Argentarius Management: Accessing Europe in an AIFMD world

 

Q

What services does Argentarius provide and who are your clients?

Wölfl:Argentarius offers commodity
trading advisors (CTA), hedge fund managers and asset managers access to its network of securitisation platforms to issue exchange traded instruments (ETIs) which deliver the performance of any managed account as a stock exchange-traded security. Argentarius is Europe’s leading issuer of ETIs linked to alternative investments. We enable our clients to issue an ETI and list it at an EU stock exchange creating a feeder structure into a managed account offered by our clients. We offer the fastest gateway into the European market.

 

Q

What is an exchange traded instrument and how does it work?

Wölfl: An exchange traded instrument (ETI) combines the advantages of mutual funds (assets as collateral in case of insolvency) with the flexibility of a certificate (derivative security issued by a bank). ETIs feed into the underlying assets and have no derivative or leverage embedded. It is a “pass through” instrument that delivers the delta one performance of the underlying asset(s). We list these securities either at the open market at Frankfurt, or at the EWSM, the European Wholesale Securities Market in Malta.

 

Q

Your business is to issue an exchange traded instrument. Is it a kind of alternative exchange traded fund (ETF)? Or what are the differences between ETFs and ETIs?

Wölfl: ETFs are securitisations of well recognised financial indices. ETIs are securitisations of any kind of portfolio, even alternative investments like a hedge fund, a managed account or similar kind of assets. The main difference is the licensing requirement. Whereas an ETF is licensed as a collective investment scheme and even the manager has to be licensed an ETI is regulated by the European Central Bank and the manager of the portfolio does not need to be licensed. As long as the ETI units are issued by one of Argentarius’ approved securitisation platforms, no additional approval is needed for the portfolio manager or CTA.

 

Q

Describe how the Argentarius solution works?

Wölfl: We set up a special investment vehicle (SIV), a limited liability company which opens an account with a broker. Argentarius gives power of attorney to our client – the asset manager or CTA – allowing them to allocate the assets held within the special investment vehicle. The securitisation cell company then issues an ETI unit, a pass through instrument linked to the special investment vehicle and its assets. Thus the performance and risk of the SIV is passed through to investors in the ETI units.

 

Q

What are the advantages of this solution?

Wölfl: There are several benefits. The first is the speed to market, structuring an offer for professional investors including listing on the stock exchange takes between four and six weeks. As well as quicker, ETIs are much more cost efficient with less volume than a fund. Whereas you need at least €20 million for a cost efficient fund an ETI reaches a cost efficient hurdle at around €3 million to €5 million. Then we have the advantage of having no restrictions on the underlying asset class, meaning the SIV itself can invest into any asset class that a normal limited liability company can buy.

Finally, the securitisation falls under ECB regulation 24/2009 and therefore is out of the scope of AIFMD. The structure is not a collective investment meaning the investment manager has no need for a European licence as an alternative investment manager. Any US CTA can act as the investment manager in our securitisation solutions whereas that would be much more difficult within a fund.

 

Q

Can a non-EU asset manager without licence access European investors with this structure?

Wölfl: Yes. For example, a US CTA with a Cayman Island fund is not allowed to promote his Cayman Island fund units within the EU, but we can set up an ETI that is backed by the portfolio of his Cayman Island managed future fund and list it in Frankfurt where the manager can market the ETI units. That is because the AIFMD itself includes some exceptions where the directive is not valid including securitisations that fall under the ECB regulation. So as long as we structure the ETIs to fall under the regulation of the ECB they are out of the alternative investment regulations introduced by the EU. We specialise in structuring the ETI units to fall under the ECB regulation rather than collective investment regulations.