HNWs and their representatives gathered at the Dorchester for the latest Spear’s breakfast briefing held in association with FP Wealth Solutions
More than 30 HNWs and intermediaries gathered at the Dorchester for the latest Spear’s breakfast briefing, held in conjunction with FP Wealth Solutions, a multi-family office headquartered in Geneva.
The focus of the briefing was to provide an introduction to Actively Managed Certificates (AMCs) — a recently established category of investment vehicle.
FP Wealth Solutions co-founder and senior partner Yuri Emelin explained that AMCs were a highly liquid security issued by a major bank — he name-checked Credit Suisse, UBS and Julius Baer — usually in Switzerland or the UK, which offered many attractions to HNWs and investors.
In addition to desirable liquidity and transparency, these certificates can be transferred between custody banks internationally, and share a performance valuation linked directly to a portfolio invested by the investment manager, Emelin explains. ‘At first glance it looks like a fund,’ the wealth manager states, noting however that the AMC is different: ‘First of all it has an issuer – it is created, supported and issued by a big bank which is finally responsible.’ This means that were there to be any breach of investment guidelines, the bank was finally responsible. ‘Second, it provides good access to final markets,’ Emelin added, in part because it obviates the administrative or compliance delays associated with some other forms of investment: ‘Because this is a security which is issued by a bank it can be purchased like any normal structured products,’ says Emelin, who points out at since your bank makes the purchase, it is responsible for the compliance involved. ‘It is not necessary for the issuer bank to do this job again,’ adds Emelin, whose firm was founded in 2012 and already counts some 50 families among its clients.
All this means that AMCs allow would-be investors to move quickly to market, offering them the opportunity and flexibility to capitalise on a tactical investment play within days. Meanwhile, the certificates can be redeemed or sold on a secondary market quickly, too.
These certificates are also straightforward from a tax perspective: ‘Legally this is regarded as the money of the bank, not of investors,’ states Emelin, with taxes are due only when you make a redemption.
‘The AMC is a very simple package – a bank issued note,’ confirms Jonathan Roberts, from the equity derivatives desk at UBS in London. ‘You can go to your bank and trade as easily as you would trade your Apple stock.’
And as Emelin pointed out, certificates can be traded intra-day: ‘It has very good daily liquidity,’ adds Roberts, who praises their simplicity and fee transparency. ‘They allow for allocations to be made in a very straightforward manner. They generally very liquid instruments which is very important as we see more volatility in the market. Clients can get in and out in a very straightforward manner. We feel AMCs are a very suitable product for inclusion within your own investment portfolios.’
One of the strongest points of this vehicle, says Roberts, is it gives very fast access to ‘thematic ideas’. ‘The benefit to the smart investor is that they can access that strategy quickly or go to a investment manager such as Yuri with the theme, and this can be brought to market very quickly – far quicker than launching it in a fund,’ adds Roberts, noting there ‘much less documentation and processes’ involved and that a new product can be launched ‘within a couple of days’. Not only that but the products are highly transparent with clearly demarcated fees, he says.
FP Wealth Solutions has launched two AMC products to date and ‘worked with almost all issuers in the market and know their strengths,’ according to co-founder Emelin. ‘If you would like a tailor-made product, this is something we can help with.’
FP Wealth Solutions currently offers certificates based on its in-house existing strategies, and managed by its investment team. ‘One of them is linked to the global high yield bonds which has returned around 10 per cent over the seven years,’ confirms Emelin. ‘Another is linked to high dividend stocks, a niche of the equity universe which is more conservative, less volatile and that’s why it’s better suited to the needs of our clients.’
The former is based on a portfolio of some 40 international blue-chip stocks, firms such as Orange, previously France Telecom, according to Alexey Debelov, a partner at Geneva-headquartered wealth manager who points out that the very fact of dividends is a sign of both management quality and positive cashflow in the selected stocks.
As a result, because of the nature of the underlying stocks, an AMC will ‘generally have a very favourable lending value with a private bank’, FP Wealth Solutions says, pointing out this can be as high as 50 to 80 per cent. ‘In conclusion,’ notes Yuri Emelin, the AMC is a great product: ‘It’s very simple to trade, it’s easy to allocate across your portfolio, it’s highly liquid and it has a very disciplined structure with controls and checks across its lifecycle and it’s a very cost-effective wrapper.’
For more information on Actively Managed Funds or FP Wealth Solutions visit www.fpwsolutions.com