In today’s ever-evolving financial landscape, investors are constantly seeking innovative investment opportunities that offer the potential for enhanced returns and risk management. Among these opportunities we have the AMCs, which stands for Actively Managed Certificate and is an investment vehicle combining features of structured products and actively managed funds. It provides a “wrapper” for an investment strategy, or specific underlying assets. The certificate is sold to investors and the capital is used to implement the strategy. The investors then participate in the performance of the portfolio following a dynamic approach by replicating the active management of the investment strategy applied to an underlying index. They belong to the classification of structured instruments, and have an active component that represents a significant distinguishing factor that brings them closer to the world of Mutual Funds.
The discretion of the “manager” is one of the main aspects that distinguish traditional certificates from AMCs. Ordinary certificates are in fact securitized derivative instruments with the possibility of adding one or more options including partial, total or conditional protection of the invested capital and end-of-term bonuses in case of certain scenarios occurring during the instrument’s lifespan.
AMCs, on the other hand, allow to combine some of the benefits of structured products such as adaptable strategies, quickness to market, broad asset range, reduced regulatory burdens, customisable fee structure, flexibility and more practical ones such as cost reduction, advantageous taxation, low entry thresholds, as well as the feature of actively managing the strategy and underlying assets, diversifying as typically done in mutual funds.
Actively Managed Certificates adapt to different market situations and conditions, rebalancing investments within the product as in mutual funds. Active management represents a similarity between these two instruments, but there are also many differentiating elements. Among these, the flexibility of AMCs can certainly be highlighted, characterized by low costs and rapid development of an initial structure, which represents a valid alternative to investment funds when building vehicles for Assets Under Management – AUM – below 10 million euros.
The investors benefit from it being ideal for professional investors, smaller investment thresholds, transparent, risk-free from banks.
Diaman Partners Focus
Diaman Partners, a leader in managed savings in digital assets, has analyzed an interesting challenge between AMC vs. BTP, AMC vs. wealth management, and AMC vs. Funds. In the first case, AMC wins for low entry thresholds, the possibility of listing on the stock exchange, and no entry and exit costs. They also have compensation for gains and losses, although they lose out due to higher taxation and the presence of an inheritance tax. In BNP Paribas, the rating of AMCs is A+, and geographical, sectoral, and factorial diversification puts them at a great advantage over BTP.
Within the comparison between AMC and wealth management, AMCs have low entry thresholds, can be listed on the stock exchange, do not incur additional costs for entry and exit, and have access to US ETF securities. Compared to wealth management, AMCs offer compensation for gains and losses, active management is carried out by the Index Allocator Agent, and taxes are paid upon the sale of the instrument.
An actively managed certificate can be developed through several identifiable steps starting from initial planning or defining investment strategies and parameters, followed by the preparation of necessary documentation. Next, the initial capital is raised (private placement) along with the necessary documentation, admission to trading of the instrument on the derivatives market, SeDeX. The instruments subject to investment are then selected, followed by the management or rebalancing of the underlying components of the product.
In conclusion
In conclusion, although AMCs have recently entered the market, they are gaining attention for their innovative and simplified distribution characteristics. They allow portfolios to be put together more flexibly and cost-effectively, the assets can be drawn from a wider than usual pool and the portfolio is actively managed which means it continuously follows market developments.
The digitalisation has made AMCs accessible at a low cost and are a perfect pick for those looking to optimize returns and specific investment needs. The investors, however, need to ensure the issuer is trustworthy, and beware of how quick AMCs react to technological change.
