Actively Managed Certificates: An Innovative Solution for Investing in Private Equity and Private Debt

In the dynamic world of asset management, Actively Managed Certificates (AMCs) have emerged as a powerful tool, offering unprecedented efficiency and attractive pricing. These unique financial instruments enable asset managers to steer entire portfolios with a single entity, optimizing management and performance.

🤔 How do Actively Managed Certificates (AMCs) work, their advantages and disadvantages, and why have they become so popular in the financial industry?

So, what is an AMC?

An Actively Managed Certificate is much more than just a certificate.
It offers dynamic participation in an underlying portfolio of assets. This means that unlike traditional structured notes, where the underlying assets remain static throughout the term, AMCs allow portfolios to be dynamically rebalanced. This is done according to specific advisor mandates, enabling active management and adaptation to changing market conditions.

Benefits of Actively Managed Certificates

AMCs are recognized for their high efficiency and cost savings. They can be used to implement strategic model portfolios as well as tactical allocations. What's more, they do not carry traditional issuer risk, making them attractive to asset managers and investors alike. AMCs also offer great flexibility, enabling asset managers to tailor investment strategies to specific client needs.

Disadvantages of Actively Managed Certificates

Like all investments, AMCs involve risk. There are three types of risk that the investor in an AMC should be aware of: counterparty risk, market/portfolio risk and portfolio strategy risk. It is essential that investors understand these risks and assess them carefully before committing to an AMC.

Examples of how to use Actively Managed Certificates

AMCs are used in a variety of investment strategies, from bond portfolios to more sophisticated mandates. They are particularly useful in an environment where passive investing is losing its appeal. For example, an asset manager might use an AMC to implement a thematic investment strategy, selecting a set of assets that correspond to a specific theme, such as renewable energy or artificial intelligence.

Comparison with other financial instruments

Compared to Alternative Investment Funds (AIFs), AMCs offer more distribution and passporting possibilities, can be launched in 4 weeks at a fraction of the cost, and are as flexible as a Hedge Fund. This makes them an attractive choice for asset managers looking to maximize efficiency while minimizing costs. However, it is important to note that, like any financial instrument, AMCs carry risks and must be used as part of a well-planned investment strategy.

The future of Actively Managed Certificates

The global market for AMCs now exceeds $1 trillion in assets under management, with the most significant growth occurring over the past three years. AMCs are in strong demand, particularly for thematic strategies, bond portfolios and more sophisticated mandates. As the financial world continues to evolve, we are likely to see an even wider use of AMCs in a variety of investment strategies.

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AMCs offer flexibility, lower costs and tailor-made solutions for investors.
However, like any investment, they carry risks that investors need to understand and assess.

👉 With careful management and a clear understanding of their advantages and disadvantages, AMCs can be a valuable tool for asset managers and investors alike. As the financial landscape continues to evolve, it's clear that AMCs will play an increasingly important role in asset management.