How It Works
Actively Managed Certificates: A Comprehensive Guide
The Basics of Actively Managed Certificates
In the dynamic world of finance, Actively Managed Certificates (AMCs) have emerged as a versatile and increasingly popular investment vehicle. This article provides a comprehensive guide to AMCs, aiming to educate investment managers and financial enthusiasts about their fundamental aspects, benefits, and considerations. We will explore how these instruments work and why they are gaining traction in the investment community.
Hint: Scroll down for …
Stock-Exchange Listed Actively Managed Certificates: Unveiling Their Unique Features and Advantages
Collateralization in Actively Managed Certificates: Enhancing Security Through Issuer Risk Hedging
What are Actively Managed Certificates?
Actively Managed Certificates are structured financial products that offer a flexible way for investors to gain exposure to a wide range of assets. Unlike traditional passive investment vehicles, AMCs are actively managed, meaning their portfolios are continuously monitored and adjusted by a professional management team. This active management aims to capitalize on market opportunities and manage risks more effectively.
How Do AMCs Work?
Structure and Issuance: AMCs are typically issued by financial institutions and are structured as debt securities. They are linked to the performance of a portfolio, which can include equities, bonds, commodities, currencies, or a mix of various assets.
Active Management: The key feature of AMCs is active management. Investment managers regularly analyze market conditions and adjust the portfolio accordingly. This approach contrasts with passive investment strategies, where investments are made in a fixed portfolio of assets, often tracking an index.
Investment Flexibility: AMCs offer a high degree of flexibility. They can be tailored to various investment strategies, risk profiles, and themes, making them suitable for diverse investment needs.
Benefits of Investing in AMCs
Diversification: AMCs allow investors to diversify their portfolios across different asset classes and regions, reducing risk.
Professional Management: Investors benefit from the expertise of professional investment managers who actively manage the portfolio, seeking to optimize returns.
Customization: AMCs can be customized to specific investment strategies or themes, catering to unique investor needs.
Access to Complex Strategies: They provide access to sophisticated investment strategies that might be difficult for individual investors to implement on their own.
Considerations Before Investing in AMCs
Costs: Actively managed strategies often come with higher fees compared to passive investments.
Risk Level: The risk level of AMCs can vary significantly based on the underlying assets and management strategy.
Market Dependence: The performance of AMCs is closely tied to the market dynamics and the skill of the investment manager.
Conclusion
Actively Managed Certificates offer a flexible and dynamic approach to investing, suitable for investors who seek professional management and customization in their investment strategies. As with any financial product, it is essential to understand the associated risks and costs. For those looking to diversify their portfolio and access specialized investment strategies, AMCs present a compelling option.
Which investment / trading strategies can be implemented with an AMC?
For example, with an Interactive Brokers managed account as the underlying of the AMC, the investment manager has access to a variety of assets and instruments for trading (at very low transaction fees). These include:
Stocks
Options
Futures
CFDs
Futures Options
Single Stock Futures (SSFs)
Exchange-Traded Funds (ETFs)
Exchange for Physicals (EFPs)
Currencies
Fixed Income (bonds)
Warrants
Funds
At iMaps Capital Markets we operate a two-tier structure for the launch of an Actively Managed Certificate (AMC). We set up a Segregated Portfolio of our wholly owned subsidiary Pecunia SPC which opens an account with the broker. The investment manager gets PoA (Power of Attorney) on that brokerage account via a Delegated Investment Management Agreement to execute the trading strategy. Our own structured products Issuer - iMaps ETI AG in Liechtenstein (Europe) issues Exchange Traded Instruments (listed AMCs) linked to that Segregated Portfolio.
Case Studies
The documents and investment strategies of iMaps AMCs: https://imaps-capital.com/etis/
List of our EUWAX/Stuttgart Stock Exchange listed AMCs:
https://www.boerse-stuttgart.de/de-de/tools/produktsuche/anlagezertifikate-finder/?searchstring=imapsList of our AMCs available over Interactive Brokers (search for iMaps under Products): https://www.interactivebrokers.com/en/index.php?f=2222&exch=swb&showcategories=IOPT&q=
Stock-Exchange Listed Actively Managed Certificates: Unveiling Their Unique Features and Advantages
Having explored the basics of Actively Managed Certificates (AMCs), this article delves into a specific subset: Stock-Exchange Listed Actively Managed Certificates. This variant of AMCs combines the dynamic management approach of traditional AMCs with the added benefits of being listed on stock exchanges. We will uncover the unique features, advantages, and the added value they bring to investors.
Unique Features of Stock-Exchange Listed AMCs
Exchange Listing: Unlike traditional AMCs, these are listed on stock exchanges, offering greater liquidity and accessibility.
Real-Time Pricing: Investors benefit from real-time pricing and the ability to trade certificates like stocks during market hours.
Transparency: Listing on stock exchanges ensures enhanced transparency in pricing and valuation.
Advantages of Stock-Exchange Listed AMCs
Improved Liquidity: The stock exchange listing means investors can buy and sell these certificates easily, similar to trading stocks.
Market Access: These certificates provide access to a variety of markets and asset classes, often beyond the reach of individual investors.
Flexibility in Trading: Investors can trade these AMCs during market hours, offering flexibility to respond to market changes swiftly.
Enhanced Transparency and Oversight: Being listed, these AMCs are subject to the regulatory requirements and oversight of the stock exchange, enhancing investor protection.
Potential Tax Benefits: Depending on jurisdiction, these listed AMCs might offer tax advantages compared to other investment vehicles.
Added Value of Stock-Exchange Listed AMCs
Accessibility for Individual Investors: The listing on stock exchanges makes these AMCs more accessible to a broader range of investors, including individuals.
Professional Active Management: Investors still benefit from the active management of a diversified portfolio by experienced investment managers.
Diversification with Ease: With these AMCs, investors can achieve diversification across various asset classes conveniently, as they are traded like stocks.
Opportunity for Short-Term Investing: The ease of trading these certificates on exchanges opens opportunities for both long-term investment and short-term investment strategies.
Reduced Entry Barriers: The stock-exchange listing often means lower minimum investment requirements, making it easier for more investors to participate.
Conclusion
Stock-Exchange Listed Actively Managed Certificates represent an innovative evolution in the realm of actively managed investment products. They blend the expertise of active portfolio management with the advantages of stock exchange listing, providing liquidity, transparency, and accessibility. For investors who appreciate the merits of actively managed strategies but seek the flexibility and ease of stock trading, these AMCs offer a compelling investment option.
At iMaps Capital Markets we list most of our AMCs as Exchange Traded Instruments (ETIs) at the Stuttgart Stock Exchange, currently the biggest exchange in the world for Actively Managed Certificates.
At present it features over 1.9 million publicly listed securities, making it the largest exchange-based segment for securitized derivatives in Europe.
Collateralization in Actively Managed Certificates: Enhancing Security Through Issuer Risk Hedging
Building upon our understanding of Actively Managed Certificates (AMCs), this article focuses on a crucial aspect that enhances their appeal - collateralization. This process, also known as issuer risk hedging, is a significant feature in the world of AMCs. It plays a pivotal role in mitigating risks associated with the issuer. Here, we explore the advantages of collateralization in AMCs.
What is Collateralization in AMCs?
Collateralization in the context of Actively Managed Certificates refers to the practice of securing the certificate with assets to hedge against issuer risk. This process means that if the issuer faces financial difficulties, the investors have a claim on the collateral assets, providing an added layer of security.
Advantages of Collateralization in AMCs
Reduced Issuer Risk: Collateralization mitigates the risk that investors face if the issuer defaults. This security is particularly crucial in volatile markets or with issuers having lesser creditworthiness.
Increased Investor Confidence: Knowing that AMCs are backed by collateral can boost investor confidence, making these certificates a more attractive investment option.
Enhanced Stability: Collateralization contributes to the overall stability of the investment. It ensures that even in adverse situations, there is a safety net for investors.
Market Appeal: Collateralized AMCs often attract a broader range of investors, including those who are risk-averse but still seek the benefits of actively managed strategies.
Compliance with Regulatory Standards: Collateralization helps in meeting regulatory requirements in many jurisdictions, which can be stringent for financial products like AMCs.
The Added Value of Collateralization
Diversification with Security: While AMCs offer diversified investment opportunities, collateralization adds a layer of security, making it a balanced choice for diversification.
Access to Higher-Yield Investments: With the reduced risk through collateralization, investors might have access to higher-yield strategies that would otherwise be too risky.
Competitive Advantage for Issuers: Issuers offering collateralized AMCs can distinguish themselves in the market, attracting more investors due to the added security.
Conclusion
Collateralization in Actively Managed Certificates offers a significant advantage by hedging issuer risk, thereby enhancing the safety and appeal of these investment vehicles. This feature not only increases investor confidence but also contributes to the stability and attractiveness of AMCs in the financial market. For investors seeking actively managed investment opportunities with an added layer of security, collateralized AMCs present a compelling option.
At iMaps Capital Markets the issuer risk is hedged. So, the underlying assets, for instance, Segregated Portfolio XYZ, serve the purpose as hedge and collateral for the respective XYZ ETI (listed AMC). In this respect, the underlying assets get pledged to a regulated private trust company, for the sole benefit of the program secured creditors being the respective ETI XYZ investors.