Financial institutions from large banks to boutique providers have increasingly embraced Actively Managed Certificates as a strategic product offering. For issuers, Actively Managed Certificates (AMCs) can be a powerful tool for product innovation, client acquisition, and fee generation. In this section, we look at why banks and other issuers are keen on Actively Managed Certificates (AMCs) and how they leverage them:
Rapid Product Innovation: In the highly competitive investment product market, banks constantly seek to offer the “next big thing” or to cater to specific client needs quickly. Actively Managed Certificates (AMCs) provide a platform to rapidly create new investment products without having to build them from scratch each time. An issuer can maintain a flexible Actively Managed Certificate (AMC) issuance program (a legal wrapper) and then simply slot in new strategies as they are conceived. This means a bank’s structuring desk can respond to market trends almost in real-time. For example, if clients suddenly want exposure to a new theme (say Artificial Intelligence companies), the bank can launch an Actively Managed Certificate (AMC) on a dynamic AI stock basket within weeks, whereas launching a fund or ETF might miss the window of opportunity. This agility is a competitive edge. One Swiss issuer noted that the fast time to market of Actively Managed Certificates (AMCs) is a “significant advantage” for introducing new investment ideas swiftly. By expediting product development, issuers can capitalize on short-lived market demands and be seen as innovators.
Customization for Clients: Actively Managed Certificates (AMCs) enable financial institutions to tailor solutions for different client segments with relative ease. A bank can create bespoke strategies for large institutional clients or even individual ultra-high-net-worth clients via Actively Managed Certificates (AMCs), essentially providing a customized managed account but in security form. The issuer can adjust risk levels, currencies, asset inclusion/exclusion as per client preference. The easy customization of Actively Managed Certificates (AMCs) allows issuers to target niche client needs that a one-size-fits-all fund couldn’t. This helps deepen client relationships – instead of saying “we can’t do that,” issuers can say “we’ll wrap it in an Actively Managed Certificate (AMC) for you.” Moreover, because the Actively Managed Certificate (AMC) is a transferable security, if one client no longer wants it, others can invest, so it’s sustainable to run even for a single client’s strategy (unlike a managed account that might be closed if the client leaves). In essence, Actively Managed Certificates (AMCs) empower delta-one and structured product desks to act almost like asset managers, delivering highly bespoke portfolios at scale.
New Revenue Streams: From a commercial standpoint, Actively Managed Certificates generate fee income for issuers. Banks typically charge an issuance/structuring fee and an ongoing administration fee for providing the Actively Managed Certificate (AMC) infrastructure (this may be a fixed annual percent of assets or embedded in the product’s fees). In addition, the issuer often handles execution of trades and can earn trading revenues or spreads from that activity. Market making the AMC’s secondary trading can also be a source of profit (the bid-ask spread). Essentially, Actively Managed Certificates (AMCs) allow banks to monetize their trading and structuring capabilities in a relatively low-risk way (since the market risk is passed to investors, the bank mainly earns fees for facilitating). As external asset managers and hedge funds increasingly use bank platforms to issue Actively Managed Certificates (AMCs), banks see a growing business line in offering “AMC as a service.” The more Actively Managed Certificates (AMCs) launched on their platform, the more recurring fees accrue. For example, a bank might earn a platform fee of 0.2% of AUM and execution commissions on each trade – with tens or hundreds of millions in Actively Managed Certificate (AMC) assets, this becomes significant, steady revenue.
Capital Efficiency: For on-balance sheet issuers, Actively Managed Certificates (AMCs) can be capital-efficient products. Because they are typically structured as delta-one (fully funded by investors), the issuer might not have to deploy much of its own capital aside from hedging transactions. Unlike lending or derivative trading, the credit exposure is on the investor side (investors lend to the bank via the note). The bank does assume some operational risk, but it’s not using its balance sheet to fund investments – investors’ money does that. So banks can earn fee income without heavily straining regulatory capital. That said, if the bank hedges by holding assets, it will have those on its balance sheet, but often these are client assets in a ring-fenced way. Off-balance sheet issuance is even more capital-light; the bank just earns fees for arranging without any asset impact. This makes the Actively Managed Certificate (AMC) business attractive from a return-on-equity standpoint.
Client Retention and Attraction: Offering Actively Managed Certificates (AMCs) can help banks retain talented managers and attract external assets. Private banks often have talented relationship managers or portfolio managers who might consider leaving to start a fund – instead, the bank can allow them to run their strategy internally via an AMC, creating a win-win. Similarly, independent asset managers might bring their business to a bank’s platform if the bank provides superior Actively Managed Certificate (AMC) issuance services. This brings in new assets under the bank’s umbrella (even if off balance sheet) and typically results in custody of the underlying assets at the bank, boosting assets under custody. Dozens of external managers may use a single bank’s Actively Managed Certificate (AMC) platform, leading to network effects and a sticky business (moving an existing Actively Managed Certificate (AMC) to another issuer isn’t trivial, so managers tend to stick around if service is good).
Innovation in Distribution: Actively Managed Certificates (AMCs) also allow issuers to offer strategies in jurisdictions or channels that funds might not reach. A bank can list an Actively Managed Certificate (AMC) on an exchange, and suddenly that strategy is accessible to any brokerage client who can trade on that exchange. This widens distribution beyond the bank’s own client base. We have seen some issuers list Actively Managed Certificates (AMCs) on multiple exchanges (SIX Swiss Exchange, European MTFs, etc.) to gather interest from independent financial advisors and retail investors. This distribution capability can generate volume and also raise the profile of the issuer’s structured product business. In effect, a bank can package its investment expertise and sell it broadly without managing a fund.
Risk Management and Control: From the issuer’s perspective, Actively Managed Certificates (AMCs) have the advantage that the market risk is borne by the investor, not the bank (aside from short-term hedging before passing through trades). The bank does not guarantee performance – it simply facilitates it. This is safer for the bank than products with principal protection or fixed payouts where the bank carries risk. The primary risk the issuer takes is operational and reputational. As long as they run the operations well, their risk is limited to their fee being lower if AUM falls. They do have to ensure compliance and not inadvertently become an investment advisor or fiduciary for the strategy (which they mitigate by clear contracts that the external manager is responsible for strategy). So in many ways, an Actively Managed Certificate (AMC) platform is a scalable, low-risk business for an issuer, compared to proprietary trading or lending. Each new Actively Managed Certificate (AMC) adds fee income without adding proportional risk (aside from the issuer’s general credit exposure to the assets if on balance sheet, which is usually hedged).
Use of Technology: Many issuers leverage specialized software (like platforms from vestr) to automate Actively Managed Certificate (AMC) lifecycle management. This means an issuer can handle a large number of Actively Managed Certificates (AMCs) and trades with a lean team. The digitization of Actively Managed Certificate (AMC) management (trade capture, NAV calc, client reporting) not only reduces error but also provides a selling point when courting asset managers to use their platform. For instance, some banks offer a web portal where the external manager can log in, see their AMC’s positions, initiate trades, and generate reports in a self-service manner. This reduces manual work for the issuer’s operations staff. All this contributes to operational scalability – issuers can grow the number of Actively Managed Certificate (AMC) programs without linear cost growth.
White-Label Services: A number of institutions now act purely as facilitators, letting others brand the AMC. For example, there are “white-label” issuance firms that a family office can use to issue an Actively Managed Certificate (AMC) under the family office’s chosen name, with the firm handling all backend. These arrangements bring in revenue for the issuing firm while the strategy provider essentially gets a turnkey solution. Issuers see this as tapping a new client segment – those who want to launch investment products but lack a license or infrastructure. By providing the legal vehicle and distribution, issuers earn fees and the strategy owner gets their product to market. It’s analogous to the platform approach in fintech but applied to structured products.
In practice, leading structured product desks have integrated Actively Managed Certificates (AMCs) as a core offering. They highlight benefits such as low set-up costs, low maintenance costs, fast time to market, and easy customization for each customer segment – all of which are compelling from a business perspective. Low setup and maintenance means the bank isn’t heavily invested for each product, but can reap ongoing fees. Fast time to market means they can outpace competitors with new offerings. Customization means they can win mandates from various client types (retail, institutional, external asset managers) by tailoring strategies via Actively Managed Certificates (AMCs). And the ability to include any asset class (even new ones like digital assets) means they can position themselves at the cutting edge of investment trends.
Revenue Example: A large bank might have, say, $5 billion equivalent across various Actively Managed Certificates (AMCs) on its platform (not an unrealistic number given the market). If it charges an average of 0.5% on those assets in various fees, that’s $25 million annual revenue, plus whatever trading spread revenue accrues. And because a lot of the process is automated, the profit margin on that can be high. Multiply by growth each year, and it’s clear why many banks find this business attractive.
Strategic Positioning: Offering Actively Managed Certificates (AMCs) also fits into the trend of banks providing holistic solutions. Instead of just executing trades or selling third-party funds, a bank can offer its own “products” via Actively Managed Certificates (AMCs) that encapsulate advisory strategies. This vertical integration (advice -> product -> execution) can increase wallet share of the client. For example, if a client trusts the bank’s investment advice, the bank can implement that advice through an Actively Managed Certificate (AMC) and earn the product fees too, rather than sending the client to an outside fund manager. It also gives the bank proprietary offerings that differentiate it from competitors (since each Actively Managed Certificate (AMC) can be unique).
Risk Control for Issuer: One thing issuers must manage is the reputational risk – if an Actively Managed Certificate (AMC) blows up or performs very poorly, it could reflect on the issuer even if the strategy was the manager's fault. Thus, issuers often have an internal approval process for Actively Managed Certificate (AMC) strategies to ensure they are not too outlandish or risky. They also impose certain limits (e.g. no extremely illiquid assets unless fully understood, or requiring collateral for certain underlying assets) to protect themselves and investors. But this risk is more about perception and client relationships than financial loss to the issuer. In fact, by providing transparency and disclosure, issuers protect themselves: the strategy manager is typically clearly identified, and documentation will state that the investor bears the risk of the strategy and assets. The issuer’s role is more like a conduit.
In conclusion, for issuers, Actively Managed Certificates are a win-win: they deliver value to clients (in terms of bespoke, innovative solutions) while also providing a profitable, scalable business model. By leveraging Actively Managed Certificates (AMCs), financial institutions can stay at the forefront of product innovation, deepen client engagement through customization, and generate recurring revenues with relatively low balance sheet usage. It transforms the role of a bank from just an intermediary to a platform and manufacturer of investment solutions. In the current competitive landscape, that is extremely valuable. Little wonder that a growing number of banks, brokerages, and even fintech startups are embracing the Actively Managed Certificate (AMC) issuance model as part of their service arsenal.