Latest: new AMCs launched, SEC releases Reg BI guidance

Timber Finance has developed the first structured product offering investors access to the forest and timber industry in the USA, Canada, and Europe.

The Swiss firm has partnered with Zurcher Kantonalbank to launch an actively managed certificate (AMC) tracking the performance of the Timber Finance Carbon Capture and Storage Index which incorporates the carbon benefits of mass timber construction (3S - Sequestration, Substitution, and Storage).

We can see that climate change is driving systematic structural change in the construction industry - Erik Reichmuth, Timber Finance Management

The index developed by Timber Finance aims to represent companies which have direct or indirect exposure to the production of long-term durable wood products which have the potential to store CO2 for a century or more in the construction sector – it is comprised by an equities basket of 20 leading listed companies from forestry and timber industry and is calculated by Solactive.

Through participation in the value chain of durable wood products, these companies contribute to the long-term capture and storage of CO2 in the built environment. Timber Carbon Capture and Storage (TCCS) has a positive climate impact through the removal of Carbon Dioxide from the Atmosphere (CDR).

‘Our index and listed equity product focuses on improving CO₂ absorption rates through sustainable forest management, the long-term storage of carbon in mass timber products, and the simultaneous replacement of CO₂-intensive building materials such as steel and concrete,’ said Erik Reichmuth (pictured), managing director of Timber Finance Management.

‘We can see that climate change is driving systematic structural change in the construction industry. New regulations are being implemented which limit CO₂ emissions associated with the building sector and technological advancement as well as revised building codes enable the use of timber in entirely new applications, establishing mass timber as a megatrend that will be with us for decades to come.’

According to Reichmuth, there are a couple of similar products in the market, but what differentiates the new AMC from others is its ‘focus on the long-term storage of carbon in mass timber products’.

‘Disruptive technologies are revolutionizing the traditional use of timber,’ he said. ‘It can now be used to build highway bridges, basements, load-bearing structures, and high-rise buildings, replacing emission-intensive concrete and steel.’

The certificate launched by the Zürcher Kantonalbank (AAA) as issuer, MRB Fund Partners as investment manager and Timber Finance as investment advisor is available on the SIX Swiss Exchange as of today (26 April 2023).

UBS lists five new AMCs on JSE

The Johannesburg Stock Exchange (JSE) has granted UBS, London Branch (UBS) approval for the listing of five new actively managed certificates (AMCs) targeted at investors looking for opportunities to gain exposure to one of the fastest-growing securities globally.

The listed AMCs aim to deliver real returns to investors by investing in focused portfolios of high conviction, quality growth stocks. The  new UBS AMCs are linked to several Reference Portfolios including the SA Asset Management Local and Global Growth Portfolios, Mergence Global Quant Equity Portfolio, SBT Global Flexible Portfolio, and FNB Local Select Portfolio.

‘The AMC product has proven itself in the local market over the last six-years and is definitely continuing to gain broader traction and acceptance within the local investment community. We welcome the ongoing interest as well as the new managers which joined our programme last week,’ said John Slettevold, managing director at UBS.

“The growing demand for AMCs is indicative of investors’ need for reliable and efficient investment management services,’ said Adèle Hattingh (right), manager of exchange traded products (ETP) at the JSE.  

With the complexity of financial markets and the rising demand for sophisticated investment products, AMCs have become a viable option for individual investors looking to access the financial markets’ benefits.’

Last year, the Financial Sector Conduct Authority (FSCA) approved amendments to the JSE’s listing requirements enabling issuers to list and trade AMCs and actively managed ETFs (AMETFs) for the first time. As at April 2023, there were 27 AMCs (including the new UBS AMCs) listed on the South African exchange with a market capitalisation of R7.7 billion (US$420 million).

SEC issues new Reg BI guidance

The US Securities and Exchange Commission (SEC) released new reiterating the standards of conduct for broker-dealers and investment advisers when providing investment advice and recommendations to retail investors.

The new guidance, released in Q&A format, focuses primarily on the Care Obligation of Regulation Best Interest  (Reg BI) for broker-dealers and the duty of care enforced under the Investment Advisers Act of 1940 for investment advisors.

The care obligations, the SEC explains, generally includes three overarching and intersecting components including understanding the potential risks, rewards and costs associated with a product, investment strategy, account type or series of transactions; having a reasonable understanding of the specific retail investor’s investment profile; and based on the understanding of the first two elements, having a reasonable basis to conclude that the recommendation or advice provided is in the retail investor’s best interest.

The bulletin clarifies the term “investment profile” and explains that while costs are always a ‘relevant factor to consider when recommending or providing advice on investments or investment strategies, they should not be the only consideration, and a firm or financial professional cannot satisfy its obligations simply by recommending the lowest cost option’.

According to the regulator, ‘the firm and financial professional should consider the total potential costs when evaluating whether the recommendation or advice is in a retail investor’s best interest, including direct and indirect costs that could be borne by the retail investor’.

Under the new guidelines, firms and financial professional should consider potential costs, such as commissions, markups or markdowns, and other transaction costs; sales loads or charges; advisory or management fees; other fees or expenses that may affect a retail investor’s return (such as Rule 12b-1 fees, other administrative and service fees, revenue sharing, and transfer agent fees); and the trading and other costs associated with an investment strategy.

Click in the link to read the SEC Staff guidance.

iCapital onboards Simon Markets ecosystem on wealth tech platform

Alternative investing platform for the asset and wealth managers iCapital has launched a ‘holistic structured investment ecosystem that includes full proposal generation and the trading workflows’ within wealth management platform Envestnet.

Powered by iCapital’s Simon Markets, the integration with the Envestnet platform is aimed at enhancing advisors' workflow by ‘streamlining the proposal-to-execution process for structured investments and offering access to analytical features’.

‘This first-to-market integration brings structured investments into an advisor’s suite of investment solutions and gives them a 360-degree view of client finances,’ said Jillian Altamura (right), head of platform partnerships at iCapital.

Dana D’Auria, co-CIO and group president, Envestnet Solutions at Envestnet noted that the partnership will enable advisors allocate to structured investments through the Envestnet for the first time.

‘The integration allows advisors to add fee-based structured investments into proposals, transact on those products and assess them next to more traditional asset classes without ever leaving the Envestnet ecosystem,’ she said.

Advisors using the Envestnet platform will also be able to access multimedia educational resources, including a library of 90+ videos, on-demand asset class education and customised compliance-tracking tools; the partnership includes a structured investments module available via Envestnet MyBlocks | MoneyGuide for investor education where advisors can understand the potential impact of structured products on a portfolio.

Citi launches range of products linked to Qontigo’s clean energy indices

Qontigo has introduced an exclusive series of Stoxx indices targeting the clean energy theme and that have risk control and decrement overlays.

The indices, which will be licensed to Citigroup as underlyings for structured products, include the iStoxx Global Clean Energy Selected 30; iStoxx Global Clean Energy Selected 30 NR Decrement 5%; iStoxx Global Clean Energy Selected 30 NR Risk Control 10%; and iStoxx Global Clean Energy Selected 30 NR Risk Control 10% Decrement 4.5%.

‘Events in the last year have catalysed the transformation of the energy sector towards alternative energy sources and more sustainability,’ said Arthur Dorbessan, global head of retail indices at Citigroup.

The iStoxx Global Clean Energy Selected 30 is comprised of 30 companies from developed and CEEMEA markets that make at least 20% of sales combined from 140 business activities within the clean energy theme. These include production of wind energy equipment, solar cells, electric vehicles charging stations and biodiesel. The business categorisation is based on Revere (RBICS) data. 

Companies in breach of global norms, or those that have a severe controversy rating, or are involved in controversial and military weapons, adult entertainment, gambling, oil and gas, nuclear power, thermal coal or tobacco are not eligible for selection - companies whose trading volume fails to pass a threshold are also removed to ensure index tradability. 

In a final selection step, the 50% of stocks with the lowest volatility are kept. From there, the 30 stocks with the highest dividend yield are selected into the index. The new index family includes versions which apply either an additional risk-control overlay or a decrement on top, or both.

‘The structured-products industry continues to unveil some of the most innovative solutions, meeting the needs and objectives of a sophisticated client base,’ said Armelle Loeb (above right), head of Emea index sales at Qontigo.