Swiss hedge funds welcome changes to fund rules in line with EU legislation
Amendments to the Swiss rules for funds will bring the market into line with the EU’s AIFM directive which comes into force in July 2013. The revision includes changes to licensing and distribution.
The Swiss hedge funds industry has welcomed an update to rules on collective schemes that are less restrictive than originally feared.
Revisions to the Collective Investment Schemes Act (Cisa) were passed by the Swiss parliament on September 18. The idea behind the changes is to bring Swiss law in line with the EU’s alternative investment fund managers (AIFM) directive, which is due to be implemented in July 2013. Switzerland has also used the update to make amendments to its private placement rules.
The Swiss Funds Association (SFA) originally voiced concerns about the proposed amendments. However, it has welcomed the final revisions.
“When we received the draft bill, we were quite shocked,” says Matthäus Den Otter, chief executive of the SFA. “If that had been implemented it would have had an adverse effect on the Swiss market and the cross-border market. We think it is no longer the case. In fact it is a moderate amendment and should secure the market and bring it in line with international standards without crippling business with the rest of the world.”
The changes will include a requirement for Swiss-based managers to be licensed by the Swiss Financial Market Supervisory Authority (Finma). There are exemptions for managers with an AUM of less than Sfr100 million ($107.23 million) of liquid assets or Sfr500 million ($535.97 million) of illiquid assets.
Previously only managers of Swiss funds were subject to Finma authorisation. Alternative investment funds were not licensed by Finma.
Under the revisions all distributors of funds in Switzerland, Swiss-based or foreign, will need authorisation from Finma. Foreign distributors will be required to have a representative and a paying agent in Switzerland. Individual products will not require authorisation.
Most hedge funds distributed in Switzerland are domiciled elsewhere. The jurisdiction is the third most popular location for hedge fund managers after the US and the UK. At the end of August, volumes of Swiss alternative investments reached Sfr5.9 billion ($6.35 billion), a month-on-month increase of Sfr11 million ($11.83 million) according to figures from the SFA.