January 3, 2022

Actively Managed Certificates (AMCs) in Europe – Podcast with Daniel Jaeger and Paolo Brizio Torchio

Hear the conversation between vestr’s Head of Development, Stefan Wagner, and Executive Board member, Daniel Jaeger, and Head of Clients, Paolo Brizio Torchio, at Banca Credinvest, on everything Actively Managed Certificates (AMCs) related.

In this episode we find out about:

  • Actively Managed Certificates (AMCs) and its features
  • The future of Portfolio Management and Asset Managers
  • Global growth opportunities for Actively Managed Certificates (AMCs)
  • Commercial applications of Actively Managed Certificates (AMCs)
  • How do you choose the right Actively Managed Certificates (AMCs) issuer
  • New market players and trends

…and much more

Read the full interview that Stefan hosted with Daniel and Paolo:

Daniel is a member of the Executive Board and is responsible for the legal and compliance areas of Banca Credinvest. Paolo is the Head of Clients at Banca Credinvest responsible for products and investment solutions of the bank. What are the benefits of Actively Managed Certificates (AMCs)?

Daniel: You could say at least from our perspective, it is the future of portfolio management. And I would also say it is the future of the distributability of a strategy. An Actively Managed Certificates (AMCs) is a structured product, a security. And the beauty of it is that you can book it with any bank. And it allows basically to dynamically transpose whatever your idea is. At the same time you can manage a multitude of clients. So, that is the future of portfolio management with different banks. And that’s what we offer as a service in order to facilitate life of external asset managers.

Paolo: The idea is making the financial idea of a fund more accessible. To gather assets in one place in order to facilitate the execution of the brainpower of the portfolio manager. It becomes convenient from a cost perspective and easily accessible by clients.

Traditionally, it has been more on a private placement basis. Actively Managed Certificates (AMCs) were mostly accessible via asset managers. But now with being listed, and off-balance sheet solutions, Actively Managed Certificates (AMCs) are becoming more and more popular. They can be the future because they become more accessible to a much broader audience. Namely smaller (retail) investors. Asset managers enjoy Actively Managed Certificates (AMCs) because it is convenient, safe and quick to test a new strategy, or scale a tested one.

What about legal and regulatory aspects?

Daniel: An Actively Managed Certificates (AMCs) hatch has a much leaner framework all around. If you think back to the early days when you had those unregulated funds. Which you needed to use to transpose any particular strategy. You had to invest in an offshore fund, and you did not really know where you were investing, who were all the participants. So many unknowns.
Whereas today, you know who the issuer is, you have the possibility to collateralise. You have much more trust into the instruments. Today, the whole environment is much more flexible in terms of what you can do. In terms of restrictions. Also setting it up from a regulatory perspective; prospectuses, licenses. It is, if I can say that, a very sexy instrument, compared to the past.

Paolo: Actively Managed Certificates (AMCs) is Swiss mainly but ultimately it boils down mostly into a certificate as a legal instrument. Ultimately how the portfolio is managed. Whether it is Delta One, synthetic, or by any index, how it is replicated. So if the performance can be delivered to the investor, and to the ISIN ultimately, it depends from jurisdiction to jurisdiction.

With many global opportunities for Actively Managed Certificates (AMCs), where do you expect the future growth to come from?

Paolo: I think Europe definitely is one of the largest markets that can grow. Also Latin America. The US however still relies on bigger investments and so we see more activity in the funds business. We see Actively Managed Certificates (AMCs) emerging as well. But the US is more delayed at this point. But maybe they will ultimately be quicker when they start, we will see.

Switzerland is the traditional or original market. Asia is very developed, especially in Singapore and Hong Kong. So, the one with the highest growth could be Europe.

Daniel: I agree with you Paolo. However, we should distinguish if you if you speak about growth in terms of where you can distribute to and from where actually the managers will come. Definitely Hong Kong, Singapore is where the interest comes from. Especially from asset managers, or product managers. And in terms of growth we see a lot in Latin America. But this is true for many structured products.

With the introduction of white-labelled execution platforms, and off-balance sheet issuance vehicles, how important are Actively Managed Certificates (AMCs) for Banca Credinvest?

Paolo: It is definitely one of the key pillars of the strategy of the bank. We have always been offering the certificate out of the bank’s balance sheet. So the bank was the issuer. Now, we also developed other off-balance sheet solutions, because the key benefit of working with Banca Credinvest is the flexibility and the execution.

We basically white-label online trading platforms that are fully integrated with us. And we have our own trading desks, to which the asset manager has total and unlimited access. So, there is no limit on the type of asset classes traded on the number of rebalancing on anything.

What geographies are you covering?

Paolo: The key perspective that we have tried to develop is to access the European market besides Switzerland. We do this via a Luxembourg-based vehicle. For us it is really a big turning point.

The first output market will probably be Italy because of the closeness of Ticino. But actually, we have some very good business cases in Switzerland as well. And definitely using the Zurich branch that we have, as well as the German’s. So, DACH would be the second after Switzerland.
And Spain the third, because Spain also is kind of a palatable market. Which then also links with the Spanish speaking countries in Latin America.

Regulatory changes are expected to have positive effects for broader applications of Actively Managed Certificates (AMCs). Daniel, what are the compliance aspects to consider?

Daniel: The product that we have now and the fact that we can issue out of Europe is where we hope will give asset managers a big edge. Because the difference is really big in terms of how you treat them from a regulatory perspective. Let’s say this way, if you want to really do it in a compliant way, and not have to take too many risks. We’ve always been in quite a grey area. And actually this new partnership that we have will allow us to really go out and target the public in Europe. So, we will act under the prospectus regulation in Europe, have something that is distributable to retail clients and which will comply with all the regulations. This really changes, let’s say that the risk approach that we could have, and if we find the right partner with a license to distribute, we will be able to have a fully compliant product which really changes the way we can do business and actually target these markets being Italy in the beginning, German and Spain afterwards.

Paolo, what are other factors to think about for Actively Managed Certificates (AMCs) in Europe?

Paolo: One other key thing that’s important is that Europe has always had the issue of treating. That’s why a lot of the big banks in Europe have not, do not have a traditional history of issue Actively Managed Certificates (AMCs) and alikes because the regulators and also the market watcher, like the console board, Bafin etc, they’ve always thought of these type of products as collective investment schemes or alikes. And so the problem was always in the disclosure and in the laws under which they fell with respect to the structured products part because there was an active manager of underlyings, which was exactly what funds were. But now the situation also from a regulatory perspective is becoming much much clearer and there seems to be quite detailed consensus about these players and these watches, that there are actually two different, very different regulatory frameworks. And that’s why I think that the Actively Managed Certificates (AMCs) business will take a big step in Europe, because there will be fewer, fewer restrictions and more players coming into the game more and more.

So what questions should an external asset manager ask when choosing an actively-managed certificate issuer?

Paolo: Ultimately, it depends on what your priorities are. What are the target investments that you have? What are the markets that you want to issue, if listing is important to you, if not, if you have any problems with the counter party risk, so if there is a credit rating, probably a worth, in your paper, in the paper, that’s that will be the issuer, if you prefer an off-balance sheet vehicle. So these are some very important questions that concern probably the issuer per se, and the regulatory aspect. Then, since it’s a fund, you will, it’s a fund-like strategy, you will need to look at what is the execution that you can actually get? So what’s the type of market access that you get? What’s the flexibility that you have? What is the breadth of the of the products that you can take if there are restrictions on the number of rebalancing on the issuers of the paper, etc, etc. And this is something that is not always easy to grasp at the beginning, because sometimes professionals are used to maybe use managed accounts, or to have their own executions via their prime broker. But most likely, when you let’s say, go to a service provider of an Actively Managed Certificates (AMCs), you will need to take part of their package or the full package. And so you need to be able to evaluate all the bits and pieces of the package. Because there are pros and cons depending on what are the key traits that you need.

Looking back, the impact of vital developments in the finance world has had a varied effect on Actively Managed Certificates (AMCs) in 2021. Who are going to be the new market players going forward? What trends do they see?

Daniel: From my perspective, ESG is not really a topic that we have seen so far in Actively Managed Certificates (AMCs), I mean, it’s probably the all-over topic, but let’s see how it really gets them concrete in the end. And I think regulatory wise, it’s still quite a challenge. I mean, in terms of how you handle it. So, this is where I see it, not really as crypto and other trends.

Paolo: More probably the other point is that more and more market players are trying to enter into the business from a different perspective. If there are only service providers for issuers, if they are broker dealers, wherever their vehicles. So, it definitely has this potential. So, there are many people who are trying to put their head in, which is positive on one side. But negative on the other, because it also creates a lot of noise. And for the questions that you were asking before that what an asset manager or a client will need to ask themselves in order to understand where is the true value, this is often not fantastic, because it’s even harder for people who approach the market to actually understand and not be tricked either by the name of the institution, or by a LinkedIn profile, to be very brutal.

And finally, time for the top finance movies and why:


  • Trading Places (1983), because I think that apart from all the stereotypes is the key part trying to tackle an issue which is the nature versus nurture front. Basically how the environments affect the behaviour of a person versus their own character, genes and inclination.
  • Finance Effect, I think it actually has a message that should be even more valid in today’s world.

Daniel: I less of a TV guy, I have not had a TV for four years. But I just thought, we were speaking about a new dynamic product, which is flexible. Hence, I thought it is not a movie, but I would point out you Netflix in general. We could consider Actively Managed Certificates (AMCs) to be the Netflix of finance. So you can watch them whenever you want and do what you want.

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