The Swiss market for alternative investment funds is highly diverse, some brief comments on appetite in 2014. The demand from pension funds continues to be fragmented, several took a first move back into hedge funds following 2008 by investing solely into macro/managed futures strategies in 2009 and 2010, the negative experience since has dampened enthusiasm for alternatives in general. In addition there are moves to discuss limiting total fees paid across the fund reducing appetite further.
Global corporations whose pension schemes are managed in Switzerland struggle with the challenge of how to convert their defined benefit approach to defined contribution which generally requires access to regulated retail offerings only.
The major private banks who have traditionally had comprehensive alternative offering have seen an increase in demand for single managers as portfolio managers look to reduce fixed income and credit in client portfolios. However certain fund of funds that have met return expectations are seeing some demand. Private banks and wealth managers in general do prefer more liquid and regulated offerings as this increases their target client market.
Family offices continue to be highly diverse in their approach but it should be noted that demand for smaller emerging managers is very limited. In general the new rules governing offering of alternative nonregulated are regarded as pragmatic and far easier for promoters to comply with than the hurdles faced though the implementation of AIFM in Europe.
In order to assist alternative managers wishing to continue to promote their funds, ARM Capital (Swiss) SA are working with Anne Simond to launch ARM Swiss Representatives SA with a focus on offering Swiss representation and distribution services.
REGULATORY KEY POINTS FOR DISTRIBUTING FUNDS IN SWITERLAND
What are the changes that a foreign asset management company should be aware of when distributing or planning to distributing a foreign CIS in Switzerland? As per the circular, the concept of a public offering was replaced by the introduction of the concept of distribution, which is defined as "any offer or advertisement for CIS which is not exclusively addressed to regulated financial intermediaries". According to the Circular, distribution now therefore includes marketing to both qualified and/or nonqualified investors.
While authorization is needed for distribution to nonqualified investors (as it was before), distribution to qualified investors does not require a FINMA authorization. However, it is important to note that the definition of qualified investors has also been replaced by a new definition.
When distributing a foreign fund in Switzerland or planning to distribute a foreign fund in Switzerland, it is now extremely important to ascertain that the target investors meet the qualified investor criteria. As an example non regulated independent asset managers and family offices shall not be considered as qualified investors per se.
One should note also that as per the circular the use of websites is strictly regulated. The main goal is to avoid distribution to non-qualified investors.
Is there specific requirements for distribution to Qualified investors?
Additional change is also the requirement, as of 1 March 2015, to appoint a Swiss legal representative and a paying agent regardless of the type of investors to which the CIS is marketed. This is a new requirement as in the past only CISs registered for public offerings were required to appoint a Swiss representative and a paying agent.