A Private Bank Launching a Discretionary Strategy as an ISIN Product
The house view is already running in hundreds of accounts. Turning it into one security is how it stops being hundreds of accounts.
The situation
The bank runs a discretionary mandate — a house allocation, a balanced profile, a thematic sleeve — and it is implemented account by account. The investment committee decides, and the implementation team then places the same trade across a long list of portfolios, each with a slightly different starting position, a different cash balance and a different set of constraints. Every rebalance is a project.
The consequences are familiar. Clients in the same strategy get different fills on the same day, which is awkward to explain and harder to defend. Performance reporting is per account rather than per strategy, so the bank cannot show a single track record for something it has been running for years. Smaller accounts cannot hold the full allocation at all, so they get a diluted version of the house view. And when the committee changes its mind, the lag between decision and full implementation is measured in days.
There is usually a second driver too: the bank wants the strategy to be visible outside its own client base — bookable by an external wealth manager, or by another institution's clients — and a mandate is not something an outside custodian can hold.
The vehicle we would recommend, and why
An actively managed certificate issued from a ring-fenced compartment, unlisted, denominated in the mandate's base currency.
An actively managed certificate — an AMC — is a security whose value tracks a portfolio someone continues to manage. It carries its own ISIN, is valued at an agreed frequency by an independent calculation function, and is delivered into a client's custody account against payment like any other instrument. The bank keeps full discretion over the portfolio behind it; what changes is that the portfolio exists once rather than three hundred times.
That single change resolves most of the situation above at once. One order replaces hundreds, so every client in the strategy gets the same execution on the same day. There is one net asset value series, which is a track record. The minimum meaningful holding drops to the size of one unit, so a smaller account can hold the full house view rather than an approximation of it. And because it is a transferable security, a client at another bank can hold it too — the instrument is the distribution.
A fund would achieve much the same thing, and for a strategy intended for retail distribution it is the right answer. For a professional-client mandate it is a heavier instrument than the job requires: a fund brings its own regulatory authorisation, its own governing body and its own ongoing obligations, and the launch is measured in months. The certificate route gets to the same bankable outcome without acquiring a regulated product the bank does not otherwise need.
Where the bank wants the strategy visible on a screen rather than only bookable, the same compartment can issue a listed instrument instead. That is a different conversation and a longer one; most first products from a private bank are unlisted, because the buyers already have a relationship with the bank and do not need an exchange to find the product.
Jurisdiction logic
The investors decide. A Swiss client base held at Swiss custodians points to a Swiss ISIN, which books cleanly across Swiss custody without anyone having to think about it. A client base spread across the EU points to a compartment settling through the international depositaries, which is what makes an instrument bookable at effectively any European bank.
Where the bank has an international private-client franchise — Latin America, the Middle East, Asia — an offshore segregated portfolio is often the better fit, because the custodians those clients already use are familiar with it and the structure is neutral rather than tied to one region's regulatory perimeter.
The bank's own domicile is close to irrelevant here, and treating it as the deciding factor is the most common way to end up with a structure that fits the issuer rather than the buyers.
Timeline
What the weeks look like
- Week 1
Mandate and vehicle selection
Fix the strategy definition, the base currency, the valuation frequency and the target investor base, and confirm the certificate is the right instrument.
- Weeks 1–2
Jurisdiction and structure
Select the issuing jurisdiction against the client base, and draw up the compartment, the valuation methodology and the subscription and redemption mechanics.
- Weeks 2–4
Documentation and approvals
Term sheet and issuance documentation drafted under the existing programme; onboarding completed on the bank and the mandated manager.
- Weeks 4–6
ISIN, settlement and custody onboarding
ISIN allocated, settlement eligibility obtained, and the instrument made receivable by the custodians the clients already use.
- Weeks 6–8
Launch and first subscription
Seed subscription issued, opening valuation struck, and existing mandates migrated in cash or, where the mechanics allow, in kind.
Four to eight weeks from signed mandate to first ISIN is the normal range. What moves it is onboarding: the drafting is predictable, and the documentation on the bank and the sponsoring parties is what tends to arrive late.
What you need to bring
The five things that decide whether the timeline holds
The strategy definition
What it holds, what it may not hold, how often it rebalances and what governs the decisions — the investment committee's own mandate document is usually enough.
A valuation source for the underlying
Every position needs a price a third party can independently verify at the valuation frequency you want.
The custody picture
Where the underlying assets will sit, and which custodians the target clients hold their accounts with.
Onboarding documentation
KYC and AML on the bank and on the individuals authorised to act for it. This is the step that decides whether the timeline holds.
The reporting you have promised clients
Frequency, format and content of the factsheet and statements, so the lifecycle is built around what has already been committed to.
The instrument does not change what the bank is doing. It changes how many times the bank has to do it.
Frequently asked questions
Can existing discretionary clients be moved into the certificate?
Usually yes. Existing mandates can be seeded into the new compartment either with cash or, where the underlying and the custodian mechanics allow, by transferring the holdings in kind. In-kind migration avoids taking the whole book to cash and back, but it depends on each client's tax position and on their custodian's ability to deliver the assets, so it is worth reviewing client by client before the structure is fixed rather than after launch.
Does the bank keep investment discretion?
Yes. The bank continues to manage the portfolio under a management agreement with the issuing vehicle; the vehicle issues the security and holds the assets, and the bank makes the investment decisions inside the mandate set out in the documentation. The division is deliberate: the issuer is independent of the manager, which is what makes the instrument bankable for investors who are not clients of the bank.
Can clients of other banks buy it?
That is one of the main reasons to do it. Once the product is a transferable security with an ISIN and settlement eligibility, any custodian that can receive that settlement can hold it for its own clients, subject to that institution's own product-approval process and to the distribution restrictions in the documentation. It is a professional-investor instrument, so it is not offered to retail clients.
What happens to the strategy's existing track record?
The certificate starts its own net asset value series from launch, and that series is what can be shown as the product's performance. A composite of the prior discretionary accounts remains what it was — a mandate track record, presented under whatever performance-presentation standards the bank already applies to it. The two are not the same thing and should not be joined into one line; most banks show the mandate history and the product history side by side.
Related situations
Wealth manager: a multi-manager or model-portfolio shelf
A range of model portfolios or externally managed sleeves, issued as a shelf of ISIN-bearing products on one platform.
ReadLatAm manager distributing through a European ISIN
A Latin American strategy issued as an international ISIN so offshore-held clients can hold it at their own banks.
ReadDescribe the situation, get a structure back
Tell the structuring team what the strategy is and who it is meant to reach. You will get a vehicle, a jurisdiction and a timeline — and the reasoning behind each.