It is indisputable that alternative investment funds (AIFs) are considered in the market as a higher-quality solution; however, Actively Managed Certificates (AMCs) are in many aspects competitive and boast certain benefits of their own. In this article, we would like to explain what we consider to be the most important aspects that can influence the subjective choice of the solution. We limit ourselves to AMC private placements, although we also have access to other formats.
AMCs as private placements and AIFs are both investment vehicles with particular benefits and drawbacks. The choice between them depends on your specific needs and plans. Here are the key benefits of each to help you compare:
Benefits of AMCs:
1. Lower costs
For both solutions, the setup and minimum annual costs are important factors. The larger the project, the smaller the cost difference between these two solutions becomes. While the break-even point for AIFs is around EUR 20-30 million due to the applied minimum costs, this threshold is reached for AMCs at around EUR 10 million or even less, depending on the chosen jurisdiction.
2. Faster time to market
Setting up an AIF can take six to nine months or more, while an AMC can be implemented in as little as six to eight weeks.
3. More flexibility
Many fund solution providers only accept exotic and complex projects if the amounts are very large, whereas with AMCs, smaller projects are usually accepted as well.
Benefits of AIFs:
An AMC as private placement cannot be promoted to the public, and there is a limitation in the number of professional investors you can approach with it. This is related to the chosen AMC solution and jurisdiction. The AIF, on the other hand, can be distributed to professional investors without limitation. Keep in mind that for either solution, the distribution of the finished solution requires licensing in the respective country and may require the support of distribution partners.
2. Acceptance with large institutional investors
An AMC may not meet the investment criteria of large institutional investors, while an AIF might appeal to this group of investors if the AUM and track record is right. In most cases, EUR 100 million AUM and a three-year track record would be required. Below this hurdle, the investor focus for both solutions is very likely on the same target market, and both solutions have very similar chances.
3. Stamp duty
Both solutions are fully tax transparent per se. However, collective investment schemes (CISs) may be eligible for certain tax exemptions, such as on the stamp duty. In any case, it is essential to consult with legal and tax advisors who are knowledgeable about current tax laws and regulations if you want to fully understand all these tax benefits.
In our experience, the choice between AMCs and AIFs depends mainly on these three key factors: budget, urgency, and distribution plans. Other factors are more secondary. AMCs are generally less expensive, while AIFs provide access to some larger institutional investors seeking such a high-end format. Clients should carefully consider all aspects to determine which option better meets their overall needs and goals. It is also important to consider the specific terms and characteristics of different AMC solutions, as they can vary significantly.
At Gessler Capital, we can show you the various options and assist you in your journey. Reach out to us today and make an appointment.