The global asset management landscape is undergoing a significant shift, with Actively Managed Certificates (AMCs) emerging as a powerful and increasingly popular tool. These innovative financial instruments are reshaping how boutique asset managers operate and compete against larger, more established firms, particularly in Europe.
The Genesis of AMCs
The rise of AMCs can be traced back to a specific regulatory change in the European Union. Between 2009 and 2013, the EU introduced a major reform to collective investment scheme regulations, amending the Alternative Investment Fund Managers Directive (AIFMD). This reform mandated that all asset managers, regardless of their size, must be fully regulated. While formally intended to increase oversight and investor protection, this policy inadvertently created a significant barrier for many small and medium-sized asset managers, forcing many to close their doors. The high costs and administrative burden of becoming fully regulated were simply unsustainable for smaller firms.
In response to this monopolistic, “Big Finance-friendly” move, a clever solution was devised on Swiss soil. Swiss legal and financial experts began to package managed portfolios into a securities. These securities, known by various names such as portfolio-linked notes, tracker certificates, or, most commonly, Actively Managed Certificates (AMCs), allowed asset managers to continue their business and retain their investors.
The “Killer Feature” and Why AMCs Took Off
The defining characteristic, and the primary reason for the meteoric rise of AMCs, is their unique regulatory status in Switzerland. The Swiss financial market regulator, FINMA, does not classify AMCs as collective investment schemes. Also it is the standard practice that the firms managing the underlying portfolio do not need to be regulated asset managers.
In practice, the person responsible for managing the portfolio is often referred to as a “strategy sponsor”, a term that implies they are merely a consultant providing advice on the portfolio’s composition. This progressive, business-friendly approach allowed Switzerland to attract a substantial amount of asset management business from the bureaucracy-ridden EU. By offering a viable alternative to the strict AIFMD regulations, Switzerland positioned itself as a hub for boutique asset managers looking for a more flexible and efficient operating environment.
How AMCs Work
An AMC is, at its core, a (formally) debt security issued by a special purpose vehicle (SPV). The proceeds from the sale of the security are used to purchase the underlying assets of a portfolio, which is actively managed by a third-party ‘strategy sponsor’. The AMC’s performance is directly linked to the performance of this underlying portfolio. This structure provides a legal and administrative buffer, as the investor is holding a security rather than a direct interest in the collective assets of a fund. Although various types of underlying assets, including equity, can be packaged into the AMC, it is almost always classified as a debt security (CFI code starting with ‘D’).
The SPV, which acts as the issuer of the AMC, is often incorporated in jurisdictions with favorable corporate and tax laws. The Cayman Islands are the undisputed leader in this regard, offering a well-established legal framework and robust corporate services. While other jurisdictions like Guernsey and Hong Kong can also be used, they often come with limitations. For example, in Guernsey, local providers may insist on appointing their own directors, which can create a lack of control for the client. Hong Kong SPVs are typically better suited for securities with a less actively managed underlying portfolio.
AMCs have proven to be a valuable lifeline for small and medium-sized asset managers, enabling them to thrive and innovate without the regulatory burdens imposed by traditional collective investment schemes.
Tiner Wernow (form. John Tiner & Partners) designs and creates securities and other financial instruments to enable our clients to raise capital, sell managed trading strategies and securitize any type of assets. We provide a full-cycle service from developing the structuring concept to its full implementation (ISIN, issuance, global clearing, exchange listings, placement routes). We help to wrap any type of asset or investing idea into easily tradeable, globally cleared securities. Our global services platform is 208Markets (https://208markets.com). We provide issuance, brokerage, SPV maintenance services in multiple jurisdictions. The educational materials appearing on the internet under the “Tiner Educational Hub” headline are to increase the awareness of the professional audience as to the securitization tools available to more efficiently attain your business objectives.
