Switzerland has long been an offshore haven in the heart of Europe, often running money in offshore funds for anonymous clients. As such, its fund managers did not have to submit to formal regulation by their Financial Market Supervisory Authority (FINMA), while few did.
But if FINMA seeks to govern the outbound distribution of Swiss managers’ funds, Keijsers says: “That would surely restrict the distribution efforts of Swiss managers.”
Thommen dubs such a move “damaging protectionism that does not create any market access for us [and] no added value for investor protection. International standards are to be adhered to, but the [Swiss funds law] should not be transformed unnecessarily into an ‘EU corset for the whole world'”.
One option for Swiss managers – if foreign distribution becomes dependent on agreements between FINMA and foreign watchdogs – would be for those disaffected managers to move their distribution of non-EU strategies, along with the management of them, outside Switzerland.
This would be reverse a recent trend of UK hedge fund managers feeling the UK and its 50% top personal income tax rate. Managers agree such a reversal is possible.
“That would have a major impact on the workplace and jobs within Switzerland,” says one manager. “If it became impossible for us to sell funds to countries we wanted to target, we would have little choice but to move,” said another manager.
Given all this, Keijsers says Switzerland “should create a level playing field with the EU and be reciprocal, but not go that much further than AIFMD”.
He adds that the regulatory burden could become great for smaller Swiss managers. He foresees smaller managers “grouping together or in consortia, or providers of regulatory services providing very well-regulated frameworks that a manager plugs his funds into”.
“People will need to add to their resources if they do not already have them in place,” he says, “and some may underestimate what it means to be regulatedbecause they have not been [regulated] before.”
Reyl says: “Regulation will mean higher capital constraints, higher regulatory burdens and higher IT and compliance costs, it is ongoing, and only going in one direction. For some players who have not anticipated this evolution, it will be difficult to effect the changes as and when forced to.”