offices and RIAs are seeking independent, institutional-quality, data-driven investment advisory and manager research services, often in the form of strategic partnerships that can be integrated with their specific service models and business requirements. At the same time, the needs of the firm’s traditional institutional client channels in both Canada and the U.S. continue to evolve, influenced in part by the perceived erosion of independent advisory services across the consulting industry amid a trend toward asset management product provision. Investors’ changing needs are also driving innovation in key services such as Private Markets, Fee Review, and Data & Digital Solutions.

North America leadership

Cox, who will be based in the firm’s Chicago office, will have a broad leadership mandate that includes building and managing the North American team, overseeing client relationships and project delivery, accelerating growth across all channels (institutional, wealth, RIA), expanding access to the firm’s newer service offerings, and strengthening collaboration across global research teams.

He brings more than twenty-five years of experience in investment consulting, alternative investment, and program management. Cox founded LP Capital Advisors in 2004, where he was President and Managing Director for more than ten years until Pavilion Financial Corporation acquired the business in 2014 He then became President and Managing Director of Pavilion Alternatives Group and, subsequently, Global Leader at Mercer’s Alternatives group after Mercer acquired Pavilion in 2018. As such, he has been at the forefront not only of key shifts in the institutional investment management industry but of competitive dynamics in the investment consulting sector as firms respond to a shifting investor ecosystem and technological change. Cox brings not only senior leadership experience but also a long-held commitment to independent advisory models.

Donn Cox, Head of North America at bfinance, said: “For more than 25 years, bfinance has stood out for its commitment to rigorous global research, independent advice, and alignment with the specific objectives of each client. Those qualities are increasingly rare in a market where many advisors have shifted into product manufacturing. There is a real need in North America—especially in the U.S.—for an advisory partner whose sole focus is helping investors make better decisions. I’m looking forward to building on this foundation and expanding our ability to serve institutions, family offices, and RIAs across the region.”

David Vafai, Chief Executive Officer at bfinance, said: “The US and Canada represent one of the most important growth frontiers for bfinance. Since 1999, we’ve worked with institutions in nearly 50 countries as an extension of their investment teams, and our North American client base has become increasingly strategic. Donn’s appointment brings the senior leadership, credibility, and connectivity we need to deepen our partnerships across the region and continue delivering world-class, independent investment advice.”

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Matt Poblocki

The cryptocurrency market edged down 1.7% in August, but the month highlighted clear signs of maturity, according to the latest Binance Australia Monthly Crypto Market Insights Report. Bitcoin’s dominance eased, while capital rotated into both altcoins with practical utility and into innovative sectors such as decentralised finance (DeFi) and stablecoins.

This evolution shows long-term adoption is increasingly driven by innovation and functionality rather than short-term macroeconomic conditions. DeFi lending protocols are capturing record levels of capital, while stablecoins are redefining the role of digital dollars by combining stability with yield – together laying the foundations for the next phase of crypto’s growth.

Bitcoin consolidates while altcoins rise

 Bitcoin’s dominance dipped to 57.3% in August as capital rotated into alternative assets. Ethereum gained 18.6%, buoyed by record ETF inflows and significant corporate treasury purchases, while Solana (+15.5%) and Chainlink (+35.9%) also posted strong gains on the back of ecosystem upgrades and institutional adoption.

“Bitcoin remains foundational, but the spotlight is shifting,” said Matt Poblocki, General Manager of Binance Australia & New Zealand. “Investors are increasingly drawn to altcoins that enable real-world applications, whether that’s Ethereum staking yields, Solana’s network upgrades, or Chainlink’s role in tokenising assets. It’s a sign of a maturing ecosystem.”

What to expect in a falling interest rate environment

Expectations of a potential Fed rate cut dominated market discussion in August, with many anticipating rate cuts to result in a bullish outcome for Bitcoin. Yet Binance analysis shows the historical correlation between rate cuts and Bitcoin’s price is weak and highly volatile.

Over the past two years, BTC’s price has been influenced more by institutional adoption, political catalysts, and structural market changes than by central bank decisions.

“The idea that rate cuts automatically drive Bitcoin higher oversimplifies today’s reality,” Mr Poblocki said. “The market is becoming more sophisticated, and investors are looking beyond simple one-to-one correlations. What’s really moving capital now are innovations across altcoins, DeFi, and stablecoins.”

DeFi lending and stablecoins surge

The sector’s growing complexity was underscored by rapid growth in DeFi lending and stablecoins. Total value locked (TVL) in DeFi protocols has risen 72% this year, with Maple expanding 586% and Euler soaring 1,466% in August alone – evidence of capital being deployed into productive, yield-generating assets.

Stablecoins are also taking centre stage. Ethena’s USDe supply grew 43.5% in August to US$12.2 billion, making it the fastest stablecoin to surpass US$10B. Unlike purely transactional stablecoins such as USDT or USDC, USDe’s yield-bearing design positions it as both a store of value and an income-generating asset. With USDe now accounting for more than 4% of the US$280B stablecoin market – and on-chain flows rivaling those of BTC and ETH ETFs – stablecoins are emerging as an engine of growth, broadening adoption and reshaping market liquidity.

“The surge in DeFi lending and the rise of yield-bearing assets like USDe prove that crypto is building a new, more efficient financial infrastructure,” Mr Poblocki noted. “Investors are seeking returns and new ways to generate value within the ecosystem. This growth confirms that the demand for productive assets is a durable, long-term trend.”

Australian investors embrace diversification

Locally, Ethereum retained its position as the most-traded coin on Binance Australia for the second straight month, with Chainlink breaking into the Top 10 after climbing five places.

The recent Binance Australia user survey of 1,900 Australians found that nearly nine in ten (86.1%) already hold at least one other crypto asset outside of Bitcoin, and more than half (57.8%) plan to add to their altcoin portfolios in the next six months.

“Australian investors are moving with purpose, backing projects that deliver real innovation and utility,” Mr Poblocki said. “It’s a very positive sign of a healthy, maturing local market that is more focused on diversification than ever before.”

Read the report.

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Matt Poblocki

Binance, the world’s largest cryptocurrency exchange by trading volume^[1], has appointed fintech leader Matt Poblocki as General Manager of Binance Australia and New Zealand.

With nearly two decades of experience in fintech, regulatory, and commercial business strategy, Mr Poblocki has held senior executive roles at some of the world’s most recognised digital businesses, including PayPal, Afterpay, eBay and others. He has also worked with start-ups and scale-ups in commercial, legal and regulatory, and business head roles across international markets.

With more than one million Australian users and nearly one in three Australians having owned cryptocurrency^[2], Australia is becoming one of the most advanced and regulation-forward digital asset markets globally. Mr Poblocki brings a strong track record in helping to scale fintechs globally, further supporting Binance’s continued growth ambitions across Australia and New Zealand.

“Few markets are as digitally capable and commercially dynamic as Australia. With a strong ecosystem, a progressive policy environment, and millions of Australians already engaging with crypto, we have a real opportunity to lead responsibly on the global stage,” said Mr Poblocki.

“Australia and New Zealand are renowned globally as early and fast adopters of innovative technology. This next wave of Web3 and blockchain is well and truly upon us. I’m excited to help shape the next chapter of growth and innovation for digital assets in Australia and New Zealand, and energised by the opportunity to pair Binance’s global expertise with local momentum to build a trusted future for crypto in our region.”

Respected for his strategic leadership in driving business growth and expansion, Mr Poblocki was an executive leader contributing to the early establishment and growth of the likes of eBay and PayPal.

At PayPal, Mr Poblocki oversaw legal affairs in Australia and New Zealand before heading international legal and regulatory expansion across 170 markets from PayPal’s International Headquarters in Singapore. He then joined Afterpay to drive its expansion plans across Asia, before returning to Australia, where his passion for innovative business models saw him co-found startups and advise scale-ups on expansion both into and from Australia, including from international markets.

Throughout his career, Mr Poblocki has contributed to the shaping of Australia’s fintech, payments and commercial ecosystem. His combined experience in commercial strategy and government, regulatory and policy environments give him a unique blend of business acumen. He has worked with government and regulators, including APRA, RBA, AUSTRAC and ACCC, both domestically and internationally.

“Our next chapter will be about showing what responsible growth really looks like,” said Mr Poblocki. “That means combining commercial strategy and innovative product offerings with proactive engagement with regulators, robust compliance, and supporting everyday Australians with safe access to the digital asset economy. Regulation and innovation don’t have to be at odds. In fact, they must go hand in hand if we want to build a future that all Australians want to be part of.”

Binance CEO Richard Teng welcomed the appointment, noting Mr Poblocki’s combination of international legal expertise and commercial acumen.

“Matt brings an exceptional track record of scaling some of the most recognisable fintech brands across complex, highly regulated markets,” said Mr Teng. “He brings a unique ability to connect governance leadership with commercial strategy. His appointment reinforces our commitment to the Australian and New Zealand markets and to building a sustainable digital asset ecosystem for the long term.”

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Notes:
[1] https://coinmarketcap.com/exchanges/binance/
[2] https://www.independentreserve.com/blog/wp-content/uploads/2025/04/IRCI-Australia-2025-web.pdf

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Martha Brindle

The expectation of ‘non-concessionary returns’ has been central to the expansion of the impact equity sector. As such, periods of real-world underperformance can create significant tensions. Nowhere is this challenge more evident than in public equities: positive absolute returns notwithstanding, relative returns of the global impact equity segment have trailed the MSCI ACWI over the last 3-5 years, net of representative fees. Even with high performance dispersion between managers in an extremely varied space, these numbers should not be overlooked. We ask: how should investors view the results, and what are the implications for the future?

The active equity management industry now offers a wide variety of strategies for investors that seek to deliver positive non-financial outcomes alongside investment returns. The number of funds available has roughly doubled over the past two years: bfinance now tracks a roster of over 125 ‘impact’ active equity managers (many offering multiple strategies) in Q1 2025, up from over 65 managers (offering over 100 strategies) in Q1 2023.

Impact investing should not be confused with ‘Responsible Investing’ or Environmental, Social and Governance (ESG) integration, although strong ESG practices are often viewed as a pre-requisite within impact investment approaches. ESG integration is primarily concerned with risk related to how companies operate, whereas impact chiefly relates to what companies do – the positive environmental and social outcomes resulting from their products or services (particularly for an unmet need or underserved population). That being said, the distinctions between strategy types are not always clear-cut. One may find the same stock held by an asset manager in thematic ESG and impact funds, although the intentionality and thesis for the investment may (and should) be different. In addition, many strategies sit in a ‘grey area’: for example, we see funds that target specific (potentially impactful) themes such as water or biodiversity but lack key characteristics that an investor might expect to find in a true ‘impact’ strategy.

However one chooses to define the impact universe, the resulting group of strategies remains hugely diverse. Impact is not technically a ‘style’ but, rather, an approach that can be applied with different styles – Growth, Value or others. Many strategies exhibit high tracking error – one would likely question the impact credentials of a strategy that exhibited high similarity to the index! They also tend to be highly differentiated versus each other, and versus active non-impact strategies; indeed, this diversification can be one motivation for holding a satellite impact allocation.

One interesting driver of diversity within the impact fund landscape is the question of where managers ‘set the bar’ on impact. NVIDIA is a popular example of manager disagreement: some impact funds have held the stock due to potential work and economic efficiency gains for society; others avoid it, often citing lack of ‘additionality’ in a now widely available technology, and of course the complex questions surrounding the potential negative societal impacts of AI. Companies such as Mastercard and Microsoft are similarly divisive.

Objectives and benchmarks: the concession question

Importantly, the bulk of asset managers in the impact equity sector have not envisaged (or at least not openly anticipated) a trade-off between impact objectives and the achievement of financial returns over the long term, although there are exceptions to the rule. Our 2023 landscaping study of the equity impact manager universe showed broadly conventional targets for outperformance versus benchmarks, with a minority having no relative return target (chart below). Moreover, the use of mainstream market indices such as the MSCI World or MSCI ACWI as benchmarks helped to foster accessibility and offer comfort to investors exploring this space for the first time.

From an asset owner perspective, we see very limited appetite for sacrificing returns in pursuit of positive impact. Among bfinance clients, many impact-oriented investors seek traditional performance objectives; indeed, the lowest target we’ve seen in practice (to date) among institutional clients was a goal of ‘market-like’ returns (in line with the benchmark or better, net of fees). This strongly aligns with the findings of the GIIN’s State of the Market 2024 report across asset classes: only a small minority (11%) of investors in that study intentionally invest in impact for ‘below-market rate, closer to capital preservation-level’ returns (these could perhaps be described as philanthropic investments).

With this context in mind, the recent underperformance of many impact strategies demands careful consideration. Our latest Manager Intelligence and Market Trends report reveals impact as the worst-performing global equity manager peer group of the past three and five years. Despite positive absolute returns, we estimate that the median global impact equity strategy lagged the MSCI ACWI by 6.4% p.a. over the three years to March 2025, and by 3.8% p.a. over five years, net of representative fees. That being said, performance dispersion has been high: the interquartile range for impact equity manager performance over the past three years was 5.2%, versus 2.6% for Quality managers. As such, there are strong relative performers within the group.

Investors might well ask: is this underperformance temporary or likely to persist over the medium or longer term? At what point might perceptions of ‘concessionary’ returns affect stakeholder commitment to impact strategies? Might it be appropriate to consider a different or additional benchmark when reviewing results, given the highly differentiated nature of strategies? Are non-financial (impact) outcomes satisfactory, even where financial outcomes might have lagged? Finally, is the manager selection process sufficiently robust?

A performance ‘perfect storm’? Recent headwinds reviewed

The strategic question of whether a strategy that (by its nature) will exclude a large proportion of the available investment universe is able to avoid ‘concessionary’ returns over the long term is one that has long been debated by sustainable investment practitioners. Indeed, the early days of ‘ESG investing’ in the 2000s involved much discussion and research on this subject. One could perhaps apply the same challenge to more aggressive style-focused strategies (such as Deep Value or High Growth), note that in those cases, a focused universe is viewed as a source of alpha rather than an impairment.

Whatever view one takes on this point, we should at the very least acknowledge that recent poor results can, in large part, be attributed to quite a specific combination of problematic circumstances.

• The ‘Magnificent Seven’ era has challenged active equity managers.
  A period of increasing global index concentration has proven challenging for active managers more widely, with the largest index constituents disproportionately driving returns (FAANGs, then Magnificent 7). Indeed, the median active global equity manager (not impact) has lagged the MSCI World by 1.5% p.a. over the past three years, net of representative management fees. Over 2023-24, The ‘Mag7’ accounted for a staggering 63% of the S&P 500’s 24% price return over 2023, and 55% of the index’s 23% return over 2024 according to JPMorgan. With the US dominating global markets, this effect flowed through to benchmarks of global equity managers.

While the vast majority of active managers have struggled in these circumstances, impact equity managers have been particularly negatively affected due to very low average exposure to the relevant mega cap stocks. When we look at the impact equity manager peer group discussed above, we find that the average exposure to the Magnificent 7 peaked in December 2024 at just 3.4%; indeed, the majority of funds in this group held no ‘Mag7’ stocks whatsoever. By contrast, these stocks represented 24% of the MSCI World index in December 2024, and 21% of the MSCI ACWI.

• Energy ‘underweights’ have affected ESG (and impact) strategies.
  Since impact strategies typically apply ‘do no harm’ principles that are commonly found in ESG funds, energy sector exposure tends to be minimal and carbon-intensive producers are typically avoided. In 2022, Energy was not only the strongest GICS sector performer within the MSCI World (+46% in USD terms); it was also the only positive sector performer. Structural sector tilts or exclusions work both ways, however: when Energy does underperform, we should expect impact (and ESG) strategies to benefit.
• US underweights have affected impact strategies.
  ‘US exceptionalism’ has been an important theme driving market returns over the past three and five years. Significantly, global equity impact strategies tend to be underweight US stocks: in our analysis of the aforementioned impact equity manager peer group, the median portfolio exposure to the US was 59% at the end of March 2025, compared with 64% for global all cap core strategies (based on eVestment data), 64% for the MSCI ACWI and 71% for the MSCI World.

With strategies under pressure, watch out for discipline

Short track records are potentially highly problematic for the still-nascent impact equity sector. When strategies hit critical three- and five-year track record thresholds, relative return numbers matter more than ever. And, unlike other active equity managers (including many ESG strategies) with longer track records, recently-established impact funds cannot typically point to more appealing seven- and ten-year performance numbers.

We have now observed several instances of impact franchise closures and portfolio manager changes, driven by a combination of poor returns, investor outflows (or weaker-than-expected inflows), and the lack of a significant forward-looking asset pipeline. The pressure can also lead to perverse incentives: managers may be tempted to pivot into momentum market darlings with questionable impact credentials in order to chase performance, or take excessive risks in more volatile, early-stage transformative solutions businesses in the hope of regaining ground.

Pressure can also have positive consequences, of course. In some cases, we have seen impact equity managers enhancing their risk management efforts (minimising correlated risks across portfolio holdings, increasing diversification, paying stricter attention to valuation discipline) in order to provide a margin of safety. As with any process change, these adjustments need time to ‘bed down’ to be proven in practice.

More broadly, if further consolidation or closures do occur, this could eliminate a number of fund managers who have entered the space as a trend du jour but lack deep long-term commitment to an impact investment philosophy. The same, perhaps, can be said of asset managers who have softened their ESG or impact investment approaches in order to address a changed U.S. political climate. Regulator-imposed penalties – with a spate of high profile fines in recent years affecting managers – provide further disincentive for asset managers who may be ‘impact-washing’ or ‘green-washing’ their strategies. Arguably, periods of difficulty may help to separate the committed impact players from those chasing a transient fundraising opportunity.

The recent ‘perfect storm’ of impact manager underperformance has been driven by a number of challenging headwinds and, as a result, should not be viewed as a predictor of the future.

This is particularly true where a broad public market index is used as a benchmark for what are often highly differentiated, niche portfolios: the question is not just whether such a benchmark is ‘fair’ but whether investors and stakeholders are willing and able to tolerate potential divergence. Investors should confront head on the potential for prolonged periods of below-market returns in impact investment and consider how such scenarios are to be handled. Performance dispersion in the impact equity sector has already been high to date.

Looking forward, investors should consider the extent to which performance pressures could affect fund viability, strategy discipline, and high-level commitment to impact investment philosophies. From a practical standpoint, this underscores the importance of robust manager selection and careful ongoing manager monitoring.

By Martha Brindle, Senior Director, Equity

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Odi Lahav

Independent investment consultancy bfinance is pleased to announce the appointment of Odi Lahav as Chief Operating Officer.

Lahav brings more than 25 years of leadership experience across financial services, technology, and institutional consulting. He joins bfinance from Apex Group, where he served as Global Head of Digital Products, overseeing the group’s portfolio of fintech solutions across Europe, APAC, and North America. Prior to Apex, he held senior leadership roles spanning technology, data and analytics, and investment advisory services, including leading the global alternative investments group at a major ratings agency.

Over the course of his career, Lahav has also advised large institutional investors across a broad range of disciplines, including investment strategy, manager research, OCIO, private markets, digital product strategy, and operational execution.

In his new role, Lahav will oversee Investment Research, Digital Solutions, and corporate functions, including Technology, Legal, Compliance, and HR. His appointment marks a key step in aligning product, research, and delivery functions to further enhance bfinance’s innovation, operational execution, and delivery of data-driven insights for clients.

This appointment underscores bfinance’s continued investment in talent and infrastructure to support clients navigating an increasingly complex and fast -evolving investment landscape.

David Vafai, Chief Executive Officer, said: “We are thrilled to welcome Odi to bfinance. His exceptional track record in digital product leadership, institutional advisory, and operational transformation makes him ideally placed to strengthen our capabilities and support our clients’ evolving needs.”

On his appointment, Lahav commented: “I’m delighted to be joining bfinance at such an exciting time in its journey. The firm’s commitment to innovation, client-focus, and independence is truly compelling. I look forward to working with the team to advance the firm’s digital strategy, strengthen its operational foundations, and deliver even greater value for our clients.”

bfinance celebrated its 25th anniversary and completed a management buyout in 2023, when it moved back into employee ownership under the ongoing leadership of David Vafai.

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