The financial landscape is always evolving, and a recent innovation gaining significant traction is the Actively Managed Certificate (AMC). These structured products are a modern, flexible alternative to traditional investment funds, offering a solution for asset managers and investors seeking to navigate complex regulatory environments and access dynamic investment strategies.
An AMC is a security, typically issued as a debt note, whose value is linked to the performance of an underlying, actively managed portfolio of assets. Unlike a traditional fund, which holds the actual assets, an AMC provides investors with a claim against the issuer for the performance of the managed portfolio. This key distinction is what allows AMCs to circumvent certain regulatory hurdles. The individual responsible for managing the portfolio is often called a “strategy sponsor,” a nod to their role in providing guidance on the portfolio’s composition rather than directly managing a collective investment scheme.
The Rise of AMCs: A Swiss Solution to EU Regulation
The primary catalyst for the rise of AMCs can be traced back to the European Union’s regulatory reforms between 2009 and 2013. The Alternative Investment Fund Managers Directive (AIFMD), a collective investment scheme regulation, was amended to require all asset managers, regardless of size, to be regulated. This move, intended to increase investor protection and financial stability, effectively created a monopolistic environment favoring large, well-capitalized financial institutions. Many small and medium-sized private asset managers in the EU, unable to bear the substantial costs and bureaucratic burden of the new regulations, were forced out of business.
In response, a clever solution emerged from Switzerland. The Swiss Financial Market Supervisory Authority (FINMA) took a different approach. FINMA does not classify these packaged securities as “collective investment schemes,” and does not insist that they employ a regulated asset manager. This legal interpretation provided a lifeline for the displaced EU asset managers, allowing them to continue their business and serve their clients by packaging their managed portfolios into securities like AMCs. This business-friendly move has enabled Switzerland to attract significant asset management business away from the heavily-regulated EU.
The Mechanics of an AMC and Its Global Footprint
The issuer of an AMC is typically a Special Purpose Vehicle (SPV), a legal entity created for this specific purpose. The SPV issues the certificate to investors and, in turn, enters into an agreement with the strategy sponsor who manages the underlying portfolio. This structure provides a clear separation of duties and responsibilities.
When it comes to incorporating these SPVs, the preferred jurisdictions are often those with favorable legal and tax regimes. The Cayman Islands have emerged as the definite leader due to their robust legal framework and reputation as a top domicile for offshore funds. Other jurisdictions, like Guernsey, are legally viable but may impose less flexible corporate governance requirements, such as mandating local directors. Hong Kong SPVs can also be used, particularly for securities with less actively managed underlying assets.
AMCs represent a significant innovation in the financial world. They offer a fast, cost-effective, and flexible way to structure investment strategies, attracting both sophisticated investors and nimble asset managers. Born out of a need to circumvent burdensome EU regulations, the AMC model, championed by Switzerland and supported by business-friendly jurisdictions like the Cayman Islands, continues to redefine the landscape of active investment management.
Tiner Wernow (formerly John Tiner & Partners) designs and creates securities and other financial instruments that help our clients raise capital, sell managed trading strategies, and securitize a wide range of assets.
We offer a full-cycle service, guiding you from the initial structuring concept through to complete implementation. This includes obtaining an ISIN, handling issuance, ensuring global clearing, listing on exchanges, and establishing placement routes.
Essentially, we help package any asset or investment idea into easily tradable and globally cleared securities.
Our global services platform, 208Markets, provides issuance, brokerage, and SPV maintenance across multiple jurisdictions.
Our educational materials, published under the “Tiner Educational Hub” headline, are designed to increase awareness among professionals about the securitization tools available to help them achieve their business objectives more efficiently.
