Access to the Swiss market for foreign funds
The Swiss regulatory framework for the offer of foreign funds has changed and opens exciting new opportunities for asset managers. With Switzerland’s reputation as a sophisticated but complex market, how can foreign funds navigate a straightforward and cost-effective route through the new landscape?
For asset managers and their funds, Switzerland represents an exciting and potentially lucrative market. It is one of the largest markets in the world, with CHF 7.3 trillion in securities holdings, of which more than a third, some CHF 2.8 trillion, is invested in funds. Switzerland is renowned as a global leader in wealth management, and offers an exceptionally diverse range of investors, from high-net-worth individuals and family offices to banks, pension schemes and fund platforms.
The marketplace for foreign fund managers in Switzerland is sophisticated, open, transparent and operates in a unique regulatory landscape. In January 2020, a new Federal Act on Financial Services (FinSA) came into force and led to modifications of the Collective Investment Schemes Act (CISA).
That said, for non-Swiss asset managers, certain elements of the authorisation process have been made easier; for example, when applying to the Swiss Financial Market Supervisory Authority (FINMA) for authorisation to offer funds to Swiss retail investors, the relevant documents can be filed in English.
The new bilateral agreement between the UK and Switzerland, which came into effect on 1 January 2021, also aims to facilitate closer market access for financial services between the two jurisdictions.
Appointing a Swiss representative is still a mandatory step in the compliance process for most foreign funds and target client segments but can offer far more than simply meeting a regulatory requirement. By working with an experienced Swiss partner, such as Carnegie fundservices (CFS), asset managers can minimise the burden of becoming Swiss-compliant and take advantage of the strong and growing demand from Swiss investors for good-quality foreign funds with diverse investment strategies.
Investors and distributors
Main Swiss investor groups:
Institutional (pension funds and insurance): Switzerland is home to almost 1,500 pension funds, which account for CHF 1,000 billion assets under management. There are also 198 insurance companies operating in the Confederation.1
Intermediary wholesale (banks and asset managers): Demand is driven by a high concentration of intermediaries, with more than 240 banks and about 2,000 independent wealth managers active in Switzerland. Wealth management accounts for approximately CHF 4 trillion of assets.
Intermediary retail (IFA, unit-linked, private pension solutions) as well as traditional retail (direct): The 300 wealthiest high-net-worth individuals (HNWI) and family offices in Switzerland are estimated to have a total net worth of CHF 707 billion. Private customers account for more than CHF 1.3 billion of funds, and commercial customers for more than CHF 350 billion.
T main distribution channels are:
Banks (particularly private banking) and independent wealth managers: The main distribution channel for funds, banks, and wealth managers offers the opportunity for direct face-to-face selling.
Fund platforms: Developed as part of large banking groups, fund platforms have become independent from banks and are now significant distribution channels in their own right.
Locally, global banks active in wealth management now rely on large fund platforms, having recently partnered with third–party entities.
Funder managers active in Switzerland
All the leading international asset managers are active in Switzerland, and many foreign boutiques and specialised fund managers also operate successfully in the Swiss market.
The market: Funds in demand
Foreign funds dominate the Swiss market, with more than 8,000 foreign funds authorised by the Swiss Financial Market Supervisory Authority (FINMA) for offer to retail clients.
Swiss-domiciled funds are a minor component of the market, with 1,771 funds at the end of 2020, according to FINMA.
There is a demand for both UCITS and Alternative Investment Funds (AIFs), with European and non-European funds commonly used.
Requirement to appoint a Swiss representative and paying agent
Offering share of funds to an investor in Switzerland in any way is considered a financial service and requires appointing a Swiss representative and a Swiss paying agent. This requirement can be avoided when the targeted investor is a regulated Swiss Qualified Investor, such as an insurance company or pension fund or Swiss fund management company.
A Swiss representative plays a key role in supporting a fund to become and remain Swiss-compliant, from applying to FINMA for authorisation on behalf of the fund (if required), to helping to structure appropriate point-of-sales activity for the clientele segment being addressed. This could involve modifying internal processes within your company or providing training for staff.
For more details please contact:
Alexandre Pini (Director of Business Development): a.pini@carnegie-fund-services.ch
Nicholas Weir (Senior Business Development Manager): n.weir@carnegie-fund-services.ch
Sources: Swiss National Bank, Swiss Financial Market Supervisory Authority, Swiss Federal Statistical Office, Bilan
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