Insights into the process of designing AMCs

Raphael Haldner
Blog posts

Since their introduction, Actively Managed Certificates (AMCs) have become a significant component of the European financial market. As a structured product, legally classified as debt securities, they hold a counterparty risk for the investor that is comparable with other structured financial products. AMCs are securitised, which gives the holder the right to cash repayment or the delivery of an underlying asset. As the buyer, the investor becomes a creditor of the issuer and thus dependent in terms of the type and amount of repayment, which is subject to different parameters.

In addition to this counterparty risk, AMCs can also present liquidity risks. During the term, the certificates are generally not subject to mandatory redemption by the issuer. This means the option to liquidate before maturity may be restricted in individual cases and depending on how the offering has been drafted.

Despite these risks, AMCs are often seen as an extremely attractive alternative to conventional funds due to their unique character and versatility. AMCs enable investment managers to provide a track record of their investment strategy, even with small investment volumes, without the need to directly set up a fund.

It is therefore vital to act carefully when structuring these products and use appropriate measures to reduce or completely eliminate key issues such as counterparty risk. It is crucial to find suitable partners or officials to guarantee maximum convenience and security for the investors and thus ensure the success of the placement.

Interaction with officials

A seamless and successful process requires a well-coordinated team made up of key individuals who can work together like an orchestra in perfect harmony. The administrator assumes the legal representation of the issuer and ensures compliance with legal regulations. The banking partner plays a central role encompassing the issuance and redemption of notes, the custody of assets and any trading activities associated with executing the investment strategy. A collateral agent is responsible for ensuring investors are always able to assert their claims against the issuer, even in the case of insolvency. In addition, an auditor carries out regular audits of the accounts to guarantee the integrity of the process. It is only through the harmonious interaction of these key players that an issuer can meet the requirements of an ever more demanding investor base.

Product design and structure

Designing and structuring AMC products requires significant help from the investment manager, who sets out both the investment strategy and the targets. This involves taking a flexible yet risk-conscious approach, which includes analysing the market, defining target groups, determining product features and assessing the regulatory framework and risks. Developing marketing and sales strategies is the final step in this process. Careful planning is essential to ensure the financial product is in line with market and investor expectations. These steps are usually carried out in collaboration with a financial institution to ensure that the implementation complies with regulations and meets the needs and requirements of the target market.

Marketing and sales strategy

The marketing and sales strategy is key to economic success. An effective marketing strategy aims to optimally position the AMC in the market and highlight its unique selling points. This involves approaching specific target groups in order to understand their needs and preferences and adapt the product accordingly. Furthermore, choosing suitable sales channels – be they through banks, financial consultants or digital platforms – is equally important for achieving maximum reach and market penetration.

A key step in implementing a public offering of AMCs is the creation and approval of a securities prospectus. As a member of the European Economic Area (EEA), Liechtenstein is an extremely attractive option for this, not least due to the efficient Financial Market Authority (FMA), which has extensive practical experience in this process after having reviewed and approved numerous prospectus applications over the past few years. The issuer does not necessarily have to have a registered office in Liechtenstein or in the EU. However, approval in Liechtenstein enables passporting into other member states, which allows them to efficiently scale up their sales activities. Liechtenstein thus becomes an efficient point of access into the EU by offering a legally stable and appealing environment for the successful sale of AMCs.

Raphael Haldner
Raphael Haldner
Head of Fund and Capital Markets at Bank Frick