Exploring the Rise of Actively Managed Certificates (AMCs)

Actively Managed Certificates (AMCs) are becoming more visible in global markets, with applications that range from traditional securities to alternative assets like real estate, collectibles, and even digital tokens. In this episode, host James Jockle speaks with Rico Blaser and Stefan Wagner of vestr A.G., to examine the structure of AMCs, what’s driving market interest, and how evolving regulation and technology—including AI—are influencing adoption and use cases.

This conversation offers a closer look at a fast-growing but often misunderstood corner of the structured products space.

Episode Transcript

James (00:06):
Welcome to Trading Tomorrow Navigating Trends in
Capital Markets the podcastwhere we deep dive into
technologies reshaping the worldof capital markets.
I'm your host, jim Jockle, aveteran of the finance industry
with a passion for thecomplexities of financial
technologies and market trends.
In each episode, we'll explorethe cutting-edge trends, tools
and strategies driving today'sfinancial landscapes and paving

(00:29):
the way for the future.
With the finance industry at apivotal point, influenced by
groundbreaking innovations, it'smore crucial than ever to
understand how thesetechnological advancements
interact with market dynamics.
In today's episode, we exploreactively managed certificates,

(00:59):
or AMCs, a dynamic and rapidlygrowing market worth an
estimated $2 trillion.
These certificates act asinvestment wrappers for
everything from traditionalassets to more unconventional
instruments like real estatecollectibles and even jumping
horses.
Joining us today are tworemarkable leaders from Vestor
AG, bringing a wealth ofexperience in finance trading
and fintech innovation, startingwith Rico Blasser, chief

(01:21):
Executive Officer of Vestor.
Rico has a deep background inmathematics and trading, with
nearly two decades of experiencemanaging billions in trading
volume across a wide range offinancial products.
His company, vestor, is afintech leader, providing the
most advanced white-labeledplatform for AMCs, helping
issuers, portfolio managers andinvestors navigate this growing

(01:42):
market efficiently andtransparently.
We're also joined by StefanWagner, vice President of
Business Development at Vestor.
With over 30 years experiencein the financial industry,
stefan specializes in structuredfinancial products and actively
managed certificates.
Since joining Vestor in 2019,he has leveraged his extensive
background in AMCs andstructured products to drive

(02:04):
business growth Together.
Rico and Stefan bring onparallel insights into the world
of AMCs and structuredfinancial products, and we're
thrilled to have them with ustoday.
Welcome, thank you for havingus.
Well, why don't we just jump in?
What exactly are activelymanaged certificates and how do
they differ from traditionalinvestment products?

Speaker 2 (02:23):
So I think let's start with the legal side of
things, the difference sort ofif you want to compare it versus
a fund, in the sense in a fundyou buy an equity and if you buy
an AMC you're buying a debtinstrument.
Usually it's issued out of thestructure notes program at banks
or off balance sheet fee, kekal, and in many jurisdictions

(02:44):
because of that it's alsotreated as a structural product.
But I think AMC is probably thename we will use today in our
conversation.
But there are so many othernames used for the same
instruments, for example,strategy node, dynamic equity
nodes, strategic indexcertificates, actively managed
trackers.
Then when they start becominglisted, these products on

(03:05):
exchanges, then they're calledETNs or ETPs or ETIs or, which
actually reflects more, let'ssay, the legal definition,
performant linked bonds becauseof debt instrumentings or direct
note investments.
And we also have now thingslike called EAMCs or
electronically actively managedcertificate, which is basically
the tokenized version of it, orwe probably will touch on that

(03:28):
later.
It's also called fractionalbonds because you, via these
products, you can get fractionalownership of underlyings.

James (03:35):
Basically, oh, and the AMC market is currently valued
about 2 trillion.
Can you explain what's drivingthis growth and why are AMCs
becoming so popular?

Speaker 3 (03:45):
Yeah, sure.
So I would say there are twoareas that should be discussed
here.
One is international growth andone is non-bankable assets.
In terms of internationalgrowth, you see that the
regulatory framework in multiplejurisdictions is improving and

(04:06):
allowing these products.
For example, in Italy, that isthe case recently.
There are also jurisdictionslike France, where the financial
authority have changed theregulations on how these
products can be distributed toretail investors, or even,
that's the case for South Africa, that they're allowed to be

(04:28):
listed on exchange where theyhaven't previously been, and so,
in the example of South Africa,this has led to over 60 AMCs
actually being listed in thepast two years, and so we really
see the growth, not just in thetraditional markets, but also

(04:50):
in these new markets, and soit's quite exciting.
Another example would be LatinAmerica, where we see a lot of
stuff happening in this area.
Then, when we talk aboutnon-bankable assets this area

(05:12):
Then when we talk aboutnon-bankable assets, people are
looking for non-correlatedreturns, and one of the problems
with ETFs is that, especiallyif they're broad-based, is that
they're very correlated totraditional markets, whereas
AMCs are extremely flexible interms of the underlyings that
you can put into theseinstruments, and so you can get

(05:32):
exposure that you couldn't getwith traditional ETFs.
An example of this is certainlycryptos.
I usually bring this examplethat in the States, people try
to create funds crypto funds andit took them several years to

(05:52):
get them launched and to getthem approved, whereas in AMCs
you could trade, for example,bitcoin already quite a few
years ago.
And maybe the last point aboutthis growth is basically the
cost structure.
To start a fund, you need, Iwould say, at least about $30

(06:16):
million in assets probably moreactually, because you have so
many costs associated with itlike to start it up and running
costs whereas an AMC can alreadybe profitably launched with as
little as a million in assets,and so that's quite a big
difference.

James (06:37):
The concept of uncorrelated returns is quite
fascinating.
I'm going to come back to thatin a minute.
But you mentioned that amcs canbe used from everything from
traditional stocks and bonds tocrypto.
Even non-traditional assetslike collectibles can.
Can you share um some examplesof some of the more innovative

(06:58):
uh amc strategies we've seen?

Speaker 2 (07:00):
yeah, I mean, I mean rico really mentioned it is on
on the on.
They call it the non-bankableasset.
So we have, like we manage onour platforms that are used by
our clients, for example, aportfolio of jumping horses.
The trainer buys them young,trains them for approximately 18
months and then sells them,hopefully with a profit, and

(07:22):
through the product you haveaccess to the performance of
that one.
We have things like a Ferrari250 GTO.
Probably current price range is50 million plus 50 guys got
together and bought each 1million of it of that product of
the AMC, and each have a 50thshare of the Ferrari 250 GTO.

(07:42):
That's sort of on thenon-bankable asset.
And suddenly, because it's asecurity, it's transferable, has
an ISIN, it can be booked, itsits in your account.
So that because it's a security, it's transferable, has an ice
in, it can be booked, it sits inyour account.
So that makes it veryattractive.
That's probably sort of morethe call it the exotic ones, but
then let's say sort of more onthe actively trading side.
We also see more and more theuse of artificial intelligence

(08:04):
to pick actually the stocks orbonds that are being traded, and
that sort of is quiteinteresting as well, and there's
a lot of innovation happeningthere as well.
Trying to get something likethis, where regulation in other
places, where regulation reallyhas decided how not to, they
have not really decided how todeal with AI, is difficult.
You find then coming back andusing the AMC vehicle to do that

(08:27):
.

James (08:28):
For issuers and portfolio managers.
What would you say?

Speaker 3 (08:32):
the key advantages of using AMCs are yeah, I think a
big advantage is time to market.
Whereas it takes several monthsto actually launch a fund, you
can literally start an AMCintraday or exchange listed the
very next day, which is a verybig speed up, and so that makes

(08:57):
this instrument viable fortactical trading ideas and
really gets you out there to themarket.
Another benefit is flexibility.
We touched on the differentunderlyings, but there are also
different forms in which you canmanage the AMC.

(09:18):
You could put in fractionalshares, you could trade intraday
, and so on.
You have technology platformsat your disposal that you
typically don't have with funds.
And then the last one is justcosts and fees.
I mentioned that it's muchquicker to set up, and this is

(09:40):
primarily because you'releveraging the infrastructure of
the issuer, and so you canreally benefit from their
trading infrastructure and fromtheir setup, and so a lot of the
things are done for you thatyou don't have to take care of
yourself, and so, consequently,the costs are significantly

(10:00):
lower.

James (10:01):
So you know, clearly I'm sure there's no research on the
correlation between jumpinghorses and oil in emerging
markets at this point in time,but you know it sparks questions
as it relates to adoption Right?
So when I look at structurednotes here in the United States,
you know education has been,has been, a barrier to growth,

(10:30):
been a barrier to growth,especially in terms of retail
investors, even for financialadvisors, as it related to
suitability or transparencyamong the underlyings, things of
that nature, obviously,secondary markets, liquidity,
has all been an issue.
Some of that, obviously, ismitigated by the fact that some
jurisdictions are on exchange.
But you know what would you say.
You know what is influencingthe adoption of AMCs and how is

(10:55):
this evolving.

Speaker 2 (10:56):
There's definitely historically let's go back 10, I
mean, I think the longestrunning AMC that we have on the
platform is 14 years old.
So you know the product hasbeen around for quite a while,
but historically it was purelydistributed via private
placement but more and more it'snow becoming still a very small

(11:18):
portion but it's more and moregoing also into being listed on
exchanges and with this way evenpossible to go into public
distribution and that way it'seven closing the gap to ETFs.
And if you actually look atsome ETFs, the way they are
structured, they're actuallyusing an ETN structure, which
makes them actually very closeback to an AMC, only that

(11:39):
basically the assets aresegregated and that can be done
in an AMC as well.
So more investors are gettingaccess to it.
But you're absolutely right,education is very important.
There's still a big gap withcertain clients.
But the interesting thingbecause we have the statistics
on our platform once an externalasset manager has used an AMC,

(12:01):
the form of an AMC theybasically become repeat
offenders.
On average I think it's betweenthree to five of them they
manage.
It's not a one-off thingthey're using, so it's often
they're using it more and moreand they're telling other people
in a sense, and because itallows for innovation.
People often start with a greatidea of doing it in a certain

(12:23):
form and then realize there'sactually the easiest one for
them to do is actually AMC andcome back.
So we find a lot of innovationthat way, and because it can be
connected to other things, likeRico mentioned it crypto trading
, different underlyings, butalso other technologies like
index calculation or analysis ofthings.

(12:45):
It's very easy to plug that andpeople more and more use it,
but it is definitely still much,much smaller than any other
vehicle that is out there, butit's nicely growing on
innovation and really allows itto be used.

James (13:02):
And one would argue right now that market conditions are
conducive for, for taking onrisk um kind of across the board
.
I mean, what kind of trends areyou observing in terms of the
issuance um and, ultimately, themanagement of of amcs?

Speaker 2 (13:18):
I mean, I would say we definitely.
Historically, there was alwaysthese non-bankable assets being
securitized.
I think probably, if you goreally far back it, you would
have found it probably withcredit card loans and everything
else that were securitizedpurely that's out of which the
wallet came, and then it becamemore actively managed and then,

(13:41):
obviously, stocks and bonds cameback in.
But it is so incredible broadwhat can be done with it that we
, every day we find somethingnew.
What people thought about howto use it to solve a problem for
them, it's.
It's the trend is more thatmore and more adoption happens

(14:03):
across markets and clients.
But in which directness isgoing is very difficult to say
because there's so many peopleexploring different avenues.

James (14:13):
And in terms of the trends, I'm sticking with that.
Uncorrelated returns Are youseeing issuance impacted by rate
environments, FX environments,equities?
I'm just curious if there's acouple of catalysts.

Speaker 2 (14:31):
There was definitely something that happened when
interest rates went up, thatpeople more started going into
credit and bonds as underlyingsbecause there was, you know,
suddenly some yield to beachieved.
Um, I would say that has gone alittle bit back again.
Crypto continued, obviously,with bitcoin now so high again,

(14:52):
that is coming back as well, butit's become pretty much
standard that that is possiblein amc.
Nobody's surprised about that.
I was, was already there and Iwould say that it's.
It's more also that otherunderlying so underlines.
For example, let's say you couldsee bankruptcy claims come in.
That's clearly an uncorrelatedthing.

(15:13):
Or structural products arebeing used excellent inside as
an investment for it.
So it's, it's.
It is not really a specifictrend.
I could tell you clearlybetween equity and bonds, it
shifts around where, where theinterest rate environment is and
volatility drives a little bitof structural products are being

(15:33):
used or not as a defensivemechanism.
But it's the same way as a fundmanagement site would look at
it, or portfolio management inprivate bank or family office.
But it's much broader andallows you much more flexibility
in the vehicle if you use theAMC than versus.
Let's, for example, use itsfund.

James (15:55):
And what typical size range are the amcs on your
platform?

Speaker 3 (15:58):
so when I started out in this business, the sizes
were still above 10 million onaverage, I would say, and now
they have um do in part um tothe availability of technology
have decreased significantly.
I would say, on our platformnow the average size is about 4

(16:21):
million, but we have products assmall as they're actually under
a million, like 500,000 or so,but then we also have really
large products that exceed 2billion.
So it's quite a range, but onaverage the ticket sizes have
come down with automation.

James (16:44):
And how does Vestor's platform enhance the management
and oversight of AMCs for bothissuers and portfolio managers?

Speaker 3 (16:52):
Yeah, I mean we have quite an extensive platform and
so there's a lot of areas thatwe touch here, I mean.
So maybe I should brieflyexplain how our platform works.
So we're basically we're a whitelabel technology platform for
issuers of these products, forissuers of these products, and

(17:18):
then these issuers then makethat platform available to
institutional portfolio managersor asset managers and they can
then launch their AMCs or, ingeneral, active investment
products, with these issuers,and so one of the things we do
is automate the interactionbetween the asset manager and

(17:39):
the issuer.
Another thing we do is westandardize these rebalancing
instructions of investment rules, constraints, but also the
reporting to the end investor byallowing these institutions to

(18:02):
create very customized reports,and so we actually speed up that
process considerably.
I remember back in the dayswhen I was a trader of these
products, days when I was atrader of these products, asset
managers would come to us and wewould have billions in these

(18:22):
things in spreadsheets and wewould create reports manually
and do the rebalancing manuallyand all that kind of stuff.
And this is now all automated,you know, all automated, and we
offer this to quite a number oflarge and small issuers on and
off balance sheet, and so assetmanagers and also the traders

(18:44):
can access the platform fromanywhere and manage their
product.
So that's, in a nutshell, ouroffering.

James (18:57):
There are a lot of details involved.
I'm happy to answer anyquestions.
Yeah, I guess one of thequestions and this is probably
especially to our Americanaudience illuminating, as we
don't see these products here,but what would you say the key
risks associated are with AMCsand how can issuers and
investors mitigate the risk.
How do they do that on yourplatform?

(19:18):
You know one thing I couldassume like a global hay
shortage is going to hurt thehorses.
You know other than that, wheredo you see the risks?

Speaker 2 (19:28):
I mean the number one risk that everybody needs to
look at when they invest in AMCis the credit risk that is
associated with the issuer.
Like structured notes, you knowyou take the credit risk of the
issuer and that's why usuallyinvestors not only invest in
structured notes or amcs of oneissue alone.
They go across multiple issuesto diversify their credit

(19:50):
exposure.
And that's why it still makessense for even new players to
come into that market becausethey offer this additional
source of credit risk while, aswe know, the overall market is
more going the other way,consolidating.
You know, take switzerland yousuddenly order two issue big
issues.
You only have one availableanymore to invest with, and

(20:13):
that's one.
The first thing.
The second thing you can gowith issuers who collateralize
the underlying assets to makesure you reduce the credit risk
or you put credit overlays withit.
And there's many vehicles likeoff-balance, where the assets
are segregated in bankruptcy,remote compartments or,

(20:34):
depending on the jurisdiction.
For example, in Luxembourgthere's something like called
the fiduciary note program it'sthe same thing possible and it
then becomes very much look likean ETN, like nearly an ETF, in
some jurisdictions even gettreated like an ETF on the
trading platforms.

James (20:55):
Interesting.
So well, unfortunately, youknow, we've made it to the final
question of the podcast.
We call it the trend drop.
It's like a desert islandquestion.
So if you could watch only ortrack only one trend in this
market, what would it be?

Speaker 3 (21:14):
I think at the current time it's undoubtedly AI
.
That's no surprise to you and Iknow you had entire podcasts on
this topic.
The impact of AI, you know,cannot be overstated, and both
for automation of processes andthere we already use it in some

(21:44):
areas Also translation ofcertain areas of the term sheet
or things like that.
It really has a big impactalready.
But then also further down theline and people are already
experimenting with this, for theactual investment decisions.
And this is a very interestingtopic for me personally, because

(22:05):
I was working as a prop traderfor a number of years for a
large US bank and I also did myPhD in machine learning actually
.
So we watched this verycarefully because we think it's
not just hype, it's real and itwill have an impact, and we try

(22:29):
to very deliberately takeadvantage of the advancements in
this space.

James (22:37):
Well, gentlemen, I want to thank you so much for your
time today.
I really appreciate yourinsights and opening up a new
market to me as well as all ofour listeners.
Thank you so much, thank you,thank you very much, thank you.
Thanks so much for listening totoday's episode, and if you're

(23:00):
enjoying Trading Tomorrow,navigating trends in capital
markets, be sure to like,subscribe and share, and we'll
see you next time.
You.