1 - Platform Assets

• Platform structure

  1. Wrappers

  2. Assets
• Platforms are services designed to enable retail investors and financial advisers to manage investment portfolios
• Platform operators must decide upon the range of assets to be supported
• Types of assets commonly supported by platforms

  • Authorised collective investment schemes (CISs)
  • Open-ended investment companies (OEICs)
  • Authorised unit trusts (AUTs)
  • Various types of assets that trade on Regulated Markets
• Platforms enable investors to make use of tax allowances and tax-efficient methods of investing such as ISAs and pensions
• Products like ISAs and pensions are designed and operated by a product provider to ensure compliance with relevant tax laws
• Tax-efficient wrappers


  Product rules wrapped around investment assets to make investments tax-efficient
• General investment account (GIA)


  A product that is not tax-efficient and can be used for general investment purposes
• Assets available on platforms

  1. Cash

  2. Exchange-traded assets

  3. CIS units/shares

  4. Structured products
• Platform operators aim to enable investors to perform all their investment activity via the platform's services
• Cash on platforms is not just for transactions but also for future transactions and paying platform charges
• Platform operators must consider whether to handle only sterling or enable investors to hold balances in other currencies
• Platform operators need to decide whether to pass on interest earned on uninvested cash balances to investors
• Exchange-Traded Assets


  Represent a diverse range of investment types, from shares and government bonds through to ETFs
• Equities


  Holding shares in a company gives ownership stake and voting rights in key decisions
• Corporate and Government Bonds

  Bonds are debt instruments where the issuer undertakes to repay the capital at a specified future date
• Bond


  A debt instrument, essentially an 'I owe you' (IOU), usually written for a fixed period. The issuer receives money from the initial buyer and undertakes to repay that money (the capital) at a specified future date. Interest payments are made to the bond holder, with the regular interest rate known as the coupon rate and the date of payment known as the coupon date
• Types of bonds

  • Government bonds
  • Supranational bonds
  • Corporate bonds
• Bonds are the larger market in terms of global investment value compared to shares
• Capital value of a bond at maturity is fixed, but the market value can change over time
• Changes in prevailing interest rates

  Affect the attractiveness of the bond's interest to investors, changing the capital value of the bond
• Bonds are generally considered less risky than shares, provided the issuer remains solvent
• Government bonds are regarded as particularly low risk
• Holders of Greek government bonds had to accept losses due to the restructuring of the country's debt since 2009
• Holders of corporate bonds can face more real default risks if the issuing company becomes insolvent
• Closed-Ended Funds include investment trusts, real estate investment trusts (REITs), and venture capital trusts (VCTs)
• Closed-Ended Funds are issued by companies whose business is investment
• Real Estate Investment Trusts (REITs) own and operate income-producing real estate
• REITs own various types of commercial real estate, including office buildings, warehouses, hospitals, shopping centres, hotels, and agricultural land
• REITs engage in financing real estate as well
• Legislation for REITs in the UK was first enacted in the Finance Act 2006
• For a company to be a UK REIT, it must be a closed-ended investment trust, reside in the UK, be publicly listed on a recognized stock exchange, and distribute 90% of its income to shareholders
• Venture Capital Trusts (VCTs) provide private equity capital for small expanding companies and capital gains for investors
• VCTs are listed on the London Stock Exchange and invest in companies not listed on any Regulated Market
• Exchange-Traded Funds (ETFs) combine aspects of closed-ended funds with open-ended CISs
• Types of funds available via platforms

  • UK-domiciled funds authorised by the FCA (AUTs or OEICs)
  • UK-domiciled unauthorised unit trusts
  • Funds domiciled within the EU (UCITS or AIFMD)
  • Funds recognised by the FCA from other parts of the world
• Types of schemes established in major EU fund centres

  • Sociétés d’investissement à capital variable (SICAVs)
  • Trust structures
  • Corporate structures (SICAV or OEIC)
• Authorised CISs are open-ended assets, meaning the number of units available to investors can change every dealing day
• If the AFM has more requests to buy units/shares than requests from investors wishing to sell their units/shares back to the AFM, the AFM can issue more units/shares to satisfy these requests
• The price of the units/shares in authorised CISs is directly related to the net asset value (NAV) of the underlying investments in the fund