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How to create and issue investment vehicles that are easy to distribute

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ETPs are a flexible alternative for market participants

For every investor, it is essential to have a working knowledge of investment vehicles as a basis for decision-making. For any financial advisor, the key is for their clients to have an understanding of the portfolio and easy access to invest in it.

Mary Lyons, financial advisor and founder of Benchmark Income Group, told Business Insider, “in an ideal world, a financial advisor would look at your overall financial picture and help you create a plan to get to and through retirement.”

An investment vehicle can be understood as how a person can invest their money. The distribution challenges are often significant for those who offer a specialized investment portfolio.

In this context, securitization, can be an alternative to evaluate. Asset securitization is a mechanism that converts illiquid or liquid assets into an exchange-listed product (ETP) to be issued in the capital market to provide a return to investors.

Contrary to conventional thought, not only large companies are prone to asset securitization. Currently, a wide variety of portfolio managers distinguish themselves by their specialized investment strategies under this trend.

In these cases, managers offer access to investment portfolios through ETPs, providing several advantages to investors compared to traditional investment methods and direct investments. These include:

  • Professional management: is essential when direct investments are difficult to find.
  • Ease of access: to off-shore investors, who would otherwise be more challenging to reach.
  • Diversification: investments made through securitization allow investors to participate in large-size assets, such as real estate developments. This advantage is vital for non-institutional investors who cannot afford high tickets.

Securitization of portfolios with ETPs

Since they were marketed for the first time in the last decade of the 20th century in the United States, ETPs have been an essential part of asset managers’ portfolios as they are flexible, transparent, and open to a universe of global investors.

The securitization of investment strategies has since marked a trend that has been of great help to financial advisors, as it provides them with various benefits when promoting and obtaining clients.

Flexibility

One of the main reasons for launching an investment strategy under this mechanism is the flexibility provided to managers.

An ETP brings together several advantages of stocks, can be traded in a regulated market, and their cost is similar to buying or selling securities. In addition, they do not require early redemption charges.

These characteristics facilitate the distribution of notes in the leading global financial markets and allow them to be more flexible than traditional funds since these lose dynamism by requiring more significant requirements and other regulatory burdens.

Customization of products

Within the large group of ETPs, there are several alternatives available to portfolio managers, depending on the investment strategy they plan to launch. Allowing them to structure products according to their needs, considering a large pool of financial assets or even investment portfolios, is something in which FlexFunds specializes.

The flexibility of underlying assets that the investment strategy can have includes specific sectors or particular assets such as a significant new real estate project, a novel alternative energy generation plant, or many others, which investors can access from their own brokerage account.

Cost savings

ETPs management can translate into lower maintenance costs, greater liquidity, transparency and, of course, transactional savings for portfolio managers and investors compared to other funds. 

The British firm IG summarizes this quality by stating that an ETP combines “in a single transaction” what “would otherwise be several transactions in different individual assets”, which translates into lower expenses.

In addition, it may provide for tax benefits, in the case of some jurisdictions, as “capital gains only arise on the sale of the entire ETP and are therefore only taxed once and in aggregate.”

Distribution

Given its quality of being a highly versatile instrument, an ETP opens up a universe of opportunities for asset managers on a global scale, allowing them to connect with investors looking to diversify their portfolios with a solid model.

The key is to take advantage of this instrument’s exposure to “certain underlying markets that are not available through traditional trading vehicles, such as exotic stocks or indices”, IG notes in its report.

In the current landscape, the firms that make up the asset management industry are facing abrupt and rapid changes in which many of their traditional products, tools, and approaches must adapt quickly to maintain the effectiveness of pre-Pandemic times.

Nowadays, players like FlexFunds specialize in structuring ETPs by securitizing assets quickly and efficiently, serving portfolio managers of any asset class around the world.

FlexFunds is helping managers adapt to market changes through solutions that meet the need for cost control while providing investment structures launched in half the time of many existing alternatives.

Sources:

  • https://www.businessinsider.com/personal-finance/what-does-a-financial-advisor-do
  • https://www.ig.com/es/estrategias-de-trading/-que-es-un-producto-negociado-en-bolsa–etp–0-190204

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FlexDual Portfolio Details

Dual Custody: Securitizes a strategy with listed assets in a Bank of New York Mellon & Interactive Brokers accounts

Applications

  • Bankability: Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds
  • Design a mixed investment strategy of fixed income, equities, and derivatives

Advantages

  • Trading and custody platform with available leverage
  • Efficient subscription through Euroclear
  • Actively managed by a Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient
  • Flexibility in the choice of executing broker for underlying trades

FlexRegulated Portfolio Details

Securitizes a strategy with listed assets in an Interactive Brokers account targeting institutional and retail investors

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Trading and custody platform with available leverage
  • European UCITs compliant
  • Market to institutional and retail investors
  • Actively managed by a Portfolio Manager
  • Market maker as part of the solution
  • Low value tickets
  • Cost efficient

FlexOpen Portfolio Details

Securitizes a strategy with listed assets in any custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Manage portfolios from any major custodian
  • Introducing Broker Dealers maximize revenue from own trading fees structure
  • AUM remain on the introducer broker agreement
  • Efficient subscription through Euroclear
  • Actively managed by the Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient

FlexPortfolio Details

Securitizes a strategy with listed assets in a Bank of New York Mellon or Interactive Broker custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds

Advantages

  • Efficient subscription through Euroclear
  • Actively managed by a Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient
  • Flexibility in the choice of executing broker for underlying trades
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Welcome to FlexFunds

We provide our services under the Global Note Programs through several entities that perform different activities. Among these entities are FlexFunds ETP LLC which acts as Calculation Agent, and FlexFunds Ltd, which acts as the Program Coordinator. Before making a decision to invest in the Global Note Programs, you should consider the following:

  1. Independent entities. FlexFunds ETP and FlexFunds Ltd. are not managers of the special purpose vehicles, collectively, responsible for the issuance of Notes under the Global Note Programs.
  2. Coordinated Activities. FlexFunds ETP and FlexFunds Ltd act as coordinators of the different entities participating in the Global Note Programs. However, each of the entities is responsible for its own duties and activities in the process.
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