Actively Managed Certificates: Key Risks for Portfolio Managers
Actively Managed Certificates, or AMCs, are increasingly being used as a fund-like solution for implementing active investment strategies. They can be launched more quickly than a fund, usually receive an ISIN and appear in marketing as a fund substitute. From a regulatory perspective, however, they are something fundamentally different — and the risks arise precisely from this discrepancy.
An AMC is not a fund
An AMC is a structured product and not a collective investment scheme within the meaning of the CISA. Investors do not invest in segregated assets, but hold a claim against the issuer. If the issuer becomes insolvent, a loss may arise even if the underlying strategy has developed positively. Issuer risk is therefore the central structural risk.
The distinction from a collective investment scheme is not always trivial. If an AMC is offered to an indefinite number of investors, managed collectively and structured in its essential features like a fund, it may qualify from a regulatory perspective as a collective investment scheme requiring authorisation. This distinction should be carefully reviewed and documented before each launch.
Roles and conflicts of interest
A typical AMC structure involves several parties: issuer, AMC advisor, portfolio manager and distributor. The roles may overlap, and the economic interests are not always aligned. Functions, remuneration and potential conflicts of interest should therefore be clearly regulated contractually and disclosed to the end client.
Remuneration flows are particularly sensitive. In AMCs, structuring margins, ongoing remuneration or performance-related components are frequently returned to the portfolio manager. These remunerations are subject to the rules on benefits from third parties under Art. 26 FinSA and the case law of the Federal Supreme Court on retrocessions. They must be disclosed to the client, and it must be contractually clarified whether they are to be passed on to the portfolio manager or retained by the client.
Transparency and investor information
Investors must be able to understand which strategy is being pursued, which investment limits apply, who makes adjustments and which costs are incurred. This includes management fees, performance fees, structuring costs, spreads, transaction costs and any remuneration to third parties.
AMCs are also subject to the information duties under FinSA. For retail clients, a key information document (KID) must generally be prepared or made available in accordance with Art. 58 et seq. FinSA. In the case of a public offer, the prospectus requirement under Art. 35 et seq. FinSA must be reviewed, as must the question of whether an exemption applies.
Liquidity is often overestimated
An ISIN does not automatically mean that sufficient liquidity is available at all times. Depending on the product structure, issuer and underlying investments, exit may be restricted or possible only on unfavourable terms. During volatile market phases, spreads may widen or redemption may be restricted in practice. These risks should be taken into account in client suitability and ongoing monitoring.
Duties of the portfolio manager
For the portfolio manager, not only the launch is relevant, but also ongoing monitoring. When using AMCs in a client portfolio, the following duties apply in particular:
• Suitability assessment pursuant to Art. 11 et seq. FinSA, particularly for complex products
• Consideration of concentration limits and cluster risks
• Disclosure of the portfolio manager’s own role (AMC advisor, distributor) and any remuneration
• Documentation of product selection and suitability assessment
• Regular review of strategy, costs, liquidity and performance
Conclusion
AMCs are not problematic products per se. They can provide an efficient and flexible structure. The risks arise mainly when they are treated as a simple fund substitute without sufficiently considering the differences in structure, regulation, liability and investor information.
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