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25th May 2020

The advantages of Actively Managed Certificates

Over the last ten years, Banca Credinvest has managed to establish itself as a recognised player in Ticino, with the aim of continuing to expand its presence and brand throughout Switzerland.

In an era of increasing regulations and challenging economic conditions with rates at all-time lows, the bank has been able to increase its market share leveraging on a high level of specialisation for its institutional products and services.

Banca Credinvest has a lean corporate structure that allows it to be quick and efficient in responding to the different needs of customers and come up with tailor-made solutions. This is certainly of great added value in a market where many other players still offer a static and ultimately outdated business model.

The bank's objective has always been to become a reference point in certain specific sectors and provide state-of-the-art services and solutions to every single client. Their feedback and needs are one of the key factors behind the bank’s strategic initiatives and investments in infrastructure and human capital. In fact, in recent years, the bank started a recruitment process aimed at attracting highly specialised profiles capable of bringing new ideas and contributions to the internal organisation and a fresh look to the image of the bank.

Banca Credinvest decided to add a specialised desk to serve institutional clients (banks, broker dealers, funds, asset managers, family offices, etc.) to offer:

  • trading and custody services;
  • structure investment solutions such as structured products, including Actively Managed Certificates (AMCs) and credit linked notes;
  • and distribute carefully selected niche financial products to generate sustainable and uncorrelated returns with a limited level of risk.

The bank's institutional team was established in 2014 and now includes a group of young highly-specialised people with diverse backgrounds and fields of expertise. The desk is therefore able to internalise most processes and follow every activity from beginning to end, interfacing directly and providing a personal contact to each customer.

The team's breadth of knowledge is matched with the bank's constantly ongoing search for solid strategic partnerships with other market players, specialised in their own field of expertise, to broaden the spectrum of services that the bank can offer to satisfy a growing audience of sophisticated customers.

How does the institutional team fit in the dense market of banks and financial intermediaries?

To provide an answer, perhaps the most effective way is to go back to the idea that led to the formation of the team:

We live in an era of strong market fragmentation, where numerous independent financial entities are extremely specialised but remain quite modest in terms of size.

Those entities often do not receive a high-quality service from the leading large banks in the market. That's where the idea to create a team aspiring to cater to this audience came from. This team would be able to replicate for medium/small institutions what large financial institutions reserve for their large clients.

In few years, the team managed to create and strengthen a set-up that today is unique in Switzerland. Each institutional client can use the Bank's trading services, both via online trading platforms and with direct access to the Bank's trading desk. Thanks to the proprietary IT system, the Bank is then able to integrate the entire data flow in one place (the client's e-banking account) for a real-time consolidated view of all transactions.

The same set-up is offered not only to entities that can money-pool but also to asset managers through AMCs.

The added value of actively managed certificates

Unlike traditional passive financial instruments, AMCs are characterised by a discretionary, and therefore active, management of the underlying assets. The composition of the underlying assets changes over time on the basis of decisions made over the life of the certificate by a third party (the strategy manager).

AMCs combine the flexibility of structured products (favourable tax structure, low entry level, speed of issuance, efficient cost structure) with those of classic investment funds (portfolio diversification and adaptability to different market conditions).

All this without the need for the end investor in the AMC to open an account with Banca Credinvest. The AMC is a security with Swiss ISIN and can therefore be purchased in any client's securities deposit.

Banca Credinvest is at the forefront of the market as it allows the strategy manager to have access to the online trading world and/or to the dealing desk and trade all asset classes (bonds, equity, structured products, FX, derivatives, funds) without limits to portfolio rebalancing or the number of transactions granted.

The institutional team's highlights

In 2017, when the issuance programme was launched, the bank issued approximately CHF 8 million of products for four external asset managers. 2019 ended with more than 60 products issued for a total amount of AMCs outstanding of over CHF 175 million, managed by 33 counterparties!

A legitimate question would be: but then, how does Banca Credinvest differ from the numerous start-ups that are increasingly tapping the market and offer investment services?

Quite simply, by having a solid and highly-specialised structure, with long-term objectives and grounded on core values such as trust, transparency and reliability. All this combined with independency, flexibility in the decision-making and willingness to offer ad-hoc solutions in the interest of its clients.

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