AMCs: The Financial Swiss Army Knife

How the world's most flexible financial wrapper opens up new avenues for uncorrelated returns and yields: two short case studies.

In last week’s newsletter, I walked you through the various financial wrappers in our toolbox – AMCs, trackers, CLNs, and tokens.

Of all those, the AMC is by far the most versatile. In this post I thought I’d take a closer look at just how versatile an AMC can be by means of two quick case studies out of the GenTwo archives.

But first, a quick recap of the AMC itself for readers not familiar with them.

The Financial Swiss Army Knife

AMC stands for Actively Managed Certificate. It combines features of structured products and actively managed funds, providing a standardized wrapper around an investment strategy or specific underlying assets. The certificate is sold to investors, and the capital is used to implement the strategy, with investors participating in the performance of the portfolio.

Unlike many structured products with fixed asset compositions, AMCs are dynamic. The strategy manager can adjust the portfolio composition within a pre-defined investment universe as market conditions change.

This has many advantages.

For managers, AMCs provide adaptable strategies, quick time-to-market, reduced regulatory burden compared to traditional funds, cost efficiency, and the ability to incorporate a broad range of asset classes.

For investors, they offer access to professional-grade investment strategies, often with lower minimum investment amounts than private funds, transparency through a bankable ISIN.

These properties open up opportunities for innovation on many fronts.

Here are two examples.

Example 1: The Exotic Asset – Uranium

On last Tuesday’s podcast I spoke with Patrick Michaels, the Executive Chairman of Zuri-Invest, a Swiss investment boutique with a strong focus on mining and metals.

As Patrick explains in our talk, he believes strongly in uranium as an investment opportunity tied to the green energy transition. And he wanted to give his clients a means for direct exposure to physical uranium (in a financial sense of course).

For obvious reasons, however, the uranium market is highly regulated, and there are significant barriers to entry.

Setting up an AMC allowed him to overcome these barriers in an elegant and cost-efficient way by in effect creating a small fund. This in turn involved putting together a lean, purpose-built organization to source, custody and value the uranium holdings.

Here’s the setup:

For the buying and selling, the AMC took on Curzon Uranium, a top-tier trader, as an advisor. That provided the knowhow.

For custody it arranged a storage agreement with Cameco Corp, one of the world's largest uranium fuel providers, and a regulated, secure, and auditable storage facility. That provided the security and trust.

Finally the AMC partnered with TradeTech, an independent uranium commodity-specific price reporter, to provide daily uranium prices based on market transactions. This provided reliable valuations. (You can read about in more detail here.)

Investors could then purchase certificates of the AMC over their banks and partake in the performance of this otherwise hard-to-access commodity easily, safely and in a highly transparent way.

Example 2: The Exotic Strategy – AI-Driven Small Cap Investing

But AMCs aren't just for physical assets. They're equally powerful for packaging innovative investment approaches.

One example we’ve written about before is mu Capital Management's AI-driven small cap strategy.

In this case, the creators of the product noticed that, with so much attention being placed on large cap stocks, many well-run, profitable smaller companies go unnoticed by investors. They saw an opportunity in small cap stocks in the US and Europe.

The trick however was finding the right ones (40% of small caps don’t make money). To address this, mu Capital developed a proprietary portfolio construction strategy, combining AI-powered analysis with human oversight. Their secret sauce relies on:

• Data selection and vetting to identify predictive relationships

• Running data through multiple models to ensure robustness

• Synthesizing outputs into a coherent strategy

• Final human validation to ensure the AI's recommendations make financial sense

But how to bring this secret sauce to market? That’s where the AMC comes in.

While it would be highly time-consuming and expensive to create a traditional fund, an AMC is fairly easily setup. Because it’s active, mu Capital can adjust the portfolio as needed based on its research. And investors can simply purchase the certificates to partake in the results.

New Avenues for Uncorrelated Returns

What I like about these two examples is that they show the flexibility of the AMC.

In the small cap example, the AMC is basically acting as a simplified funds structure.

With the uranium, the AMC provided a platform – to me, almost like a small organization – to solve a uranium access problem.

In both cases, the result was access to innovative investment opportunities.

As a colleague of mine likes to say, AMCs allow for the creation of new avenues for uncorrelated returns and yields.

Since finding such avenues is becoming ever more important, they are a great tool to have at your disposal.

With best regards,

Tom Lyons
Head of Communications and Content, GenTwo

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