#5 Romuald Orange - Natixis CIB

The Vestr Securitization Podcast

Actively Managed Certificates, Indices, and Swaps: Flexibility, Complexity, and the Real Drivers of Alpha

In this episode, we explore the AMC landscape with Romuald Orange, Global Head of Proprietary Client Interfaces at Natixis CIB — an institution with more than 12 years of experience in actively managed certificate structuring. Romuald unpacks how Natixis structures its entire AMC business around the Actively Managed Index framework, giving clients the ability to express strategies in both certificate and swap format. He makes the case for why Natixis's size is an advantage rather than a constraint, pointing to concrete examples, including the onboarding of distressed bonds into an AMC, and explains how the bank's equity derivatives desk sits at the heart of its product offering.

We also discuss how Natixis partnered with vestr AG to outsource the rebalancing and lifecycle platform, freeing its team to focus on the value it truly creates: access to complex underlyings, structured product integration, and bespoke client advisory.

You will also hear insights on:

• Why first-time issuers should start simple and expand complexity over time

• How QIS strategies can now be accessed in a fully funded format without an ISDA

• The rise of multi-asset AMCs and structured product wrappers as the next trend

• Why direct API connectivity is becoming the new standard for portfolio managers

This episode offers practical takeaways for asset managers and product developers looking to deepen their understanding of the actively managed certificate market and its evolution.

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🎙️ Transcript:  

Intro: 00:02 The Vestr Securitization Podcast with Stephan Wagner. Unlocking investment innovation. Vestr's end-to-end platform enables securitization providers and investment managers to streamline the lifecycle of dynamic investment solutions, ensuring better results for their clients and their operations.

Stefan Wagner: 00:24 Hello and welcome. In this series, we explore the cutting edge of investment innovation. I sit down with leading asset managers who use securitization vehicles to execute their unique investment strategy.

Romuald Orange: 00:36 The link between the AMC on one side and the instructor product offering on the other side is made very easily because of the way we operate. We are agile due to our size and we are capable of making sure that equity derivatives and the EMC world go together.

Disclaimer: 00:56 The information in this presentation is for informational purposes only and does not constitute an offer, solicitation or recommendation to buy or sell any financial products. It is not intended as investment, legal, tax or accounting advice. Always seek the advice of your financial advisor or other qualified professional regarding your investments.

Stefan Wagner: 01:18 Good morning, everybody. I'm here to record the next Vestr Securitization Podcast. I'm very excited. It's a long time coming. I got Romuald Orange. He is the global head of proprietary client interfaces in Natixis. We've known each other for quite a while, and we're going to try to talk about their AMC business, the actively managed certificate business. Thank you, Romuald, for joining me today.

Romuald Orange: 01:43 Thank you, Stefan, for having me.

Stefan Wagner: 01:45 Let's jump right in. How does Natixis investment bank position, it's actively managed certificate business and its capabilities and what is sort of your core USP for issuers and the managers of AMCs?

Romuald Orange: 02:01 Let's start with history. I quite like history, actually. So we have Natixis CIB as a long history in the AMC space. It's something that we've been developing over the last more than 10 years. Actually, probably 12 years when we started. It's not as old as the first AMCs, but it starts to be something significant in that business. And so since then, we have constantly worked on enhancing the product offering by adding new underlyings or new payoffs or new features. It's been a long journey to come to something which is at market standard, but I would even say it's above market standard, to my opinion, what we do at the moment. From an initial perspective, Natixis CIB is a bank with a strong credit rating, which is a single A, and this allows clients to operate in safe credit environments. And what characterizes would be flexibility. I think that's where we try to dissociate from the others. We have certainly a more tailored approach to client requests.

Stefan Wagner: 03:27 Is there maybe an example you can share that was a very tailored approach for a client?

Romuald Orange: 03:33 Yeah, there are a couple, a couple actually. But the last one in mind is onboarding distressed bonds into an AMC.

Stefan Wagner: 03:45 Wow.

Romuald Orange: 03:46 And that's the very last. And it comes with a lot of haute couture, actually, as regards to managing the, just managing the corporate actions. That's not the easiest one. Yeah.

Stefan Wagner: 04:04 I can imagine that sort of leads me to my next question, you know, how do you manage all these lifecycle events, you know, I mean, one, you need to onboard the distress bonds, you need to get the data, but there's a lot of, you know, daily things that need to happen and obviously secondary market making, how do you determine what the correct NAV for things like this is? I'm sure there's certain challenges that you face.

Romuald Orange: 04:28 Well, it's a very broad question, Stefan, as you know. Let's say on the onboarding side, we start with defining the target markets that the advisor is looking to enter. The process is usually that as we work through the onboarding parameter, we also discuss the different features of the product. Once everything is agreed, we look at the product itself. And as regards to the product, then comes the actual life cycle of the product. So insurance is fully automated on our side, and comes the life of the AMC with its to me, one of the main features, which is the rebalancing elements and the active components of the EMC, which is the exciting part of it. And that is executed on a platform, and that platform is something that we have outsourced a couple of years ago. We are using Vestr, it's no secret. And Yeah, as I said, we took this decision a couple of years ago, and our approach was, okay, where is the value? And where can we put our efforts from Natixis CIB standpoint? And where can we leverage on what has been done by the FinTech world? And the value that we bring is on offering additional data of additional underlyings. So that's a very long answer to a short question, actually.

Stefan Wagner: 06:20 It's often when I say this to clients from our side, when we try to, I say always, you know, getting your NAV correct, you know, or the investment rules checked and everything else is not a USP, it's an MVP. Your USP on top of it is exactly what you just described, your tailored approach, what access you give, maybe leverage or, you know, what you are, but not that the NAV that you're calculating is correct. That is a minimum given basically. And also the other comment I wanted to make, you said, you know, probably 10 to 12 years in the AMC business. I think the longest outstanding AMC that we manage on the platform is 15 years. You're clearly one of the earlier ones, I can tell you that. Thank you. When it comes to sort of AMCs, we talked about it, but you know, it stands for actively managed certificate. Is there also other actively managed products that you're seeing coming on that you're managing out of this?

Romuald Orange: 07:23 Yeah, yeah, that's you are spot on Stefan. It's the way maybe let me take just a very short step back. The way we look at the actively managed business is interesting at Natixis CIB We look at it through the actively managed index angle. So for any AMC that we are launching, this is linked to an AMI, so Actively Managed Index. Once we have said this, technically that means that if I'm capable of engineering an AMI, then I can easily plug it into a certificate format, but I can also fairly easily plug it into a swap format. So AMCs and now so-called AMS are starting to be very interconnected. I mean interconnected into the type of platform that the banks and the different issues are using so what we observe at the moment is. Yeah, the addition of the IMS feature to the old AMC product offering. And it's something which is a bit different from a primal cred offering, because you could also consider that Portfolio swaps into the prime bulkage world on a bit of an actively managed shop but I'm here this is not what we're talking about we're talking about actively manage indices in a swap formats such as custom baskets for instance that's that works well.

Stefan Wagner: 09:25 I see. And when you do this with the indices, I presume there's also your own QoS indices in there, they can become quite complex in a sense, which means sort of leads to the next thing, you know, QoS are usually rule-based, then you have actively managed swaps. Where does active stop and where does rule-based start, particularly when you… potentially use AI driven signals. Do you have any experience with that one or how do you handle this?

Romuald Orange: 09:56 Yeah, there are several layers of complexity into what you said. What we've done and what we are looking at is offering as well some QoS bricks into the MCF platform, but we are not looking to provide this as an actively managed QoS feature.

Stefan Wagner: 10:22 Excellent, so I can basically get access to a QoS strategy without having an ISTA with you in place. It's securitized in a node, I presume.

Romuald Orange: 10:30 Yes, we are sorting the ISTA issue.

SPEAKER_04: 10:38 I remember from my old days how long it took to negotiate an ISTA and getting a credit annex, and you basically lost the will to live.

Romuald Orange: 10:48 Yeah, well, you know this, you've been on that side, you know how long it takes to sign an ISDA. For companies which don't have the bandwidth or the actual manpower or don't want to spend a fortune in legal advisors, then we have found a way to invest into about 20 QA strategies that are now available on the platform. And this is done in a fully funded format.

Stefan Wagner: 11:23 I mean, AMC is all that vehicle in a sense is very flexible and what you can put in it, which sort of do you see some other, you know, things that coming into it, maybe more derivatives cap option overlays or Harvesting carry, what do you see sort of what else is being put or wrapped or securitized in an AMC?

Romuald Orange: 11:50 The basics, I would say, like the edging overlay, as you said, that's a typical one that you can find fairly easily. So forex edging is something that is available. We see lots of demand on the option side as well. And that comes as, I wouldn't say a basic offering because we are far from this, but the requests are coming often and often. So that's clearly a trend. And we try to match as much as we can with our structured product offering. Here again, the link between the two worlds, so the EMC on one side and the instructor product offering on the other side, is made very easily because the way we operate at Natixis CIB, we are agile due to our size, and we are capable of making sure that equity derivatives and the EMC world work So that's something which is made easy on our side as well.

Stefan Wagner: 13:09 When people come to you and want to launch an AMC with you as an issuer, what are some of the most common pitfalls you see in the first time AMC launches by someone like that? And how can you guide them in a sense?

Romuald Orange: 13:23 I would say most of the time the queries are too complex. So when you start explaining what AMC can do, you get a lot of traction. And the flip side of this is that because you've said everything is feasible in an AMC, more or less, you get requests which are, okay, can you do this in that color with this and that feature? And okay, well, If you want to start, I would recommend to start with something which is fairly simple and get accustomed to it because there is a bit of an adoption. You need to get familiar to how AMCs work, you need to get used to the platform, to the rebalancing elements, getting your NAV, as you said earlier on, using the tailor-made reporting features which are available, and that's a key element also of what we are offering thanks to the partnership with vestr AG. I'm totally a fan of the reporting side, and it's something which is extremely well done and which is totally, so first, white label for the clients, and second, extremely easy to use.

And as I said, totally customizable. I don't like the word, but you can really tailor. So yeah, to get back to your question, okay, you want to get into an AMC and well, let's start with something not fully vanilla, but something which is easy-ish and then Once you get a bit of custom from a customer standpoint, yeah, we can expand the complexity of what we are going to do into it. And usually, People come with some funky strategies they want to do. At the end of the day, thanks to our trading team, they analyze the request and say, why don't you hedge this using that type of underlying instead of that complex stuff that you wanted to do and that is not going to bring any alpha but only cost. So this is the typical interaction when we are talking about Where do we add value? I think we add more value in those discussions with the clients than on trying to develop something which is already available in the streets.

Stefan Wagner: 16:22 So the old rule, KISS, keep it simple when you start with us.

Romuald Orange: 16:26 Yeah, absolutely.

Stefan Wagner: 16:30 And what do you sort of expect the trend to be for the next 12 to 24 months? We've seen clearly incredible growth in this market over the last six, seven years in AUMs and new products, but you know, that's AUM, what do you expect to happen around it or inside the AMC?

Romuald Orange: 16:50 What we observe is an increased amount of complexity or variety. Let's call it more variety of underlyings that we are looking to trade into the EMC format. And I'm using variety because something complex for me might not be complex for someone else in the street, in terms of accessing the markets. So we see a lot more requests in terms of multi-asset AMCs. And as regards to what's coming next, we see a lot of requests on the structured products world. Here, I mean, offering AMCs, including structured products, and it's going to be the next trend for sure. From a product perspective, when we say, okay, what is going to happen to the AMC community, lots probably coming from direct APIs, Interacting with the advisor of the portfolio manager not necessarily through the platform, not necessarily through the GUI, but directly in an API format. That's the next thing.

Stefan Wagner: 18:07 Yeah, I mean, we have seen this definitely across all our clients as more increase, I think, in multi-asset AMCs. I think it's a little bit of a reflection also what the market is doing, you know, it's not so as correlated anymore. So the active element of the AMC can, the active management can actually add more value now, potentially generate alpha. Yeah and definitely the connectivity everybody more and more people asking for that one can we just use the API to send trades and everything else and it's definitely a trend. Now I would like, if it's okay with you, to ask you, Romy himself, a few personal questions. You have been in this industry now for a while. You've seen a lot. Maybe it's something you can share. Maybe you can talk a little bit about sort of what drives you and, you know, maybe tell us something interesting about yourself that most people actually don't know.

Romuald Orange: 19:06 Well, if most people don't know, I'll keep it secret for another long time. But what drives me, I think two things from a professional stance. I think one element has been honesty and trust. And the phrase, my world is my bond, is definitely something I adhere to. I've always been and I've always tried to be someone you can trust and with whom you are going to build long-term relationships in terms of business and professional. My personal stance, but not too far away, is I like to make sure that the brain and the body work together. So I try to find that perfect mix of being in good shape. It helps you to be efficient in your work as well. I see a lot of benefits from this.

Stefan Wagner: 20:28 Thank you for sharing. Next one is sort of, what is sort of your definition of success? This can be in business, but also in your private life, or can span both, doesn't matter.

Romuald Orange: 20:42 Yeah, that's a difficult one. That's a difficult one because I think that the definition of success is a moving target. Younger, I would have answered probably that the definition of success was very material in terms of, okay, I've achieved that German sport car, I've achieved that. I think now I value time as being the real success and time is the real luxury. being capable of managing your time is success. And that's very difficult.

Stefan Wagner: 21:24 I couldn't agree more. I mean, as you said, time is the real luxury. Thank you for sharing. Last question then for you is, what is your favorite finance book? I mean, one or two, but yeah.

Romuald Orange: 21:40 Yeah, favorite finance book. There's one which I recommend. It's called Mania's Panics and Crashes from Charles Kindle Berger, who's a US economist and historian. Very interesting about all the different crises and bubbles around the financial markets. Let's call it the Bible of bubbles and crashes. And I'm currently reading another one which is written by Scott Skern, a professional from the repo market. And the title is The Repo Market Shorts, Shortage, and Squeezes. So yeah, you will see that my appetite on finance books is very much axed towards arbitrage.

SPEAKER_02: 22:37 It sounds like you're worried for a market correction or there's a bubble in the market or how to spot it in time.

Romuald Orange: 22:42 Yeah, no, that's all because I've been reading these for a long time. So not correlated to any current or to come bubbles.

Stefan Wagner: 22:56 And if somebody would like to get hold of you, what's the best way to contact you?

Romuald Orange: 23:01 You can contact me through LinkedIn, and I'm also available, of course, through my professional email, romualdorange@natixis.com.

Stefan Wagner: 23:15 Excellent. Thank you very much, Romuald, for taking the time.

Romuald Orange: 23:18 Thank you, Stefan.