Actively Managed Certificates (AMCs) have become more and more popular in recent years. They combine the advantages of structured products with features that allow for a flexible adjustment of the components within the underlying. In contrast to investment funds they can be structured in a fast and cost-efficient way making them the investment product of choice for launching investment strategies with limited amount of seed money.
AMCs allow for Public Offering of Hedge Fund Strategies
Another difference to investment funds is the fact that the distribution and marketing of AMCs, being derivative securities, is not subject to UCITS or the AIFMD but the Prospectus Regulation. Therefore any kind of investment strategy, as long as the underlying is transparent and liquid, can be repacked within an Actively Managed Certificate for public retail offering. This even includes Hedge Fund Strategies like Long/Short Equity, CTA Trading, Global Macro, FOREX Trading, Event Driven and asset classes like digital assets. Diversification Rules are far more flexible as under UCITS allowing for the launch of Actively Managed Certificates based on an actively managed concentrated portfolio – an ideal investment vehicle for activist shareholder strategies.
But how does the launch of an Actively Managed Certificate work?
Actively Managed Certificates get issued by investment firms or their Special Purpose Vehicles. They are derivative securities: That means AMCs are not collective investment schemes but debt instruments with a promise to pay the performance of a predefined underlying at investors request. Any AMCs therefore has an Underlying with a seperate ISIN it is linked to.
Actively Managed Certificates as a White Label Solution
Several Issuers of AMCs, including iMaps Capital Markets, offer the issuance as a White Label Solution. An Investment Manager, who needs to be authorised for asset management in his jurisdiction, acts as strategy sponsor defining the investment universe of the AMC and providing the rebalancing of the portfolio on a continous basis. The Investment Manager most of the time is also responsible for the marketing and distribution of the Actively Managed Certificate, although he might also appoint a Distribution Agent. The Issuer structures, dematerialises, administers and (in some cases) lists the AMC at an Exchange and the security tracks the investment portfolio 1:1. The Investment Manager thus avoids the hustle of setting up a whole issuance programme himself but can use a White Label Platform to save time to market as well as costs.
Investment Managers need flexible and cost-efficient investment vehicles to compete in the current market environment. The Rise of the Actively Managed Certificate has therefore just begun.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
