Authored by:
Robert Koenigsberger, Managing Partner & Chief Investment Officer
Mohamed A. El-Erian, Chair
Petar Atanasov, Director & Co-Head of Sovereign Research
Kathryn Exum, Director & Co-Head of Sovereign Research
April 10, 2025
Quarterly Outlook 2Q 2025
Decoding the Global Macro Environment
The first quarter of 2025 is likely to be etched in the memory of market participants. This period witnessed not only a marked recalibration of the prevailing narrative surrounding the U.S. economy, but a swift unraveling of long-held tenets of the global economic order – an unravelling that meaningfully accelerated in the beginning of the second quarter. The consequence was a notable sell-off in U.S. equities and a stark underperformance relative to their European counterparts, and a U.S. government bond market caught in the crosscurrents of subdued growth and elevated inflation. There was also considerable pressure on commodities, with indications of some forced portfolio de-leveraging.
The widespread acclaim for U.S. “economic exceptionalism” ceded ground last quarter to anxieties regarding decelerating growth and intensifying inflationary pressures. These concerns were vividly underscored by a series of disappointing “soft data” releases, hinting at nascent stagflationary tendencies. Compounding these worries were the persistent threats, and initial implementation, of additional U.S. tariffs, followed early in the second quarter by President Donald Trump’s announcement on “Liberation Day” of his broadest tariffs yet. The news triggered a dramatic rout in U.S. equities and spurred further fears of recession.
During the first quarter, the U.S. also experienced the disruptive approach of the Trump Administration’s newly minted Department of Government Efficiency (DOGE) towards public sector reform, while the prospect of retaliatory measures from key U.S. trading partners added to the prevailing unease.
The issue of tariffs, in particular, lay at the heart of the disruption to established assumptions about the global economic architecture. It eroded remaining confidence in the “rule of law” and the constraining influence of multilateral institutions and agreements.
Traditional alliances were unsettled, and the search for alternatives to the U.S. dollar as the dominant reserve currency and medium for international transactions gained marginal traction. For Europe, and Germany notably, this moment served as a “Sputnik” event. The once unquestioned reliance on the U.S. for national security was suddenly thrown into doubt, paving the way for increased German expenditure on defense, investment, and pan-European initiatives.
While the dislocation in markets has been considerable, a deeper downturn was averted in the first quarter, in part due to the prevailing expectation among many economists and policymakers that this uncertain trajectory could ultimately lead to a more favorable outcome. The potential for a significant wave of U.S. deregulation and tax reductions to invigorate the currently languishing U.S. growth dynamics offers the prospect of a global economy powered by two engines (Europe and the U.S.) rather than one, a fairer global trading system, and the tangible realization of AI-driven productivity gains.
Whether this more benign future materializes remains to be seen. The immediate challenge lies in navigating a journey that is likely to become increasingly turbulent in the months ahead.
Converging on a More Turbulent Growth Trajectory
The first quarter began with a still strong U.S. economy, weak growth in Europe, and lackluster activity in China. By March, the U.S. economic outlook had shifted, and concerns about a recession increased amid a blitz of tariff announcements, federal aid and job cuts, and the upending of U.S. foreign policy. Inflation expectations increased due to the threat, and reality, of higher import costs, while consumer confidence fell to its lowest level since 2022. The equity market moved into correction territory while the yield curve flattened. On April 2nd, President Trump announced the U.S. would impose tariffs between 10% and 50% on trading partners around the world, sending the stock market plunging.
However, there has been optimism for stronger growth in Europe as officials loosened fiscal constraints to boost defense spending in response to waning U.S. support for Ukraine. The Eurozone Aggregate Composite PMI moved back into expansionary territory by the quarter’s end.
In China, small improvements in PMI indexes, combined with optimism in the technology sector, were partially offset by softening trade, CPI and credit data. This reflected the ongoing structural headwinds for domestic demand and early signs of tariff strain. In March, authorities unsurprisingly set the annual growth target at “around 5%” at the annual session of the National People’s Congress, pledged moderately looser fiscal and monetary policy, and outlined a consumption support action plan.
Looking ahead to the second quarter, we expect disruptive policy to continue to weigh on confidence and growth and see an elevated risk of a U.S. recession.
The April 2nd tariff announcement unveiled a complex web of levies, calculated on a ratio of each country’s trade surplus with the U.S. to its total exports to the U.S. They are further compounded by a uniform 10% baseline tariff.
Preliminary calculations suggest that the average effective tariff rate in the U.S. economy could rise to approximately 25%, a level not seen since the 1880s. After the announcement, U.S. growth expectations were further downgraded.
China promptly retaliated with tariffs of 34% on all U.S. goods, which prompted a new threat of an additional 50% tariff from President Trump, escalating concerns of a full-scale global trade war.
Markets will closely watch for significant spillovers from sentiment and confidence into hard activity data such as PMIs, retail sales and labor market indicators in the coming months. Clarity on the ultimate effects of U.S. trade policy and DOGE initiatives, as well as on deregulation, taxes, and energy policies, would be welcomed by markets. However, expect uncertainty to remain elevated in 2Q.
We see room for economic green shoots in Europe but acknowledge the speed and scope of improved economic momentum will depend on the scale and cadence of spending, the degree of headwinds from the new round of tariffs, and the trajectory of ceasefire negotiations in Ukraine.
In China, we expect tariffs to drag down the external sector in 2Q, with looser domestic policy to partially offset economic weakness. We think authorities will allow for moderate but controlled bouts of foreign exchange depreciation.
Economic Uncertainty Clouds Outlook for Fed and EM Central Banks
The first quarter of 2025 served as a rude awakening to markets that had coalesced around the narrative of a gradual approach by the Trump Administration on tariffs, immigration, and foreign policy. Instead, President Donald Trump and his benefactor, Elon Musk, moved swiftly to dismantle the economic and political structures that have underpinned the U.S. relationship with the rest of the world since WWII, triggering significant uncertainty for markets.
As we look ahead to 2Q, our strongest conviction is that uncertainty will remain the overarching global theme for economic policymakers in the U.S. and across developed (DM) and emerging economies (EM). Against that backdrop, we believe the Fed and other central bankers in DM and EM will continue to signal a “wait-and-see” approach if clarity remains elusive and we expect the task of managing monetary policy to get progressively more difficult for global central bankers.
The Fed has been in a particularly challenging spot as it aims to deliver on its dual mandate of promoting maximum employment and stable prices. While arguably the Fed has not made as much progress as the FOMC would have liked on inflation, the U.S. labor market appears to remain resilient for the time being. This is supportive for the Fed’s ability to remain in “wait-and-see” mode a bit longer and not be forced to cut rates in a scenario where the labor market has weakened materially.
There is a risk that the economic impact of the Trump Administration’s main policy initiatives could hinder both the Fed’s objectives. Imposing tariffs on key trading partners and cracking down on both legal and illegal immigration have been the policy priorities so far. We think that these policies are likely to stoke inflationary pressures, dampen GDP growth, and continue to hurt investor sentiment. More than their actual real-world effects, the uncertainty that such policies create is arguably more damaging to economic activity in the U.S., given their effect on strategic planning and investment decisions.
In this context, we expect the Fed to face “whiffs of stagflation” in 2Q, with the risk of weaker economic activity and higher inflation than current consensus predicts. This could start challenging the “wait-and-see” narrative. The potential stagflation dynamics could transition into a full-blown recession scenario, with more material implications for emerging markets, or into a “long-term gain” in which deregulation and tax polices more than off-set short-term pressure from the policy reset. This depends on a number of political factors within the Trump Administration, as well as on the scale of near-term economic pain from the new tariffs, immigration crackdown, and a new post-WWII order.
In EM, the unprecedented level of global economic uncertainty complicates monetary policy management. However, a weaker dollar and lower U.S. Treasury rates for much of 1Q contributed to the resilience of EM assets. Looking ahead, a global trade war and anxiety about the “destination” for the global economy could generate greater volatility.
Performance in EM credit is likely to be driven by idiosyncratic investments that have enough of a fundamental and/or valuation buffer to be shielded from an overall challenging top-down context. In hard currency sovereigns, we expect to remain focused on the few remaining credits that trade in distressed territory but have political and/or economic triggers on the horizon that could catalyze structural repricing, regardless of global pressures. Ecuador and Bolivia are two examples. In local debt, we will continue to look for foreign-exchange trades where fundamental dynamics could create opportunities for further outperformance if dollar weakness persists. These investments would be in countries with disinflation or high real interest rates that could afford nominal yields to trend lower, without compromising their real rate anchor.
Reshaping of U.S. Global Role to Continue Under Trump
In our 1Q Outlook, we correctly flagged the likely prominence of U.S. trade and immigration policy in the first three months of the year. In January, President Trump and his Administration published the “American First Trade Policy” memorandum, which called for review of unfair trade practices, the establishment of an External Revenue Service, preparation for the USMCA review, and an evaluation of exchange rate practices and broader trade agreements. It also planned for an assessment of unlawful migration and fentanyl flows, particularly from Mexico, China, and Canada.
The “Liberation Day” announcement was preceded by other tariffs and tariff threats throughout much of the quarter that were targeted primarily at Mexico and Canada.
For Mexico, we expect the threat of more tariffs to linger through USMCA renegotiations but anticipate that President Claudia Sheinbaum will continue to constructively manage the bilateral relationship. In the meantime, Mexico consensus growth forecasts face downside risks, particularly if U.S. growth stalls.
Elsewhere in EM, the newest tariff rates are most aggressive on imports from Asia, particularly China and Vietnam, and less aggressive for Latin America. They will likely affect small open economies with limited policy space most negatively.
On the Russia-Ukraine conflict, President Trump campaigned on a promise to “make a deal” to end the Russia-Ukraine conflict in “one day”. This was later revised to a more realistic, but still highly ambitious, one hundred days after taking office. At Gramercy, we have been consistently less optimistic than both the Trump Administration and the broader market about the prospects of a near-term (defined as 2025-26) resolution. Under current Russian leadership, we do not see any structural anchors for a credible deal to end the war. Instead, we see the concept of a sustainable peace arrangement in Ukraine as a noble cause with an extremely low probability.
We believe the best markets can hope for is a temporary and fragile ceasefire without security guarantees for Ukraine, but this would not resolve any medium-term uncertainty. Moreover, as confirmed by the second direct call between President Trump and Russian President Vladimir Putin in mid-March, the Kremlin is conditioning any potential ceasefire agreement on its “maximum objectives” being fully met, which would be tantamount to Ukraine’s capitulation and return to Moscow’s de-facto political control.
Such an outcome would be unacceptable to Ukraine and its European allies. In that context, if a ceasefire deal fails after further negotiations, our expectation is that the war will continue with increased financial and military support for Ukraine by a “coalition of the willing”. Whether or not the Trump Administration would be a part of such a coalition is likely to be a major factor for the trajectory of the conflict.
Support for Ukraine will also be a defining moment in the transatlantic relationship, which has been under tremendous pressure since the start of the second Trump Administration. A dramatic shift by the current White House away from its traditional allies and toward a much closer relationship with President Putin’s Russia has been nothing short of remarkable in a geopolitical context and can lead to further seismic shifts in global political structures and markets. We anticipate the acute tensions between the Trump Administration and Europe, which came to the fore at the Munich security conference in February, will continue to dominate the narrative in 2Q.
In the most prominent example of shifting geopolitical sands, the Trump Administration’s sharp criticism of Europe has driven a realization among the continent’s leadership that the U.S. security umbrella can no longer be taken for granted. European markets have witnessed a complete and speedy rethink of fiscal constraints and the rebuilding of Europe’s defense capabilities. There is now a narrative of “re-arming” Europe under a newly energized Franco-German partnership, with active support from the UK, Poland, the Baltics, and other members of the “coalition of the willing”. We expect this to gain further momentum in 2Q.
A €1 trillion fiscal spending package proposed by the new coalition of incoming German Chancellor Friedrich Merz was quickly approved by the Bundestag. This is a clear illustration that what was unthinkable in Europe just a few months ago now seems to be the base case, given Russian security threats and waning U.S. security support. Such a monumental shift is likely to have material implications for relative economic performance and market sentiment in the U.S. and Europe. It can also have significant implications for EM.
The Middle East experienced a period of relative calm for much of the first quarter due to the temporary ceasefire in Gaza. President Trump’s proposal to rebuild Gaza and force the relocation of Palestinians to neighboring Jordan and Egypt was unsurprisingly met with strong rejection by both countries and the Gulf Cooperation Council, which began to formulate its own solutions. By the end of the quarter, the ceasefire in Gaza was broken as Israel relaunched attacks on Hamas and the U.S. launched airstrikes on Houthi rebels in Yemen.
In 2Q, we expect near-term retaliatory attacks from the Houthis and further attacks in Gaza, which could drive spikes in oil prices. However, we see room for a second ceasefire by the quarter’s end, as well as for further discussions led by Saudi Arabia, Qatar, and Egypt on the “Arab approach” to the Israel-Gaza conflict.
On Venezuela policy, the U.S. strategy in 1Q was led by Special Presidential Envoy for Special Missions Richard Grenell and Secretary of State Marco Rubio. The approach oscillated between pragmatic and hardline, reflecting the two men’s different views.
This quarter, we expect President Trump and Secretary Rubio to maintain tough action and a critical public stance against Venezuela’s autocratic leader, Nicholas Maduro, but to preserve Mr. Grenell’s diplomatic efforts as an option. This scenario assumes that Mr. Maduro does not have an escalatory response to U.S. “maximum pressure” announcements. While the current wind-down of Chevron’s license to operate in Venezuela is a credit negative, we do not rule out another extension of the wind-down period beyond the current deadline of May 27th, or the eventual evolution of the license as the U.S. further defines its strategy.
We see President Trump’s executive order to impose a 25% tariff on other countries importing Venezuelan oil as aligned with his “America First” agenda, although it is not clear at this point if his ultimate goal is “maximum pressure,” where enforceability would remain a question, or opportunistic U.S. access to Venezuelan oil.
We will also be watching for any ‘wins’ Mr. Maduro may give the splintered opposition in Venezuela’s upcoming regional and legislative elections on May 27th, as well as for any constitutional reform efforts that could be used as bargaining chips.
Investment Strategy Review and Outlook
In emerging markets broadly, the traditional, index-based approach has often failed investors, resulting in poor returns and elevated risk. This outdated strategy relies heavily on passive investing, which forces investors to own unstable assets and creates unbalanced portfolios. For instance, in 1998, the Emerging Market Bond Index (EMBI) included a significant portion of Argentine bonds, despite the country’s high default risk. Similarly, in 2022, the same index included a large amount of Russian and Ukrainian bonds just before the Russian invasion. These examples highlight how a single risky credit can weigh on an entire basket, the major flaw of this type of investing in Emerging Markets Debt (EMD). We believe this has caused more harm to investors than any other factor.
Gramercy’s better approach involves a “barbell strategy” that strategically balances high-quality yield from high conviction private and public credit with more asymmetric credit and special situations exposure when they are present. This strategy allows investors to capture significant upside while minimizing the threat of non-recoverable mistakes. The implementation of this approach requires strong, active EMD and special situation capabilities, as well as a focus on private credit in emerging markets. It is a blend that combines compelling risk-adjusted returns, low leverage, strong covenants, and collateral.
By combining this hybrid of both public and private strategic and opportunistic exposures, investors can achieve a well-balanced portfolio that emphasizes careful security selection and both correlated and uncorrelated collateral. The first quarter showcased the power of this “Better Approach to Emerging Markets.”
Gramercy’s CIO and Managing Partner, Robert Koenigsberger, and Chair, Mohamed El-Erian, spoke with Jonathan Ferro and Lisa Abramowicz on Bloomberg Television. They discuss how a new environment will produce winners and losers in EM, the importance of carefully choosing where to invest and where to not, and the benefit of well-structured/collateralized private loans to EM borrowers. Remember, many emerging economies and corporates are more mature than they were 15 or 20 years ago and are better prepared to manage external shocks. Watch here. (April 6, 2025)
Multi-Asset
Our Multi-Asset strategy delivered on its absolute return objective despite the market turbulence.
In Public Credit, rate volatility remained a key factor. While spreads widened, the more significant, positive impact on the strategy came from falling yields, which benefited our longer duration bias. We modestly reduced the Public Credit weighting through a decrease in investment-grade holdings and ended the quarter at approximately 27%. Despite the challenging global macroeconomic environment, the Multi-Asset strategy delivered positive absolute returns.
The Private Credit portion of the Multi-Asset book received material amortizations across several loans, fully exited three positions, and established one new position. Full realizations included portfolio projects for a Brazilian floating power plant builder, a Mexican fintech focusing on SME loans, and an Argentine gas technology company. The strategy also secured an allocation and funded a secondary transaction in a Costa Rican sugar producer. In addition, it originated a senior secured term loan for a construction finance project that is undergoing a wind-down process.
In the Opportunistic Credit/Equity portion of our Multi-Asset strategy, Ecuador sovereign bonds retraced their gains mid-quarter as the socialist candidate Luisa Gonzalez forced a runoff election with a better-than-expected showing in the first round. While it is a tight election and there are a range of views, Gramercy believes President Daniel Noboa is likely to edge out a victory, sending bonds materially higher. We believe the current market price represents an attractive entry vs. scenario-weighted outcome.
In Special Situations, our Multi-Asset strategy participated in a secondary transaction in a Gramercy-originated litigation finance facility. The facility was secured by a portfolio of contingency fee cases that are currently under litigation. In March, the Special Situations team successfully finalized a transaction to refinance this facility, resulting in a full monetization of the position.
The Multi-Asset’s Global Hedge Strategy continues to have no position. The U.S. market experienced a controlled equities selloff, fueled by tariff concerns, risk stop-outs and a shift toward a more dovish Fed outlook. Despite a significant decline in equities, volatility underperformed, signaling an orderly downturn without panic-driven spikes. A broader shift in asset allocation towards bonds and non-U.S. equities could reinforce this trend, signaling slower growth and fiscal contraction in the U.S. With spreads remaining under control, our Multi-Asset portfolio was a net beneficiary of the turbulence, and we maintain no position in the hedge strategy, especially in the face of an elevated risk premium.
As we reflect on our previous note and outlook for 2025, we can confidently say that our conviction around volatility was spot on, with the markets experiencing substantial shifts and disruptions in the first quarter. Our Multi-Asset portfolio design continues to navigate volatile conditions while striving for consistent, positive returns. This approach allows us to capitalize on our highest conviction opportunities across the platform and confidently seek value for our clients, regardless of market conditions.
Gramercy’s CIO and Managing Partner, Robert Koenigsberger, spoke with Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu, in the latest Credit Edge podcast. Listen as they discuss Robert’s outlook for significant growth in private credit to developing nations as well as EM private debt returns, default risks, real estate investment strategies, US tariffs and trade policy, and recent deals in Mexico and Turkey. Listen to the full conversation here.
Capital Solutions
Emerging markets continue to navigate a shifting landscape shaped by U.S. tariffs, trade negotiations, and broader geopolitical developments. These factors introduce a level of uncertainty that has affected trade flows and investor sentiment.
Higher tariffs on U.S. trading partners such as China, Canada, and Mexico, alongside a strong U.S. dollar, have contributed to currency fluctuations and inflationary pressures globally, as well as across EM economies. In response, EM central banks are managing their monetary policies but still relying on high interest rates, prompting businesses to reassess their capital structures amid persistently high borrowing costs in local markets.
This evolving environment has led to increased demand from regional players seeking to reduce exposure to local debt and prioritize U.S. dollar lending through public markets, private credit, and structured finance. Year to date, EM corporate issuances have risen by 22% compared to the same period in 2024 according to Bond Radar. This trend underscores our ability to deploy dollar-based and currency-hedged transactions. Despite the challenging conditions for EM borrowers, our portfolio’s bottom-up approach has resulted in less than 3% direct exposure to exporters potentially affected by new U.S. tariffs, mitigating broader market risks.
At the country level, we continue to monitor Mexico. There, President Sheinbaum has taken a constructive stance on U.S. relations by addressing migration and drug trade concerns while reducing imports from China. We anticipate that this situation will lead to a favorable review of the USMCA in the second half of 2025, with largely unchanged terms but stricter “rules of origin” regarding North American components. Given Mexico’s deep economic integration with the U.S., its lower industrial wages, and its competitive real estate costs, nearshoring remains a key financing opportunity. Additionally, infrastructure investment, SME financing, and middle-market real estate continue to attract strong sponsor interest, reinforcing Mexico’s evolving role in global trade realignment.
In Türkiye, disciplined monetary policies and high local interest rates create attractive conditions for U.S. dollar-denominated private credit. Companies with strong U.S. dollar revenue streams and manageable leverage are well-positioned to optimize their capital structures, enhancing credit quality and investment appeal. While high interest rates pose challenges for local borrowers, they also offer compelling yields for investors seeking exposure to Turkish assets. Notably, our portfolio proved to be beta agnostic to the volatility and drawdown caused by the political upheaval related to last month’s arrest of opposition leader and mayor of Istanbul, Ekrem Imamoglu.
In Brazil, rising double-digit interest rates are reshaping the financing landscape, prompting regional and local players to reduce domestic market exposure and shift towards U.S. dollar financing. Our approach prioritizes diversification, with exposure to infrastructure, oil and gas, and agriculture, and is supported by enhanced collateral packages to mitigate downside risk.
Across Latin America, thoughtful asset selection and strategic positioning are unlocking value in sectors that offer stable returns despite macroeconomic headwinds. Diversified asset-backed portfolios, industries tied to lower-volatility commodities, and well-managed real assets serve as natural hedges against inflation and broader market uncertainty, creating opportunities for attractive risk-adjusted returns.
Overall, we deployed a total of $178 million in the first quarter through a mix of new deals, loan upsizes, and platform loans. These investments were diversified across sectors such as infrastructure, oil and gas, agriculture, technology, media and telecommunications, financials, food, and others. Geographically, our capital was deployed in Brazil, Mexico, Türkiye, Africa, and Colombia. As of the end of the quarter, we had committed more than $190 million, with an additional $185 million in the advanced due diligence stage and more than $1 billion in early-stage deals. This pipeline includes opportunities in real estate in Mexico and Costa Rica, financials in Colombia, agribusiness in Brazil, oil and gas in Mexico and Africa, food in Türkiye and Brazil, healthcare in Mexico and Colombia, and technology, media and telecommunications in Mexico and Türkiye.
Emerging Markets Debt
What began as early signs of stagflation in February, marked by an upward revision to 4Q core PCE to 2.7% year-over-year and a 5.8 point drop in consumer confidence, evolved into broader concerns about the U.S. economic outlook as more weak data emerged. These developments triggered turbulence in U.S. stock markets. The S&P was down by 4.6% and the U.S. dollar weakened, with DXY down to 104.2, at the end of the quarter. The 10-year U.S. Treasury yield contracted by 37bps, and oil prices dipped below $70 per barrel before rebounding on the back of secondary sanctions on Venezuela oil. Brent closed the quarter at $74.
Despite the shifting narrative, EM fixed income remained resilient, with the EMBI Global Diversified Index and the CEMBI Broad Diversified Index up 2.2% and 2.4%, respectively, for the quarter. In the corporate market, investment-grade and high-yield performed in line. In the sovereign market, investment grade outperformed high yield by 110bps on a total return basis. Notably, EM local currency sovereigns were the top-performing sub-asset class, up 4.3% for the quarter. They benefitted from euro strength as Europe introduced fiscal measures to boost defense spending, raising prospects for better growth in the region.
Looking ahead to the second quarter, uncertainty is likely to persist and continue influencing market sentiment. We anticipate that the elevated policy uncertainty in the U.S. and April 2nd tariff announcements will further undermine consumer and business confidence, which, in turn, could dampen the domestic economic outlook. As such, we have raised our probability of a U.S. recession.
In this environment, we foresee a moderate widening of EM credit spreads, though the high carry in EM credit and expectations of rangebound rates should offer an offset. We prefer a mix of higher-quality high yield corporate credit, where fundamentals are robust, technicals are solid, and carry is attractive, alongside investment grade sovereign credit, which now offers compelling valuations relative to investment grade corporate credit. In the local credit space, we favor select opportunities with strong real rate buffers, which can benefit from continued monetary policy easing.
To effectively navigate these markets, it is essential to employ active risk management and a bottom-up approach to security selection. This strategy will help investors filter out market noise and pinpoint high-quality opportunities, positioning them to achieve strong returns despite challenges that lie ahead.
Special Situations
The Special Situations team continues to focus on the successful management and monetization of our existing portfolio of legal assets in emerging markets, including Brazil, Mexico, Peru, Argentina, Venezuela, Puerto Rico, and in developed markets, including the U.S. and the U.K.
Elsewhere in litigation finance, we see attractive opportunities in secondary transactions involving legal assets, law firm portfolio loans, and claim funding opportunities. As in past deals, we seek to structure these investments with insurance to protect against the downside. Likewise, through our network of relationships in the U.S., Europe, and Latin America, we are evaluating several attractive deals outside of litigation finance that have high potential returns with similar downside protections. They include the potential applicability of our unique insurance capabilities, completion guarantees, and other credit enhancements.
Notably, in March, Gramercy successfully finalized a transaction to refinance its $85 million lending facility with a U.S. based law firm, Dalimonte Rueb Stoller LLP, which was secured by a first lien claim on the contingency fees related to their portfolio of U.S. mass tort dockets. Gramercy is pleased to announce that the refinancing transaction resulted in a full repayment of the loan facility.
Looking ahead, additional sectors of focus may include multifamily real estate, specifically in markets where there is inadequate supply but strong economic tailwinds that should drive sustained growth. We have also significantly advanced a potential investment in digital infrastructure assets, including partnerships with key vendors and other large, well-capitalized strategic partners.
Conclusion
Given the swift moves towards realignment of U.S. policy, global trade, and security in the first three months of the new Trump Administration, we anticipate continued volatility and limited predictability in the markets. From a top-down perspective, these macro shifts promise a turbulent journey in the months ahead, with a dispersion of macroeconomic and corporate outcomes, particularly in the foreign exchange and fixed income segments.
In this environment, it is crucial to frequently test baseline scenarios against actual developments and evolving prospects. We will continue to carefully select securities and structure deals with tight covenants and strong collateral. On the positive side, this environment continues to promise opportunities generated by high carry, valuation overshoots, and changing relative values between, and within, major asset classes.
Gramercy does not see uncertainty and disruption abating in 2Q. However, we remain confident that the firm is exceedingly well positioned to manage, and benefit from, market swings and geopolitical developments, and to continue delivering strong results for our clients.
About Gramercy
Gramercy is a global emerging markets alternatives investment manager with offices in West Palm Beach (Florida), Greenwich (Connecticut), London (England), Buenos Aires (Argentina), Miami (Florida), and Mexico City (Mexico) and dedicated lending platforms in Mexico, Türkiye, Peru, Pan-Africa, Brazil, and Colombia. The $6 billion firm, founded in 1998, seeks to provide investors with a better approach to emerging markets, delivering attractive risk-adjusted returns supported by a transparent and robust institutional platform. Gramercy offers alternative and long-only strategies across emerging markets asset classes, including multi-asset, private credit, public credit, and special situations. Gramercy’s mission is to positively impact the well-being of our clients, portfolio investments, and team members. Gramercy is a Registered Investment Adviser with the US Securities and Exchange Commission (SEC) and a Signatory of the Principles for Responsible Investment (PRI). Gramercy Ltd, an affiliate, is registered with the UK Financial Conduct Authority (FCA).
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This document is for informational purposes only, is not intended for public use or distribution and is for the sole use of the recipient. The information set forth herein and any opinions herein do not constitute an endorsement, implied or otherwise, of any securities, nor does it constitute an endorsement with respect to any investment area or vehicle. It is not intended as an offer or solicitation for the purchase or sale of any financial instruments or any investment interest in any fund or as an official confirmation of any transaction. Opinions, estimates and projections in this report constitute the current judgement of Gramercy as of the date of this report and are subject to change without notice. All market prices, data and other information, are not warranted as to completeness or accuracy and are subject to change without notice at the sole and absolute discretion of the Investment Manager. Gramercy has no obligation to update, modify or amend this report or otherwise notify a reader hereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Certain statements made in this presentation are forward-looking and are subject to risks and uncertainties. The forward-looking statements made are based on our beliefs, assumptions and expectations of future performance, taking into account information currently available to us. Actual results could differ materially from the forward-looking statements made in this presentation. When we use the words “believe,” “expect,” “anticipate,” “plan,” “will,” “intend” or other similar expressions, we are identifying forward-looking statements. These statements are based on information available to Gramercy as of the date hereof; and Gramercy’s actual results or actions could differ materially from those stated or implied, due to risks and uncertainties associated with its business. Unless otherwise stated, all representations in this presentation are Gramercy’s beliefs based on sector knowledge and/or research. Past performance is not necessarily indicative of future results. Any reference to net returns reflect the deduction of management fees, carried interest, unconsummated transaction fees, professional fees, organizational fees and interest. Such fees and expenses will reduce returns to investors and in the aggregate, may be substantial. References to any indices are for informational and general comparative purposes only. There are significant differences between such indices and an investment program of Gramercy. A Gramercy Fund may not invest in all or necessarily any significant portion of the securities, industries, or strategies or represented by such indices. Indices are unmanaged, and their performance results do not reflect the impact of fees, expenses, or taxes that may be incurred through an investment with Gramercy. Returns for indices assume dividend reinvestment. An investment cannot be made directly in an index. Accordingly, comparing results shown to those of such indices may be of limited use. This presentation is strictly confidential and may not be reproduced or redistributed, in whole or in part, in any form or by any means. © 2025 Gramercy Funds Management LLC. All rights reserved.