Actively Managed Certificates. They are a way to integrate crypto assets into an investment portfolio.
Actively ManagedCertificates (AMC) are derivatives. They are structured financial products whose underlyings can be easily adjusted to the current market situation as part of an investment strategy. AMCs are flexible, efficient and, above all, can be brought to market quickly.
"Compared to funds, AMCs have the advantage of being lucrative even with rather small investment capital. Setting up funds is costly. Normally, high double-digitmillion amounts are needed as a deposit to be able to operate a fund,"says Dimitar Jauch, CEO of Leo Trust Switzerland.
Leo Trust is an internationally active and regulated financial services provider based in Zurich. Its range of services for institutional and private clients also includes crypto-assets. The asset manager develops the investment strategy including the investment mix (basket) for an AMC. The certificate comes from the issuer, such as a bank. It can be traded on exchanges (with a security identification number, an ISIN) and outside exchanges. The basket contains various asset classes such as shares, bonds or debentures - and for some time now, increasingly inclusive of crypto stocks.
At its naissance in 2008, 1 Bitcoin was worth practically nothing. In the first documented trade of Bitcoin for real goods in 2010, two pizzas worth 41 dollars were paid for with 10 000 Bitcoins. Today, 10 000 Bitcoins are worth around 500 million francs. It is not least this price development of the Bitcoin, especially since November 2020, that has brought cryptocurrencies into the focus of investors and financial service providers. Anyone who wants to invest in cryptocurrencies without the help of financial service providers is taking risks. Technical know-how is necessary. The interested party must know trading platforms and be able to assess their seriousness and security. The strong volatility of many crypto assets is a challenge even for experienced traders.
In addition, a computer-generated password is required, the private key. If this is lost, everything is irretrievably gone.
Jauch: "Anyone who wants to invest in cryptocurrencies and crypto assets must know what they are doing. If the knowledge is lacking, he should work with a professional regulated financial service provider."
Today there are over 5000 cryptocurrencies. As a genre, they have reached the threshold of market liquidity and in terms of regulatory scrutiny and institutional acceptance. One reason for this is that conventional management of cash, equities, bonds and achieving portfolio diversification with acceptable returns is becoming more difficult. Investors and financial service providers are taking advantage of the potential offered by the technology underlying cryptocurrencies - the blockchain.
The blockchain is not only the basis of cryptocurrencies. Through so-called tokenisation, other assets can also be brought onto the blockchain arena: payment tokens (cryptocurrencies), investment or security tokens (shares, bonds, real estate, gold, art and so on) and usage tokens (access to digital services). More and more assets are being placed on the blockchain - which expands the possibilities for investors and financial service providers. Here, AMCs have a special significance because they increasingly bundle crypto assets in the basket.
Through legal regulations such as the DLT (distributed ledger technology) bill, Switzerland is an international pioneer in the regulation of crypto assets. With the DLT Bill, federal laws were adapted in such a way that Switzerland can develop as a leading location in the area of blockchain/DLT.
"In practical terms, this means that trading, custody and settlement of digitised assets is defined by law. Service providers can include crypto-assets in their strategy like any other asset class within the regulated financial sector," says Jauch.
With AMC, investors have an efficient instrument for investments in crypto assets - which they can easily integrate into their own securities account. They need neither special knowledge nor an infrastructure for storing crypto assets or tokens. Nor is it necessary to find reputable crypto exchanges or have a private key. Asset managers and issuers take care of all that. The investor simply follows the asset strategy of his asset manager - and benefits from the AMC, in which the selected strategy is mapped in the desired asset classes.
This article is aimed at providing a general overview and summary of the issue. It is non-binding, and does not and should not be taken to constitute legal advice.
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Actively Managed Certificates. They are a way to integrate crypto assets into an investment portfolio.
Leo Trust Switzerland AG is a globally active financial services provider for 40 years, offering a variety of services for institutional and private clients. However, the business is changing. On the one hand, due to constantly changing regulatory standards and laws; on the other hand, due to digitalisation, globalisation and highly specific client expectations.
Leo Trust Switzerland AG is a globally active financial services provider for 40 years; with a broad spectrum of services for institutional and private clients. Since April, the operational management company based in Zurich has been overseen by the 31-year-old CEO Dimitar Jauch. In this interview, he talks about changes in the competitive environment, where and why the digitalisation of the business makes sense, the balance between the tried and tested and change - but above all about why Switzerland has a future as a financial centre.