The components of
a Good Decision.
CUSTOMIZED OUTCOMES · CASE STUDY
Avoiding a Bad Investment Decision Through Better Implementation
A wealth manager targeted double-digit returns from Israeli equities through structured notes. Given the structure of the Israeli market, issuers typically offer notes on individual stocks rather than indices, so a single note carried concentration risk. A diversified portfolio of such notes reduced that risk, but became too complex for the wealth manager to handle independently. A better implementation decision let the wealth manager avoid a bad investment decision without abandoning the strategy altogether.
THE BACKGROUND
A robust strategy the wealth manager could not run
The objective was straightforward, though ambitious: achieve double-digit returns through exposure to Israeli equities using structured notes.
Unlike major international markets, however, issuers are typically unwilling, or unable, to structure notes on the broad Israeli indices, thereby offering notes mostly on individual stocks. While this creates attractive investment opportunities, it also introduces significant concentration risk. A single customised note was therefore unlikely to provide an acceptable balance between return and risk.
The logical next step was to construct a diversified portfolio of single-stock notes. To further improve the risk profile, each note was designed with quarterly autocall observations, creating frequent opportunities for capital to be returned in full before the final barrier is observed.
The result was a more robust investment strategy, but not one that the wealth manager could practically implement. What had begun as a single buy-and-hold investment evolved into an actively managed portfolio of multiple positions, each capable of auto-calling every quarter. Such a portfolio would have required continuous monitoring, redeploying redeemed capital while maintaining diversification, and much more. This added a level of both investment and operational complexity that was difficult for an individual wealth manager to sustain.
The wealth manager now faced an undesirable choice: simplify the portfolio by reducing diversification, thereby reintroducing concentration risk, or abandon the strategy altogether.
The solution was not a different investment, but a different implementation. Oasis created a bespoke Actively Managed Certificate (AMC), allowing the original investment strategy to be implemented without compromise while relieving the wealth manager of the ongoing investment and operational complexity.
12
NOTES IN THE PORTFOLIO
5
ISSUERS
DIVERSIFIED EXPOSURE
34
UNDERLYING ASSETS NO OVERLAP BETWEEN NOTES
1
SINGLE ISIN
ONE SINGLE LINE PER CLIENT
THE IMPLEMENTATION
THE STRATEGY
Diversified single-stock notes
12 notes, 5 issuers, 34 underlying assets, each with quarterly autocall observations.
Robust, but complex to run.
THE WRAPPER
A bespoke AMC
Issued through a bankruptcy-remote SPV. Centrally managed, with reinvestment taking place inside the certificate.
Complexity absorbed.
THE CLIENT HOLDING
One line item
A single investment with its own ISIN, held across custodians in Israel and abroad.
No back-office for the wealth manager.
Follow Up Q&A
01
How does an AMC simplify complexity?
An Actively Managed Certificate (AMC) simplifies complexity by turning a portfolio of individual investments into a single, bankable investment strategy.
The strategy can be centrally managed by a specialist, while the wealth manager's clients hold a single investment with its own ISIN in their investment account.
02
Why an AMC specifically, rather than another way of solving this?
A few alternatives could, in principle, have addressed part of the problem.
The strategy could have been managed across individual client portfolios without using an AMC. However, every investment, autocall and reinvestment would still have to be allocated across each client's account separately, creating significant ongoing operational complexity.
A traditional fund structure could also have centralised the strategy. However, the cost and complexity of establishing and administering a fund would have been difficult to justify for a bespoke strategy designed around a single wealth manager's requirements.
An AMC addressed both challenges. It centralised implementation, eliminating the need to administer each client's portfolio separately. At the same time, because reinvestment takes place within the certificate rather than in each client's account, it also avoids the repeated taxable events that a strategy designed to reduce risk through quarterly autocalls would otherwise generate.
03
Does wrapping this in an AMC introduce a new layer of risk?
Traditionally, AMCs were issued directly by banks. In that structure, the underlying notes formed part of the issuer's balance sheet, leaving investors exposed not only to the issuers of the underlying notes themselves, but also to the creditworthiness of the issuing bank.
This AMC is structured differently. It is issued through a bankruptcy-remote special purpose vehicle (SPV), designed solely to hold the underlying investments. As a result, the investor's credit exposure remains to the issuers of the underlying notes themselves, rather than adding a further concentrated exposure to the AMC issuer.
04
How did it play out?
The AMC took approximately one month to establish, with the underlying portfolio fully invested within a further two to three weeks: 12 notes, issued by five different issuers and referencing 34 underlying assets, with no overlap between any two notes.
One note has already autocalled and the proceeds were reinvested into a new position within the AMC, with no action required from the wealth manager or the individual client accounts.
Clients hold the AMC across multiple custodian banks, both in Israel and abroad, as a single line item in each portfolio. Since the initial investment, the wealth manager has had no back-office involvement in maintaining the strategy.
05
What made this a better decision?
The underlying investment strategy was clearly defined. The challenge was implementing it. Left unresolved, implementation constraints would have forced investment compromises that gradually undermined the strategy itself.
The better decision was to avoid a potential investment problem by solving an implementation problem. A highly customized solution was required because the desired portfolio outcome could not be achieved efficiently with readily available investment products.
*Qualified/Classified Investor, as defined in the Securities Law - 1968.
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