Actively Managed Certificates (AMC)

IWG specialises in the design and delivery of a 'Financial Instruments' amongst which are 'Actively Managed Certificates' (AMCs), a powerful and efficient way to bring sophisticated investment strategies to market within a flexible, scalable, and transparent framework.

An AMC is a bank-issued investment certificate that tracks the performance of an actively managed portfolio or strategy. It combines the intellectual capital of an investment manager with the infrastructure of global financial institutions, enabling investors to access dynamic and institutional-quality strategies through a single, tradable instrument.

From Strategy to Security: How the AMC Process Works

IWG provides a complete end-to-end solution to transform an investment strategy into a fully operational AMC.

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1. Strategy Design and Structuring

Every AMC begins with a clearly defined strategy.

IWG works closely with clients to:

• Design and refine the investment approach

• Define asset allocation, risk parameters, and objectives

• Translate discretionary or quantitative strategies into executable frameworks

We ensure that the strategy is robust, scalable, and suitable for securitisation.

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2. Structuring with Leading Issuers

Once the strategy is defined, IWG partners with top-tier issuing banks to structure the AMC as a regulated debt security.

This stage includes:

• Legal documentation and prospectus preparation

• Definition of the payoff structure and calculation methodology

• Fee structuring and investor terms

The result is a fully compliant, market-ready financial instrument.

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3. Implementation and Portfolio Integration

IWG integrates the strategy into the issuer’s execution and replication framework.

• Trades are executed via the issuer’s infrastructure

• The strategy is implemented either discretionarily or via a rules-based model

• A dedicated hedging mechanism ensures performance tracking

This ensures that the AMC accurately reflects the intended investment strategy.

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4. Launch and Distribution

Once established, the AMC is issued with an ISIN and can be:

• Listed on an exchange, or

• Offered through private banking and institutional channels

IWG supports positioning and investor communication to facilitate efficient capital raising and distribution.

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5. Ongoing Management and Oversight

After launch, IWG continues to oversee the strategy and its performance:

• Portfolio rebalancing and allocation decisions

• Continuous monitoring of risk and performance

• Coordination with issuer and platform providers

Investors benefit from active management within a transparent and structured vehicle.

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Why Choose IWG for AMC Solutions.?

IWG combines investment expertise, structuring capabilities, and institutional partnerships to deliver best-in-class AMC solutions.

✔ End-to-End Capability

From concept to execution and lifecycle management

✔ Institutional Infrastructure

Access to leading issuers, platforms, and market participants

✔ Flexible Strategy Implementation

Support for discretionary, quantitative, and hybrid strategies

✔ Scalable Investment Solutions

Efficiently bring strategies to a broader investor base

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A Modern Wrapper for Active Investment

AMCs represent a next-generation investment solution, bridging the gap between traditional funds and structured products. They offer:

• Efficient market access

• Operational simplicity

• Customisable strategy implementation

• Scalable distribution

For asset managers, family offices, and institutional investors, AMCs provide a compelling pathway to monetise investment expertise and deliver differentiated returns.

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The AMC Origination

An Actively Managed Certificate (AMC) is essentially a ‘Structured product issued as a debt instrument’ by a financial institution that ‘wraps’ an actively managed investment strategy into a tradable security.

Its origin and creation combine elements of structured finance, asset management and note issuance.

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PART 1

An ‘AMC’ originates and is created as follow:.

1. Idea / Strategy Origination

 The process begins with an investment idea or strategy.: 

• An asset manager, hedge fund, or trading desk develops a strategy (e.g., equities, crypto, derivatives, multi-asset).

• This strategy could include:

  • Active trading rules

  • Discretionary portfolio management

  • Quantitative algorithms

• The manager wants a packaged, scalable, and investable vehicle without setting up a full fund.

  At this stage, the AMC is just a concept: “Create a certificate that tracks this strategy.”

2. Partnering with an Issuer

The investment manager partners with a financial institution (issuer), typically:

• An investment bank

• A structured product desk

• A specialized AMC platform provider

The issuer is critical because:

• The AMC is legally a debt security (note) issued by them

• Investors take issuer credit risk (unless collateralised)

The issuer agrees to:

• Create the certificate

• Replicate or track the strategy

• Handle legal, regulatory, and operational setup

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3. Legal Structuring of the AMC

The AMC is structured as a note issuance under a program (e.g., EMTN – Euro Medium Term Note program).

Key structuring elements:

a. Prospectus / Terms

     Defines:

·  Strategy description

·  Calculation methodology (NAV or index level)

·  Fees (management, performance, structuring)

·  Liquidity terms (daily trading, periodic redemption)

·  Risk disclosures

b. Reference Strategy or Index

      The AMC references:

·  A model portfolio, or

·  A custom index that reflects the strategy

c. Rules-based tracking

      The certificate includes rules for:

·  Rebalancing

·  Asset allocation changes

·  Trading signals

Legally, the AMC is a note whose payoff depends on the performance of the strategy.

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4. Portfolio Replication / Hedging Setup

Once structured, the issuer sets up a system to replicate the strategy economically:

Two main approaches: 

a. Direct replication

·  The issuer actually buys/sells assets in a hedging  book

·  Trades mirror the manager’s instructions 

b. Synthetic replication

·  Uses swaps, derivatives, or internal hedging

·  Bank delivers the performance without holding all underlying assets directly 

This ensures that: Performance of the AMC = Performance of the underlying strategy (minus fees).

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5. Role of the Investment Manager

 The manager operates the strategy through one of two models: 

a. Discretionary management

·  Sends trade instructions to the issuer

·  Issuer executes in the AMC hedging portfolio 

b. Model-based (rules engine)

·  Strategy is codified

·  Automatic rebalancing is triggered by defined rules

The manager does not legally own the assets, but rather they control the strategy, not the security itself. 

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6. Issuance of the Certificate 

Once all structures and systems are in place: 

a. The issuer issues the AMC as a note, with:

·  ISIN (security identifier)

·  Initial price (e.g., 100) 

b. The certificate is:

·  Sold privately to investors, or

·  Listed on an exchange 

At this point, the AMC becomes a tradable financial instrument. 

7. Distribution to Investors 

a. The AMC is distributed through:

·  Private banks

·  Wealth managers

·  Institutional channels

·  Structured product platforms 

b. Investors buy the AMC like:

·  A bond

·   An ETF-like product (in some cases)

8. Ongoing Operation and Lifecycle 

After issuance: 

a. Daily processes:

·  NAV or level calculation

·  Strategy rebalancing

·  Performance tracking 

b. Fees deducted:

·  Management fee

·  Issuer fee

·  Performance fee (if applicable) 

c. Liquidity:

·  Secondary market trading, or

·  Periodic subscription/redemption 

9. Redemption / Termination 

The AMC ends when:

· It reaches maturity, or

·  Issuer calls it, or

·  Investors redeem 

The payoff is:

·  Investment Value = Initial Investment × Strategy Performance (net of fees) 

10. Key Structural Insight 

At its core, an AMC is: 

Investment Strategy

        ↓

Wrapped into a Custom Index or Portfolio

        ↓

Embedded into a Debt Security

        ↓

Issued by a Bank

        ↓

Sold as a Tradable Certificate 

Summary 

An AMC originates when an investment strategy is 'securitised' into a note format. The creation process involves: 

1. Strategy design by a manager

2. Structuring by a bank issuer

3. Legal packaging into a debt instrument

4. Hedging/replication setup

5. Issuance with an ISIN

6. Distribution to investors

    

The key innovation is that it allows actively managed strategies to be delivered like a structured product, without the need to launch a fund. 

PART 2

How AMCs differ from ETF’s.

AMCs and ETFs can look similar on the surface (both give exposure to a basket or strategy in a single instrument), but they are fundamentally different in structure, regulation, and risk.

Below is a breakdown:

Core Difference (one‑line)

• AMC = a bank-issued debt note tracking an active strategy

• ETF = a regulated fund that directly holds assets (or replicates an index)

Structural Differences

Key point: With an AMC, you are effectively ‘lending money to the issuer’ whose payoff depends on a strategy.

Credit Risk

 AMC:

·  YES → Subject to issuer default risk

·  If the bank fails, investors may lose money (even if the strategy performed well)

ETF:

·  NO issuer credit risk (in physical ETFs)

·  Assets are segregated and held by a custodian

This is one of the biggest practical risks separating the two.

Investment Strategy

 AMC

• Designed for active management

• Can:

  • Trade dynamically

  • Use derivatives freely

  • Include complex or illiquid assets

• Strategy controlled by a manager or rule engine

 ETF

• Traditionally passive (tracking an index)

• Increasingly active ETFs exist, but:

  • Still operate within fund regulations

  • Usually less flexible than AMCs

 AMCs offer maximum flexibility, while ETF’s offer standardised exposure.

Regulation

AMC

• Lightly regulated (varies by jurisdiction)

• Structured under note issuance programs

• Disclosure via term sheet/prospectus

ETF

• Heavily regulated (e.g., UCITS in Europe, 1940 Act in US)

• Strict rules on:

  • Diversification

  • Liquidity

  • Leverage

  • Investor protection

ETFs are generally more investor protective.

Transparency

 AMC:

·  Often less transparent

·  Holdings may not be disclosed daily

·  Depends on issuer/manager

ETF:

·  Typically high transparency

·   Many disclose holdings daily

Fees and Costs

AMC:

·  Flexible fee structure:

·  Management fee

·  Performance fee

·  Structuring fee

·  Can be higher and more complex 

ETF:

·  Usually low-cost

·  Simple expense ratio

·  Rarely performance fees

Liquidity & Trading

 AMC:

·  Liquidity depends on issuer market-making

·  May have limited secondary market

·  Sometimes subscription/redemption windows 

ETF:

·  Traded on exchanges like stocks

·  Supported by market makers + creation/redemption mechanism

·  Typically very liquid

Complexity & Customisation

AMC:

·  Highly customizable

·  Can implement:

·  Hedge fund strategies

·  Quant signals

·  Exotic assets (crypto, private assets proxies)

·  Often used in private banking or institutional contexts 

ETF:

·  Standardized product

·  Less customization for individual investors

Typical Use Cases

 AMC

• Structured products desks

• Private wealth solutions

• Hedge fund-like strategies in a wrapper

• Niche or bespoke strategies 

ETF

• Retail investing

• Passive portfolio building

• Broad market exposure

• Tactical asset allocation

Simple Analogy

• ETF:
  Like buying a basket of assets directly held in a vault

• AMC:
  Like holding a promise from a bank that will pay you whatever a strategy returns

   

Summary

The key differences:

• Structure: Debt note (AMC) vs fund (ETF)

• Risk: Issuer credit risk (AMC) vs asset-backed (ETF)

• Flexibility: High (AMC) vs regulated constraints (ETF)

• Transparency: Lower (AMC) vs higher (ETF)

• Use case: Bespoke/active (AMC) vs mainstream/passive (ETF)

AMCs are more flexible and powerful for complex strategies, but they come with higher risk (especially issuer risk) and less regulatory protection.

ETFs are safer, simpler, and more transparent, but less flexible.

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PART 3

What risks are associated with AMC’s.? 

Actively Managed Certificates (AMCs) offer flexibility and access to sophisticated strategies, but they come with a distinct risk profile that is materially different from traditional funds like ETFs or mutual funds.

Below is an overview of the key risks associated with AMCs:

1. Issuer Credit Risk (Most Important)

 AMCs are debt securities issued by a bank.

• You are exposed to the creditworthiness of the issuer

• If the issuer defaults or becomes insolvent:

  • You may lose some or all of your investment

  • Even if the strategy performed well

 This is fundamentally different from funds, where assets are ring-fenced.

Example: If an AMC issued by Bank X returns +20%, but Bank X collapses, investors might still suffer losses.

2. Market Risk (Strategy Risk)

The value of an AMC depends on the underlying strategy performance:

• Equity, bond, commodity, or crypto exposure can decline

• Active management can underperform benchmarks

• Leverage or concentrated positions can amplify losses

This is the same type of risk as in hedge funds or active portfolios—but often less visible.

3. Manager / Strategy Risk

 AMCs rely heavily on active decision-making:

• Poor investment decisions

• Model failure (for quantitative strategies)

• Overfitting or breakdown in market conditions

• Key-person risk (if strategy depends on one individual)

  Unlike ETFs, performance is not rule-bound or passive.

4. Transparency Risk

AMCs can be less transparent than traditional funds:

• Holdings may not be disclosed daily (or at all)

• Strategy rules may be partially opaque

• Harder to independently assess risk exposures

 Investors may not fully understand:

• What assets are held

• How risks are evolving

5. Liquidity Risk

Liquidity depends largely on the issuer’s ability and willingness to make markets:

• Secondary market may be thin or inactive

• Bid–ask spreads can widen significantly

• In stressed markets, liquidity may dry up

Investors may struggle to exit positions quickly or at fair value.

6. Replication / Hedging Risk

 The issuer typically replicates the strategy internally:

• Imperfect hedging may cause tracking error

• Complex derivatives may introduce additional risks

• Counterparty exposure within the issuer’s hedging book

 The AMC’s return may diverge from the intended strategy.

7. Leverage Risk

 Many AMCs allow or embed leverage:

• Amplifies gains—but also losses

• Can lead to rapid capital erosion

• Margin effects or forced deleveraging in volatile markets

Losses can exceed what would occur in an unleveraged portfolio.

8. Fee Complexity Risk

AMCs can have complex and layered fees:

• Management fees

• Performance fees

• Structuring fees

• Trading costs inside the portfolio

 These may:

• Be higher than ETFs

• Reduce returns significantly

• Be harder to fully quantify upfront

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9. Regulatory Risk

AMCs are typically less tightly regulated than funds:

• Fewer investor protections

• More flexibility for issuers (which cuts both ways)

• Regulatory treatment varies by jurisdiction

  Investors may have:

• Less legal recourse

• Less standardized disclosures

10. Early Redemption / Call Risk

 Many AMCs allow the issuer to:

• Call (terminate) the certificate early

• Change terms under certain conditions 

This can:

• Force investors to exit at an inconvenient time

• Limit upside if strategy is performing well

11. Concentration & Exotic Asset Risk

AMCs often include:

• Concentrated portfolios

• Illiquid or complex instruments (e.g., derivatives, private exposure proxies)

This increases:

• Volatility

• Tail risk (extreme losses)

12. Operational Risk

Because AMCs involve multiple parties (issuer, manager, platform):

• Errors in trade execution

• Valuation mistakes

• System failures

These can impact performance or investor outcomes.

Risk Summary Table

Bottom Line

AMCs are powerful but higher risk, more complex instruments:

• Advantages: flexibility, access to sophisticated strategies

• Trade-off: credit risk + complexity + lower protection

They are generally best suited for:

• Sophisticated or institutional investors

• Investors who understand structured products and credit exposure

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PART 4

What is the role of the issuer in detail.?

The issuer is the central pillar in an AMC structure. Without the issuer, the AMC does not exist because legally it is the issuer’s debt obligation.

Think of the issuer as simultaneously acting as manufacturer, guarantor, and operator of the financial wrapper.

Below is a detailed, structured breakdown of the issuer’s role across the full lifecycle. 

1. Legal Creator of the AMC

 The issuer (typically an investment bank):

• Creates the AMC as a debt instrument (note)

• Issues it under a program (e.g., EMTN – Euro Medium Term Note program)

• Assigns:

  • ISIN (security identifier)

  • Legal documentation (prospectus, final terms)

Legally: The investor is lending money to the issuer, not directly investing in the underlying assets.

2. Risk Bearer (Credit Counterparty)

The issuer is the counterparty to the investor:

• Promises to pay returns linked to the strategy

• Bears the obligation regardless of how it hedges internally

Key implication:

• Investors are exposed to issuer credit risk

• The AMC is only as strong as the issuer’s balance sheet

This is why large, investment-grade banks dominate AMC issuance.

3. Structurer of the Product

The issuer designs the AMC’s structure, including:

a. Economic design

• How performance is calculated (NAV or index level)

• Fee structure

• Rebalancing frequency

• Leverage rules

b. Legal terms

• Redemption conditions

• Early termination clauses

• Investor rights

c. Operational rules

• How trades are implemented

• Data sources and pricing

The issuer translates an investment strategy into a tradable, legally enforceable payoff formula.

4. Strategy Replication / Hedging Engine

One of the most critical roles: The issuer ensures the AMC’s performance by replicating the strategy internally.

How it works:

• The bank sets up a hedging book

• It executes trades that mirror the strategy:

  • Equities

  • Bonds

  • Derivatives

  • FX

  • Commodities

Two models:

• Physical replication: buying actual assets

• Synthetic replication: using swaps/derivatives

Important: The investor does not own these assets—they sit on the issuer’s balance sheet.

5. Execution Agent

The issuer acts as the execution hub:

• Receives trading instructions from:

  • The strategy manager, or

  • A rules-based model

• Executes trades in real markets

• Ensures:

  • Timely implementation

  • Best execution (subject to internal policies)

The issuer controls the mechanics of turning strategy into trades.

6. Valuation & NAV Calculation

The issuer is responsible for:

• Calculating the AMC’s daily value

• Determining:

  • Net Asset Value (NAV) or index level

  • Performance returns

• Applying:

  • Fees

  • Costs

  • Adjustments

This introduces valuation and transparency reliance on the issuer.

7. Liquidity Provider / Market Maker

In most AMCs, the issuer provides liquidity:

• Quotes bid and ask prices

• Allows investors to:

  • Buy (primary or secondary market)

  • Sell before maturity

However:

• Liquidity is not guaranteed like ETFs

• Spreads can widen in stress markets

The issuer effectively controls how easily investors can enter or exit.

8. Distributor (or Distribution Enabler)

The issuer:

• Lists the AMC on exchanges (optional)

• Distributes via:

  • Private banks

  • Wealth managers

  • Institutional channels

In many cases, the issuer’s sales network is key to the AMC’s adoption.

9. Risk Manager

Internally, the issuer must manage multiple risks:

a. Market risk

• From hedging the strategy 

b. Hedging mismatch risk

• Differences between strategy and executed trades 

c. Counterparty risk

• From derivatives used in replication

d. Operational risk

• Systems, pricing, execution errors

   

The issuer runs a mini trading operation behind the AMC.

10. Lifecycle Manager

The issuer manages the AMC throughout its life:

Includes:

• Rebalancing execution

• Strategy updates

• Corporate actions handling

• Investor subscriptions/redemptions

Also controls:

• Early termination (call rights)

• Amendments under certain conditions

The issuer remains active from issuance to maturity.

11. Control Over Termination & Conditions

Most AMCs give the issuer powers such as:

• Early call (terminate product)

• Suspend trading in extreme conditions

• Adjust methodology if needed (per documentation)

This creates asymmetry: The issuer often has more control than investors.

12. Transparency Gatekeeper

The issuer determines:

• What information is disclosed

• How often holdings are published

• Level of reporting detail

Investors depend on the issuer for:

• Visibility

• Accuracy

• Timeliness

11. Putting It All Together

The issuer is simultaneously:

13.  The Simple Analogy

Think of the issuer as a bank that builds and runs a custom investment machine, then sells you a contract promising to deliver whatever that machine produces.

You do not own the machine, you own the promise.

Bottom Line

The issuer is the central engine of an AMC, responsible for:

• Creating and structuring the product

• Replicating the strategy

• Managing risk and operations

• Providing liquidity and pricing

• Ultimately delivering returns

This central role is powerful, however it is also why issuer risk and reliance are the defining features of AMC’s.