AMCs are currently on the rise among private bankers and independent managers in Switzerland. Fad or long-term trend?
Over the past decade, managers have increasingly adopted AMCs (Actively Managed Certificates), which have many benefits.
Why this craze for AMCs
AMCs allow for the dynamic management of an investment strategy in a vehicle with an ISIN code subscribed directly by client accounts. Add to this the writing of a visible track record, as opposed to a strategy that is managed directly in retail investors’ bank accounts. In addition, the AMC is more attractive than the fund envelope in this register because it is at the same time more flexible, cheaper, quicker to set up and, most importantly, much less restrictive from a regulatory and administrative point of view.
New proof of the end of the banking monopoly
Fintechs are attacking banks in all segments and there is no reason for the AMC business to escape this market development. Independent and specialized structures now offer competitive AMCs with the entire package of associated services (execution, consulting, digital interface, reporting, etc.). Unlike banks, these independent players issue their AMC via SPVs, i.e. off-balance sheet, which has an undeniable advantage: the absence of bank credit risk. This property is highly valued by investors, especially since the nominal amounts invested are high and invested for the long term. The SPV (Special Purpose Vehicle) is a legal entity formed by a parent company to isolate financial risk with the clearly defined objective of holding only assets. An SPV has neither active shareholders nor employees nor a physical location. Its legal status as an independent company enables it to guarantee its obligations even if the parent company goes bankrupt. In addition, securitized assets can be segregated bucket-to-bucket. Traditionally, SPVs have been used to securitise tangible assets (private equity, private debt, real estate, and more recently, cryptocurrencies), but we are seeing growing demand for AMCs issued by SPV vehicles.
The evolution of the scope of AMCs
Initially, bank-issued AMCs were dedicated solely to managing long-only equity strategies, typically tactical or thematic. More recently, we have seen a sharp increase in demand for setting up AMCs whose underlying assets are multi-asset and diversified (direct equity and bond lines, funds and structured products). Often the benefit for money managers is to replicate their sample portfolios in an envelope with an ISIN code to ‘centralize’ their management like a modern private bank. The centralized management approach allows for greater efficiencies, both from a cost and operational perspective. This development is not surprising since it is a direct consequence of the institutionalization of independent managers, which is particularly supported by the supervisory authorities.
Issuance platforms innovate through digitization
Managers now expect live digital reports to monitor their investments in real time. This prompted us at SILEX to develop an AMC interface that can be accessed directly from our “my_SPARK” customer area and offers detailed reporting. Typically, the manager must be able to provide the end investor with an accurate statement of asset allocation, performance and outlook. Also, as the independent manager’s proprietary vehicle, requests for AMC with white label reporting and marketing are becoming more common.
Increasing need for management consulting: the “Outsourced CIO” approach
Independent managers who centralize their management via AMCs increasingly want management support across the entire value chain. The SILEX management teams are in great demand both for global asset allocation and for the picking part (equities, bonds, funds, etc.). To meet this demand, our consulting teams provide our partners with management tools such as shopping lists and special model portfolios. Furthermore, in this difficult and volatile market environment where investors lack transparency, the quantitative risk management and portfolio optimization tools that we offer in mySPARK can provide valuable help.
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