Open-end tracker certificates
(actively managed certificates)

Open-end tracker certificates (also called «actively managed certificates» or «strategy certificates») are the functional equivalent of an open-ended investment fund in the world of derivative securities.

They are derivative obligations, issued by a special purpose vehicle (SPV) to securitize a portfolio of marketable securities managed by an investment manager. The SPV could be organized as an ’orphaned’ entity, but in many cases the promoter of the security chooses to keep the issuing company consolidated with its group.

The open-end feature means that a willing investor may subscribe to the certificates at any time, by instructing his broker — who then passes the order to the paying agent of the security through the clearing mechanism of the market where the security is traded. Thus the pool of assets «in» the certificate is topped up.

The underlying in actively managed certificates is typically a basket of highly liquid securities that can be easily liquidated by the manager of the strategy to accomodate any redemption orders. NAV is calculated on a daily basis by the manager or by an appointed calculation agent and is communicated to the exchange.

Although investors enjoy high liquidity of these instruments, secondary buy/sell transactions with them are much rarer than subscriptions/redemptions.

Open-end tracker certificates are a much more flexible instrument than open-end investment funds for investment into a strategy in marketable securities. It might take months and a great deal of regulatory paperwork to launch an open fund, but creating and putting in the market a managed certificate can take a few weeks or even less.

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