Actively Managed Certificates (AMCs) have emerged as a powerful and flexible financial instrument, providing a streamlined way for asset managers to package and distribute their investment strategies. This rise in popularity is a direct consequence of a significant regulatory shift in the European Union (EU) and a clever workaround developed in Switzerland.
What are AMCs?
An Actively Managed Certificate is a structured financial product that packages an actively managed investment strategy into a tradable security. While they can assume many names, such as portfolio-linked notes or tracker certificates, the core concept remains the same: a debt instrument issued by a bank, a securities dealer, or a special purpose vehicle (SPV) that tracks the performance of an underlying portfolio.
Unlike traditional funds, the AMC itself is a security, giving it a number of key advantages. It can be listed on an exchange, offering greater liquidity and tradability for investors. It is also highly flexible, allowing a “strategy sponsor” to make discretionary changes to the underlying assets without the stringent regulatory burdens and high costs associated with launching and managing a traditional fund.
The Genesis of a New Instrument 🇪🇺➡️🇨đź‡
The primary reason for the creation of AMCs can be traced back to a specific EU regulatory reform. Between 2009 and 2013, the EU implemented the Alternative Investment Fund Managers Directive (AIFMD), a collective investment scheme regulation reform aimed at tightening oversight following the 2008 financial crisis.
This reform had a severe impact on the EU’s financial landscape. It required any asset manager, including the many small and medium-sized firms that had previously operated under a lighter regulatory regime, to be fully regulated. This move effectively created a monopolistic, “Big Finance-friendly” environment that forced many smaller, private asset managers in the EU out of business.
In response, a solution was created on Swiss soil to help these private asset managers retain their business and investors. Switzerland’s financial market regulator, FINMA, did not classify these new arrangements—which packaged managed portfolios into securities—as “collective investment schemes.” They were also not required to have a regulated asset manager (although certain requirements to the people and firms managing such instruments exist, by a voluntary best practice code developed by the Swiss Structured Products Association).
The voluntary code, while not insisting that the manager of the AMC (called “AMC Advisor” in the Rules) is regulated, sets out several common-sense safeguards such as maintaining continuity of management (at least two suitably qualified persons appointed to make investment decisions) and avoiding conflicts of interest.
Anyway, the “killer feature” of avoiding complex collective investment scheme rules allowed these securities to bypass the burdensome AIFMD regulations, and the practice developed of calling the person responsible for the portfolio a “strategy sponsor” to reinforce the notion that they were merely a consultant providing advice. This business-friendly and progressive move allowed Switzerland to attract a significant amount of asset management business from the bureaucracy-ridden EU.
Issuer Domiciles
While the concept was born in Switzerland, the issuers of these AMCs are often incorporated in specific jurisdictions known for their flexible corporate and legal frameworks. The Cayman Islands are the definitive leader in this regard, a top domicile for offshore hedge funds and a globally recognized financial center. Guernsey is another option, although its local corporate providers often require appointing their own directors and managing the SPV-controlling trust, which can limit the client’s control. Hong Kong SPVs may also be used for securities with a less actively managed underlying.
Tiner Wernow (formerly John Tiner & Partners) designs and creates securities and other financial instruments that help clients raise capital, sell managed trading strategies, and securitize various assets.
We offer a complete, full-cycle service, from developing the initial structuring concept to its full implementation, which includes acquiring an International Securities Identification Number (ISIN), handling issuance, global clearing, exchange listings, and placement routes. We can transform any asset or investment idea into an easily tradable and globally cleared security.
Our global services platform, 208Markets, provides issuance, brokerage, and SPV maintenance services across multiple jurisdictions.
Additionally, we’ve created educational materials under the “Tiner Educational Hub” to help professionals understand the securitization tools available to achieve their business objectives more efficiently.
